Gurjot Portfolio

gurjota · November 27, 2021, 11:07am

@Southern_Cross I’ll actually suggest you to think about this from a slightly different perspective and approach it from the point of view of financial goals. At the end of the day, just money in it itself has no real purpose and is just a means to the end such as various life goals, aspirations and provides us with peace of mind.

So based on your goals and aspirations - you need to estimate how much money you need at different points in life.

And then work backwards to calculate the equity portfolio CAGR you need after including all other financial assets. This approach gives you a very good understanding of what you need to be aiming for i.e. your target CAGR. If you don’t know what your target CAGR is, you could be aiming too high or too low and expose yourself to negative surprises in life. The above approach should ideally work for anyone with an equity portfolio horizon of 10+ years.

So the first key takeaway for me is - someone who needs a target CAGR of 15% should ideally take much lower portfolio volatility risk vs someone who needs a target CAGR of 25%. The portfolio construction will accordingly vary significantly for each person and there are no one size fits all rules in the market.

However at the end of the day your portfolio earnings CAGR should be somewhere in the vicinity of your target CAGR to achieve your financial goals. Marcellus has shown this multiple times during their webinars how the share price performance of their portfolio companies mirrors the earnings CAGR over a long period10-15-20 years. Over short durations, lots of other factors can influence individual stocks and lead to PE re/de-rating.

I’d say you’re already doing a great job with a 25% CAGR despite 2018 and 2019 being a brutal bear market for mid/small caps. Those have been my worst years in the market till date and you seem to have navigated them quite well. So trust your process and you should be fine. But keep validating if your portfolio CAGR is matching up with your target CAGR.

Btw I’m super interested in knowing which mutual funds (especially excluding any small caps ones) are giving 28%+ CAGR from 2018 Jan/Feb period till date. I’d happily shut shop on my direct equity portfolio to invest in them.

Southern_Cross · November 28, 2021, 2:45am

Thanks Gurjot for the reply.

True - The goal is about achieving retirement income whatever I’m investing in equity in India. I understood that goal based investing is very much required so that we can course correct accordingly to our expectations. In my case, with 15% CAGR, in 30 years , I will be making 64x of my investment.

This is a good takeaway. In fact, I started serious investing after reading Coffee Can Portfolio book by Saurabh Mukherjea.

Thank you. I analysed my PF capital allocation and most of it happened in 2018 and incremental capital which is put in 2019 and 2020 has been taken away as part of profit booking in 2021. Reading Coffee Can Portfolio helped as I felt to take the safe path. At one point of time, those stocks mentioned in the book were around 50% of my portfolio. I do track my PF performance regularly and one of the insights I found recently is, I never lost money in large cap segment as a whole from 2018 and at the same time, I made 50% profit in Mid-caps.

Type	Feb-18	May-18	Aug-18	Nov-18	Feb-19	May-19	Aug-19	Nov-19	Feb-20	May-20	Aug-20	Nov-20	Feb-21	May-21	Aug-21	Nov-21
Large	85.8	39.4	50	16.7	30	100	65	50	40	9.6	11.8	11.7	24.6	22	24.5	27.1
Mid	295.1	10.3	56.4	0	-17.3	-8.1	-13.2	-0.9	-2.8	-9.3	4.7	10.8	16.8	23.2	30.6	28.7
Small	-75.2	-40.4	43	-55	-39.9	-38.3	-44.1	-36.3	-31.7	-46.4	-20	-19	-4	-1.4	8.5	9
Overall	54.6	6.3	50.3	-2.4	-8.3	0.4	-3.4	6.7	4.6	-8.2	0.2	3.7	13.3	16.1	23.7	24

Your metrics of PF performance compared with benchmarks and the lesser beta resonated with what I am looking for. Now, as a rational investor, I need to keep my ego aside and invest whats best for my portfolio. The question about sustaining CAGR is whether I will be able to beat other pathways consistently. For example, SBI Small Cap is one of the best in the business. I’m impressed with the way they have stopped taking lumpsums in certain time periods taking investor interest into consideration. If I don’t need my money for say next 30 years and as the fund is showing consistency in returns from long time and having the same fund manager(R Srinivasan), it makes a compelling idea to invest. However, if I can generate it better than him, I can have lesser risk and lot more control. At the moment, I am still learning and trying to understand myself whether I’m liking direct equity path due to bull market or it will still entice me during bear markets.

Source - Valueresearchonline.com

Looking at my past equity performance, I thought I may not be able to able to beat MFs and so from March-19 to December-20, I invested in the below MFs through direct route using SIP. I did one additional SIP in March-20 for all except DSP Healthcare. I did 3 extra SIPs for DSP Healthcare in March-20. SBI Small Cap is from July-18.

Fund	Return
Axis Midcap	40
DSP Helthcr	42
Invesco India Contra	31
Parag Parikh Flexi Cap	42
Quantum LT Eqt Value	24
SBI Small Cap	37
Mutual Funds	27

I did not like performance of Quantum MF. I stopped SIPs for all MFs in Dec-20 as I felt, it is no longer a good risk-reward. In case you are considering MF investing, I think Small Cap MFs are better as they will have more universe of stocks to pick compared to other categories if your time horizon is longer.
At this point of time, I think we need to take a hybrid approach for direct equity and MFs rather than stick to only one route like best of both worlds.

Apologies for long posts in your thread.

gurjota · December 3, 2021, 4:54pm

@Southern_Cross Just a few comments and observations from my end

Initial 3-4 years performance in the market cannot be taken as a reliable indicator of 30-40+ years of investing lifespan of an individual. And I mean both ways (up or down). We should be working on our investing process and trying to refine that as much as possible. If the investing process in place is good, the outcomes are bound to be good in general
I don’t fully understand your portfolio performance? table with the monthly type (large, small, mid, etc.)
Thanks for sharing the MF details, the data looks for great! SBI Smallcap scheme has done phenomenally over a 9 year timeframe since inception. However, the scheme seems to have begun on the cusp of a small cap bull market and currently it has seen 2 bull and 1 bear cycle. So we should ideally look at the overall performance/return of the scheme either during the next bear market or somewhere in Aug 2019 (from inception) when we had the last bear market. But I still feel the scheme performance will look great at 20%+ CAGR which is also superb
I’m not much of a mutual fund investor and small caps funds can have great boom bust cycles. SBI small cap fund itself has had 2 periods of 0-10% returns over 2-3 years during these 9 years. I have a few ELSS funds and a small cap fund from NAM - but not a very high % of net worth in them. If my direct equity exposure starts trailing the active MF performance in a meaningful, I’ll definitely re-consider.

gurjota · December 3, 2021, 5:52pm

Monthly Portfolio Note - November 2021

A few days late this time with my monthly portfolio note as I’ve not been keeping well this week. Anyway, let’s recap the month of November then. If I were to put it simply - it was a “portfolio clean-up month” for me (more on that later). It must have felt like a rude awakening for bulls, this was the first time in a never ending bull market that Nifty has shown any semblance of a correction from ATH (~10%) and the mid/small caps had already started the drawdown in October. The interesting aspect for me has been that the broader markets, both Mid/Smallcap indices, relatively outperformed the Nifty in November. From what I’ve observed, generally the bluest of blue chips (Nifty stocks) are the last ones to fall in any correction. Just the fact that the broader indices held up fairly well in November gives good confidence that the road ahead shouldn’t be that tricky.

So while the major and broad indices corrected 10-12% from ATH, how was the damage to the portfolio? Diversification is a great tool to manage drawdowns and it ensured my PF only fell as much as any of the key indices. However, there are a now a high number of Chemicals, Pharma, etc. businesses which are 30-50% off ATHs including some in my portfolio as well. I felt this was a good opportunity to add on to the higher conviction bets. Overall, a few percentage points of performance got knocked off, but I’ll hands down take this performance for any individual year of my life!

Performance Comparison YTD till Nov 30, 2021.

Portfolio Re-Balancing

Exits

Coming back to the portfolio clean-up, I sold out of 12 positions almost 20% of the portfolio - anything with earnings disappointment, uncertain growth prospects or just re-allocation to higher conviction bets.

TCI Express 3x, Fiem 4x, S H Kelkar 3.5x, IRCTC 3x minor leftover exit - These have all been very good investments from last year but I definitely wanted to get out of most of them except TCI Express. It has had great track record and execution from management but valuations seem to be running a little bit ahead of fundamentals. If not for the ongoing correction and re-allocation to other bets, would have never exited this

Alembic (10% loss) and Strides (33% loss) - Any business/management which doesn’t even have 1-2 months visibility on business performance is a poor business. Management guidance from these 2 have been all over the place in the past few concalls. I’m still more optimistic on Alembic’s prospects with the massive capex they’ve incurred - expect to bear fruit someday and might look at it again but Strides management just cannot be trusted!

SIS, Reliance, HDFC AMC, Deepak Nitrite, Bajaj Healthcare (all <20% profits) - Find better/same but lower risk growth opportunities in ongoing correction

In December, I have also exited Prevest Denpro (post the earnings call), as I feel a business with 40 crore FY22E revenue has already crossed 300 crores market cap, 8x price to sales and even if it reaches 500 crores market cap in FY24 with 100 cr revenue - it’s not a great risk-reward for such a nano-sized company with little listed history/performance. I feel there is just no margin of safety at CMP and might re-enter if it’s available at lower valuations. Even on earnings multiple basis - cannot give this business more than 20x multiple at current scale of operations.

Re-allocations
Have re-allocated and increased bets across a lot of portfolio companies - ICICI Lombard, ICICI Pru Life, HDFC Life, Vaibhav Global, MAS Financial, Muthoot Finance, Chola Finance, Poly Medicure, Goldiam, Beta Drugs, Solara, Jubilant Ingrevia (re-entry)

Investor_No_1 · December 3, 2021, 6:12pm

I see 10.5% portfolio in retail - which companies in Retail constitute this?
Also, any reason for low percent in consumer discretionary?

Another big percent is into Insurance and I see you have been adding this part… You chose HDFC that’s very clear…between rest you chose ICICI pru and not a SBI Life or even Max Financial…any reason for this?

Also, why do you chose high allocation to insurance within financial space? You got out of AMC, not much of banks…but some NBFCs?

Lastly what are your thoughts on Star Health IPO and would you buy post listing? Thanks

blue · December 3, 2021, 6:25pm

I was wondering as to how you find better risk/reward opportunities as opposed to deepak nitrite. I was of the opinion that November was a very good month to accumulate dn, which I have done. Any clarification would be much appreciated.

On a separate note, thanks for your portfolio thread. Along with @Aniesh7 your thread was the one that finally showed me that a concentrated portfolio of 15-20 stocks is not the only possible way. I will log the details on my portfolio thread before the year is done.

edit: assume 3-5 year window.

gurjota · December 3, 2021, 6:43pm

VMart, Vaibhav Global, Symphony, Titan, Bata, Goldiam

Actually some of the above “Retail” businesses are also discretionary in nature so you can basically count this all in 1 basket.

I hold all the life insurance companies but 90% allocation to ICICI Pru Life and HDFC Life, very low to SBI. And I have good allocation to ICICI Lombard as well so basically all the insurance plays of private banks. Having worked in ICICI Bank in my 1st avatar, I believe the bancassurance channel is a strong driver of sales for these insurance companies which is something Max doesn’t have. However, I haven’t looked at Max’s business closely enough to be able to comment too much on it.

High allocation to insurance is simply because of the growth rates without leverage - while an ICICI/HDFC Bank have to take up leverage on their balance sheets 6-8x equity, insurance business is about upfront premiums and payouts at a much later date ideally decades. It’s ideally a better business at a similar growth rate of banks.

Haven’t studied much in detail but just the initial comments I’ve read it was at a significant premium to ICICI Lombard was a turn-off for me.

gurjota · December 3, 2021, 6:52pm

Thanks for the kind words

Based on the capex announcements and improvements in EBITDA margin as they transition the company from chemical intermediates to advanced products , I have an estimate of 2000 cr PAT for Deepak Nitrite by FY25 and they’re already doing 1000cr PAT on TTM basis and the company is valued at 30x TTM earnings. I don’t see an expansion of the valuation multiples (in fact a steady state multiple may only be 25x for such a business) - so best case return expectation for me was 18-20% CAGR which I think we can get from some lower risk Nifty businesses or go for 25%+ CAGR in other mid/small cap businesses. However, please take my words with a bowl of salt as DN is one of my shortest ever holdings, I’ve not closely tracked the business or management. I may get back in if it corrects further.

vedantinvestor · December 4, 2021, 4:28am

Hello sir. May you kindly share your updated portfolio weights?

Thanks

Investor_No_1 · December 4, 2021, 3:31pm

Yes agree, see many are actually discretionary…

I agree to your thoughts in insurance business. Myself have good exposure to insurance with minimal to bank and nil to nbfc.
Max fin has strategic tie up with axis bank and recently they bought significant stake. Incidentally, I sold just before the stake buy confirmed and missed on a swift double after holding it for many years…no regrets though as linnen got cleaned with a better business entry…
However, after axis bank confirmation of around 20% stake, the hanging issue of consistent bankassurance is resolved now…

I am yet to see Star health details. I always wanted to have exposure to health insurance and this is a very pure exposure…any idea that with IPO price, what would be the market cap if it lists at IPO price? Thanks

gurjota · December 5, 2021, 5:00am

Moneycontrol Pro -

From article, at upper band of Rs 900, around Rs 51,000 crore

You can also calculate this yourself from the company’s IPO RHP/prospectus by multiplying post issue equity shares outstanding with issue price.

Southern_Cross · December 5, 2021, 10:55am

Thanks for your reply. Good information.

The table is basically my CAGR at that point of time. Like , on Feb 1st 2021, my CAGR for Large Cap category from beginning of my investment is 24.6, midcap 16.8,smallcap -4 and overall is 13.3

gurjota · December 31, 2021, 2:20pm

2021 CY Performance Review and Monthly Portfolio Note - December 2021

Gratitude! Gratitude! Gratitude! That’s the top of mind thought and expression which comes to mind when I look back at the past 1 year. Just getting through 2021 with a healthy body and sound mind is an achievement in itself to be thankful for. A year which started with great optimism about mankind’s ability to fight this pandemic through safe and effective vaccines has seen one too many unpredictable topsy-turvy events culminating with another new super contagious variant of the virus. This has meant governments continue to enforce severe restrictions on a number of non-essential businesses and another stop-start year for India’s economy. I suppose this is how we define the “new normal”. However, I still have hope this will all end in the next 24 months and we will resume a majority of our pre-Covid ways of living again.

Amidst all this turbulence, fast changing global macros, high inflation, supply side constraints, risk of Fed rate lift-off, Indian equities have done exceedingly well despite the massive FII selling over the last 9 months. As they say “bull markets climb the wall of worry”. Also, with more and more index constituents (metals, mining, PSU) showing decent earnings / cash flows and a very supportive liquidity environment, Nifty / Sensex continue to trade at reasonable valuations according to me. I remain quite bullish over the next 12-24 months even with the concerns around inflation / hike in interest rates. I’ve posted a thread on Twitter about the inter play of interest rates and equity market valuations and why I continue to remain bullish.

Now, coming to my portfolio performance for 2021 - the graph below speaks for itself, I really can’t ask for much more! Finally, I’ve gotten a taste of what all the hallowed folks on this forum experienced in the 2013-14 bull run. The rewards of investing in good quality small/micro cap businesses are almost unjustified in my view. DII/FII’s lust for high growth businesses has taken the valuations of a lot of small businesses to really heady levels. Only a consistent high rate of earnings growth can be the savior from now on for the next couple of years. So it’s a great time to do a portfolio review and only stick to the high conviction bets which are expected to show consistent / high earnings growth and dump the mediocre growth ones as valuations could come off fast!

Beta Drugs, RACL Geartech, Acrysil, Goldiam, Tips, Macpower, Rajshree, TCI Express, IRCTC, CAMS have been some of my big winners this year and it helped to get out of some of them at the opportune moments. The month of December had much higher volatility than I expected with sharp cuts and recovery in a matter of days. However, my satellite portfolio (mostly small / micro caps) again helped deliver handsome gains this month for me. I’ve been piling onto financial services businesses over the last couple of months and 25% of my portfolio is now in private banks, insurance, NBFCs, etc.

I’ve cut down my portfolio positions by 30% and still have a portfolio of 50+ companies. However, as the year has gone by, I’ve started allocating a lot more to high conviction bets and so now more than 50% of PF is in the top 15 positions and I’ve been piling into financials (banks, insurers, etc.) over the past few weeks.

Portfolio Exits

Strides, ITC, Godrej Agrovet, Britannia, Poly Medicure, Ice Make, Insecticides India - Apart from Strides, nothing major wrong with these businesses except re-allocation to higher growth/conviction bets majorly financials. Poly Medicure is a true coffee can / consistent compounder business in my view with great management - however valuations don’t seem to offer much margin of safety for good compounding. Watching this one like a hawk to buy back on dips.

Portfolio Entry

Mirza International - A consumer discretionary brand play at extremely cheap valuations of 1.5x sales. Demerger of branded Red Tape business (annual turnover 675 cr and 35-40cr PAT) announced from parent entity Mirza International. Metro Brands does 28% EBITDA margins with 1200 cr revenues, assuming Red Tape can do 1000 cr turnover in FY25 with 25% EBITDA margin - can do 150cr PAT and 25x multiple for consumer facing brand - it can be 3750cr valuation with other private label business also doing 20cr annual profit - 200-300cr valuation. So total business valuation of 4000 cr. Demerger ratio of 1:1 - 1 share of Red Tape for every 1 share of Mirza International. “The promoters’ have experience of around 40 years in the leather industry, during which time the company achieved significant market position in the domestic leather footwear market. The company has diversified presence across multiple channels, including company-owned retail stores, franchisee-based retail stores, established multi brand retail stores (such as Shoppers Stop and Lifestyle) and ecommerce websites (such as Amazon and Flipkart). MIL sells footwear, apparel and accessories, majorly under the Red Tape, Mode and Bond Street brands in the domestic market. Also, it undertakes make-to-order contracts for various reputed brands in the overseas market. Vulnerability to fluctuations in foreign exchange (forex) rates: The business operations of MIL involve importing raw materials, such as cow hide, which is not available in India, and other hides during temporary interruptions in its tannery (for example during the Kumbh Mela).” Source Crisil

Allocation Changes

Increase - All ICICI group companies in portfolio, HDFC Bank, HDFC Life, Kotak Bank, MAS Financial, Valiant Organics, Neuland, Macpower, Goldiam (offered a sweet little buyback 50% above CMP).

Decrease - IGL, Shivalik Rasayan, Vaibhav Global.

Core Portfolio

Satellite Portfolio

Sector-wise Portfolio

It’s been a fantastic rewarding year much more than I wished for or even imagined! Here’s hoping and wishing the new year brings the same and more for everyone!

PS: I’m not sure if I’ll be keeping up the monthly portfolio updates in 2022, but will definitely try and post as regularly as I can. Always happy to discuss and answer any questions though

Jaisish_Mohanty · January 3, 2022, 2:36pm

I think honestly having a more concentrated PF helps in terms of returns…From your core PF I have only IEX, ICICI Bank, Polycab, Laurus, Acrysil and Titan…I think being concentrated on your conviction helps improving your returns, at least it helped me to generate 125% returns in last year…just my observation

gurjota · January 3, 2022, 4:56pm

I broadly agree with the concept of being more concentrated in high conviction bets and that’s what I’m gradually doing. However, just being concentrated because everyone says that’s the way to build wealth will not automatically lead to high returns.

Marcellus’ CCP Portfolio, a highly concentrated portfolio of 13-14 businesses, 2021 returns are a paltry 20% even underperforming the Nifty 50. I had 4x the number of businesses and 2.5x the return. So portfolio concentration does not equal to higher returns. Stock selection is equally important.

https://marcellus.in/newsletter/consistent-compounders/the-benefits-of-timing-are-inversely-correlated-with-the-quality-of-fundamentals/

Shakti_Srivastava · January 10, 2022, 6:52am

Hi Gurjota,

any specific reason for not having IT companies in your portfolio…

gurjota · January 10, 2022, 3:53pm

When you say IT companies, do you mean IT services? From the major IT services companies, I have HCL Technologies in my portfolio. There is definitely very good growth visibility for all the large IT services companies over the next 2-4 years. HCL has been a very good compounder so far and I missed increasing allocation sometime back when the IT companies had corrected.

However, I started looking at these companies in 2019 when TCS, Infosys were trading at 14-17x PAT multiple for 8-10% growth which was slowing down. Though the longevity of growth seems longer post Covid, I’m not sure if the rate of growth will see much incremental uptick and so I find it hard to pay up 35-40x for a B2B 10-12% growth business with limited demand/growth visibility post 2024.

Apart from this, I would like to bracket some of my other holdings like Nazara Tech, Indiamart, IEX, Tips as all tech businesses.

gurjota · February 1, 2022, 12:00pm

Monthly Portfolio Note - January 2022

New year and the market is revealing new colors! Easy money making of 2021 in mid/small caps seems history already. The US fed rate hike is the albatross hanging around the neck of global markets and it’s severe impact has been felt across US markets and unabated selling from FIIs in the Indian market not seen since global financial crisis of 2008.

The message for me has been loud and clear - with heightened market volatility, get out of any mid/small caps with elevated valuations and potentially high PEG especially when superior coffee can type businesses have corrected 15-30% in the market sell-off. So I’ve been getting into low beta businesses like Divis Lab, Abbott India, Whirlpool, etc.

Performance Comparison

Data as on Jan 31, 2022

Portfolio Update

My portfolio is the leanest it has been since the last 12-15 months, less than 50 positions in total and more than 2/3rds of the portfolio now concentrated in top 20 positions. Have booked profits/exited from numerous small caps like RACL Geartech (10x from original purchase and 4x total returns on decent allocation), Worth Peripheral (3x), Ugro Capital (2x), GMM Pfaudler (40%), PSP Project (25%).

Also profit booked/exited out of some large caps like Polycab (3x), Symphony(21%), HDFC (41%), Chola Finance (I like the business execution and track-record will probably look to re-enter on dips).

As mentioned earlier, have entered into relatively low beta businesses like Divis, Abbott, Whirlpool along with increased allocations to some existing bets like HCL Tech, HDFC Life, RPPL, Macpower, etc.

Whirlpool investment thesis - With massive uptick in real estate and home improvement, expect growth of min. 10-12% for next 3-4 years and should do 10,000cr by 2024 and PAT close to 900cr at 50x market cap of 45k cr. Elica acquisition (87.25%, Covid impacted year FY21 total revenue 309cr expect to do 400-500 cr revenue in next couple of years and 60-75 cr PAT and 90% share of Whirlpool) puts cash on balance sheet to use and also has better margins at 15% PAT margin vs Whirlpool 8-9%.

Top 20 Positions

Name	Current %
RPPL	5.97%
MACPOWER	5.26%
TIPSINDLTD	4.64%
BETA	4.04%
KOTAKBANK	3.77%
ICICIGI	3.74%
HCLTECH	3.73%
GOLDIAM	3.65%
ICICIPRULI	3.58%
MASFIN	3.37%
DIVISLAB	3.37%
HDFCLIFE	3.17%
ICICIBANK	3.11%
HDFCBANK	3.08%
IEX	2.65%
NEULANDLAB	2.30%
ABBOTINDIA	2.22%
APOLLOPIPE	2.14%
VMART	2.06%
POLYCAB	2.05%

gurjota · February 28, 2022, 6:39pm

Monthly Portfolio Note - February 2022

Let me start this month’s portfolio note by just repeating the first line from last month’s portfolio note as it’s been reinforced this month as well.

Of course the Russia-Ukraine war has not made matters any better, but the above is getting well and truly reflected in the broader indices performance and my portfolio as well. Despite me avoiding a drawdown in good 15-20% of my portfolio with high quality low beta businesses, I could not avoid the sharp monthly drawdown.

What went well
My allocation to high quality low beta names like Divis, Britannia, Abbott in January acted as great parking spots as they offered me excellent opportunities to re-shuffle money into high conviction mid/small caps as they got pummeled in the current month while these high quality businesses barely corrected or even moved higher. So I could buy the same mid/small caps 20% cheaper from Jan levels and overall 45-60% correction from recent 52wk highs.

What I’m also pleased about is that I have completely avoided the new age tech company meltdown of Nykaa, Zomato, Paytm, Policybazaar, CarTrade, etc. If these companies IPOs came in 2017, I can bet that I would be suffering in at least one of them and would have been seduced by their high growth rates. This time I managed to avoid them by simply asking 1 question each time I saw their name propping up somewhere trying to seduce me into investing in them.

What if the company’s stock price goes down 20-25% more from here? Will I have the conviction to further add-on to the stock at those levels or will I regret buying unproven loss making business models with no clear path to sustainable profitable growth? The answer was clearly the later which has helped clear my mind whenever I see them. However, if they start posting good results over a few quarters, I’d be most happy to relook at them and pay up if warranted.

The above also doesn’t mean that I have a perfect portfolio or don’t have any decent 20-30% losing positions. I have decent losers like Glenmark Life Sciences, Vaibhav Global, Valiant Organics, Solara - however I’m a lot more confident of their business model along with my purchase price having decent cushion that I’d be surprised if I don’t make decent returns in them over the next few years.

What didn’t go well
I’ve a reasonably large allocation to financials (private banks, insurance and NBFCs) which have not gone anywhere for the past 2 years and are now again getting the stick due to various reasons which I don’t understand currently. HDFC group stocks seem to have become the whipping boys over the past few sessions.

If I look at something like an HDFC Bank, it’s trading at 3.15x P/B for FY22E (based on my estimate book value of Rs. 450) and should be close to 2.5x P/B 1 year forward. The bank has compounded book at 20% CAGR for last 5 years and even compounded book at 18% in FY21 (pandemic year). I don’t think the bank has ever traded at such valuations in it’s history if I exclude any black swan events. Even if there is no re-rating in multiples, I find it hard to imagine how this will not be a 18-20% compounder for the next few years.

Portfolio Updates

IGL - Exited and booked a ~15% loss despite showing tremendous volume growth over the past couple of quarters and a potentially bright business outlook for the medium term till EVs become dominant. The current headwinds are quite strong in my view with very high inflationary trends in natural gas continuing from last year, Russia/Ukraine war has further increased natural gas prices and IGL’s margins are bound to get negatively impacted. Plus, it’s a government owned business which is a perennial negative and I don’t want to stick with something where I know there is imminent pain for the next few quarters. And the market correction, has offered equally / more attractive opportunities without sectoral headwinds or government ownership risk.

Shivalik Rasayan - Exited with minor profits, in the current market environment, I don’t want to hold any hope or story stocks at 50-60 P/E without proven track record.

Abbott Labs, Laurus Labs - Exited for better more attractive risk reward opportunities. Laurus was an impulse sell and it held out wonderfully in the recent correction, I’m contemplating adding back as it also has decent triggers for the next couple of years.

Dr Lal Pathlabs - Re-entered with 1.5% allocation after 40% correction, this is an extremely asset light business growing revenue at mid-teens for the past 10+ years and expected to do so for the foreseeable future. Technological disruption is a major risk for this business in my view, however I do not see the risk materializing in the next 5-7 years at least. I’m not planning to hold this for more than 3 years and I could switch even earlier if other better opportunities show up.

Top 20 Portfolio Holdings - Added on to a majority of my top 20 holdings.

Name	Current %
RPPL	6.61%
MACPOWER	4.81%
HCLTECH	4.20%
TIPSINDLTD	4.19%
HDFCLIFE	4.12%
KOTAKBANK	3.85%
ICICIPRULI	3.78%
BETA	3.75%
GOLDIAM	3.71%
ICICIGI	3.63%
HDFCBANK	3.28%
ICICIBANK	3.19%
MASFIN	3.10%
DIVISLAB	3.06%
VALIANTORG	2.79%
VAIBHAVGBL	2.50%
IEX	2.45%
NEULANDLAB	2.13%
APOLLOPIPE	2.05%
GLS	2.05%

Investor_No_1 · February 28, 2022, 7:32pm

Some thing even I dont clearly understand is reason of battering of insurance stocks recently. They faced the worst of covid already, not gone anywhere literally , specially HDFC life…and now constantly falling, i think ever since LIC IPO announced…

I think this fall is not a de-rating but a temporary phenomenon and will soon revert to mean…lets see…

Also, HDFC Bank, I agree…ever since Puri gone and some issue with RBI couple years back…it lost its premium valuations…market is very quick in bringing even best to books pretty soon…this may also be a temporary phenomenon but would take significant time to prove that HDFC bank is still a leader… (HDB Financial’s NPAs worry was another factor…)

HDFC AMC is another story…

Disc: Invested