You have a lovely concentrated portfolio . Have you been following this conc PF approach recently or since long ? What’s been your PF performance in last 1-2 years n how this conc PF has contributed towards it?
What is the opportunity size for PI Industries n Ajanta n moat in your view please ?
My conc pf approach can directly be attributed to BM from TED. This is one of the great lessons that I learnt on TED and I am grateful to BM/TED for that. Before 2008, I was following a 20 stock approach and the results of 2008 forced me to rethink the virtues of diversification. it became clear to me that 5 stocks are more than enough for diversification. I am following conc pf approach from 2009 onward and my learning curve has gone up substantially, which is visible in my performance. Now I can pay clear attention to every failure, analyze and make sure that I don’t repeat it. With 20 stock pf, failures were supposed to be a part of the game-plan with little or no attention to rectify them.
God has been really kind to me this year and all my picks have performed greatly. Valuepickr community has helped me quite a lot in that and again I am thankful to all the senior members(Donald/Hitesh/Ayush/Hemant/Mahesh) for this performance (I am sure I have missed quite a few names ). This year my portfolio has gone up by more than 110% and in last 2 years I have done 70+% CAGR. A close to 7-bagger in Ajanta in a conc pf has been one of the prime contributors to this performance. But if you look closely, most of the stocks in my pf are up by at least 60-70% in this year alone. What is more important from my perspective is that I have lost money only in a single trade (Amararaja sold at 12-13% loss) at the start of the year. Otherwise, I have traded/invested only in winners.
Ajanta’s biggest moat is its MR based distribution system in more than 60 countries that contributes more than 60% to its revenues. They can continue pushing their new products(formulations) in these countries for quite sometime through this channel. In India, their focus on specific formulation segments gives them a niche. More importantly, they have filed close to 15 ANDA in US and that could provide the next leg of growth once they get the approval.
PI’s biggest asset is its long term proven relationship with international Agrochem companies. It is probably the only company of its size in Indian Agrochem CSM space. To me, it looks more like an outsourcing story on the lines of IT but with much lesser overall size of opportunity. But that pie should be big enough for PI to keep growing. Local sale of agrochems is an icing on the cake and will help stabilize in the times of client fluctuation.
HCL Tech is a story on turn around in the developed world. As the US/European economy picks up, all the software guys will do good. HCL Tech is generally more aggressive among big players and it will grow faster than other big players. Also, it is a large cap, so it should provide stability to portfolio in case of a fall. Valuations of HCL tech are not very high. It is trading at around 21+ times trailing. Based on current EPS run rate, at the end of this quarter they should be roughly at 80 Rs trailing EPS. Given that HCL tech is a large cap player in a fairly defensive industry, it can go upto 25 pe trailing(TCS valuation) and that could fetch 2000 RS, which is a good upside from current prices. If you have not paid attention to its prices, it has roughly doubled in last 8-9 months and still making a new high every day. For a large cap stock, it is a good feat.
RS Software is a sector specific services company. They concentrate on payments industry. They also have a long term relationship with Visa. Payments is a high growth area which should help them grow faster compared to other players. The company is available very cheaply at a pe of close to 5. If promoters were smart, the company would have gotten much higher valuation. But, they keep flunking from time to time. I hope they have gotten their act together this time as the company is performing consistently for last 4-5 years.
I have not studied Tech M in detail. So, I will not be able to comment with clarity. One needs to check if the Satyam portion has started performing at the full capacity utilization and how far the company can go with complete utilization(normal per employee revenue and profit for other software companies). This is one extra kicker in Tech M which other software companies don’t have.
Great performance from your conc portfolio Gyan. Keep it up n post more frequently on stocks both in n out of your PF n market happenings. There are lot of interested readers here.
What’s the rationale behind buying Mindtree when compared with other players in IT?
Don’t you think Astral which is heavily investing in brands,distribution,manufacturing new products has big opportunity size staring at it plus Superb ROCE n excellent ethical promoters with superb execution skills? This combination if there implies scrip should not be touched as long as the combo is there. IMHO Astral n Mayur scrips are buy n hold stories for long.
Which other scrips other ten your PF you are tracking n liking?
Mindtree has become a far more aggressive player after Ashok soota left them. They are bidding for projects that they were not bidding earlier. It is one of the most consistent companies among IT pack, growing faster than peers and available at reasonable valuations.
Astral is a great company to own, but I was not comfortable with its valuation. Its valuation is reaching at a stage where pe expansion looks impossible and share prices will follow the earnings growth. It will become a steady compounder from here on.
I am looking at Repco Home currently and may add to pf.
@Ashish - Thanks for commenting on the portfolio. We have a thread on Adi FineChem where we have discussed in detail about this company. The thread also has links to HDFC researach report on the company, which is pretty exhaustive and gives you a good idea about the company. Company has a good visible capacity addition program and there is a growing demand for the Oleochemicals and Neutricients that they produce.
Interestingly, this is one of the few companies from India(I guess there are only 6) that are included in Forbes’ Asia’s best under the billion list for this year.
@Harsha, I continue to hold Ajanta and Shilpa. I moved out of RS Software. I did not like the employee cost reduction part from their latest results and bailed out after seeing the results.
@Bomi I used to own Mayur when it was only listed on BSE. Because of low volumes at that time, I could never make it a large part of my portfolio and subsequently sold it as part of a portfolio concentration exercise. When volumes improved, it was too costly to make a new purchase. Probably, this stock represents one of the good lessons on how to invest in Micro caps and not bother about volumes. But, I am still not able to overcome my volume-phobia.
Regarding Avanti, I am generally very cautious about animal related stocks (Some old lessons from Venky’s keeps coming handy). You never know when a disease will strike and by the time you know about them, it could be late. Even though it has turned out very well for people who own it and I wish them good luck, I am not going to own it.
@Vivek, Here is the updated portfolio :). I hope that SEBI guys don’t find me at the wrong side of the law. If so, I would request admin to delete the portfolio part.
Ajanta Pharma 23.00%
Kaveri Seed 16.10%
Bajaj Finance 9.30%
CCL Products 8.80%
Can Fin Homes 7.40%
Adi Finechem 5.30%
Alembic Pharma 4.80%
Cera Sanitary 4.40%
Remaining 5% is used for some small time punts.
Finally, the life for stock pickers is becoming difficult. On a risk adjusted basis, it is very difficult to find good companies where a decent percentage of portfolio can be deployed. I don’t mind continuing to ride the bull market, but it is tough to ignore valuations at the same time. I am definitely not game to buy/hold companies at 40+ pe trailing, which is becoming a norm nowadays for good companies.