Hitesh portfolio

@Vijayalakshmi

Investing in commodities and cyclicals needs a special skill set. You can read the chapters on relevant topics from Peter Lynch’s One up on Wall Street. He has tried to make it as simple as possible.

If one is doing it on a fundamental basis, then one needs to know a lot about the concerned commodity/cyclical and various variables affecting the business. That is something very few people can do because it requires keeping a tab on a lot of raw material/finished goods prices, other factors like anti dumping duty etc.

Technically the chartists have it a bit easy to spot the change in sentiments, but here too things can move very fast and one has to be on one’s toes.

The long and short of it is that if you are not confident about invesing in cyclicals and commodities, better give it a miss. There are plenty of other good companies to invest in.

@Shankar Both muthoot and manappuram look good on fundamentals. Price wise both are stuck in consolidation ranges and that range needs to be broken out of for any significant upmoves.

My view is that if one wants to play any commodity/cyclical (after being sure about the concerned sector) one can go for a market leader and a laggard. When the sector really heats up, the laggards move fast. And the sector leader gives stability.

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@Ragav1024

Any investment thesis has to be so simple that you can explain it to a person who does not have too much knowledge about investment, and still he understands it and agrees to its merits. . If you have to dig holes to the centre of earth to unearth information, then probably that investment case is not worth investigating.

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Dear Hitesh @hitesh2710,

Can you please share your views on Parag Milk Foods?

  1. The chart looks absolutely flat with the stock trading in the ragnge of Rs. 90-120 since mid-April 2020.
  2. While the latest SHP is yet to be released by the company, last two SHPs show that many FIIs have taken exit and few prominent HNIs came onboard. This change of hands could be the reason for no major price action along with the poor financial performance of the company during this period.
  3. Recently the Chairman of the company updated that the business is back to normal (to pre-covid levels). Latest quarterly results of Hatsun Agro also suggests the same.
  4. Company supplies cheese to the major QSR players in India. Seeing the recent IPO frenziness of Burger King and Mrs. Bectors, I think Parag milk can also catch some attention sooner than later.
  5. Unlike other Dairy players, two thirds of their revenue comes from value added products like Cheese, Curd and whey Protein. Recently they have commissioned a lactose plant which could be a huge opportunity for import substitution.

With reasonable valuation (PE=18) compared to other players like Hatsun (PE=84), I feel this can be a good candidate for investment but don’t have courage to buy when the market is trading at all time high :frowning: How to tackle these kind of situations - when you find pockets of reasonable valuation but overall market looks like in a bubble zone?

Thank you!

Hi Hitesh, @hitesh2710

Wanted your views on liquidating my mutual fund portfolio. Had started SIP’s since 2015, unfortunately most of these funds were not the best as they were not focused, they invested in 60-90 stocks and so my returns have been poor in the past (sub 6-7% i.e. not beating FD). Due to the recent rally the funds have done much better and currently I’m making 15% annualized return on my overall MF portfolio.

In my opinion markets are overheated and hence was planning to liquidate the funds and park the funds in a FD or liquid fund and redeploy them once markets cool off a little ( I can wait for 12-15months as well).

Kindly share your thoughts on the same.

@Kris

I dont track Parag milk foods fundamentally. Looking at the price action of hatsun and parag over the past few quarters, it seems market seems to be perceiving both companies differently. Could be something to do with promoter/management pedigree. So I guess even if both companies are in similar sector, it might not be prudent to compare the two.

Coming to the technical picture, it seems to be forming a base in the 90-120 range. Rather than buying and getting stuck in a trading range, it might be a better idea to wait for a high volume breakout and buy on subsequent retracement.

Problem with these kind of investments comes with allocation. These kind of companies hardly inspire enough confidence to allocate more than 5% of the portfolio. So even if it were to double from here, you will make only additional 5% at portfolio level. And if it continues to stay range bound or goes down, it is likely to cause a lot of heartburn. Personally I would wait for a strong breakout before contemplating a position. If I have a lot of edge in terms of fundamentals and scuttlebutt, maybe I would consider a position.

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@NamantS

It is very difficult to predict market direction correctly all the time. So whether to liquidate mutual funds or not is an individual decision. I dont have a crystal ball to tell me about the future of the markets.

If you feel you are satisfied with the returns till date and these have been in line with your financial goals, you can liquidate. But at the end of the day its a personal decision. You will get ten different types of advice if you ask ten different people. You yourself will have to bite the bullet.

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Hi, @hitesh2710 ji,

There is a ahemdabad based recetly listed micro cap pharma company - Sakar Healthcare Limited. They are in CMO and formulation business (domestic and exports to semi regulated countries) of their own brand. If we look at past ten years primary numbers, there is a decent sales growth ( due to lower base) with consistency in opm.

Now they are doing big capex ( as compared to their size) of rs 140 crs in oncology segment - API, formulation and research function. Recetly they have also got EUGMP approval for their lyophilized injection plant, Promoters are increasing their stake by issuing them share warrant showing conviction in the business.

It would be helpful, if you share share your views on the same.

Thanks.

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Namaste Bhai,
Whats your take on investment in startups? Do you invest in them? If yes via which network or are you as a investor take decision on your own and invest them directly?

Hitesh Bhai,

How do you read the current results of Alembic Pharma and the market reaction to the same. Do you think the US market degrowth may continue for few more quarters?

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@ram1984

In the q2 fy 21 concall itself, alembic management had guided for a de growth in profits in fy 22. One of the reasons could have been reduction in pricing power of sartans and hence lower profitability from the group of drugs. The other worrying aspect was the they had put up a huge capex and contribution from that plant was likely to be delayed because it did not have USFDA approval. (USFDA refused to give a timeline for its visit to approve the plant. )

From listening to tast few concalls, it was clear that dependence of US portfolio on sartans was reasonably high and market being forward looking entity figured this out and did not give higher valuations to Alembic as compared to other pharma companies.

Till date the company has been lucky by being in the right molecule at the right time and getting short to medium period one off opportunities. If this trend continues there can be more to look at in alembic. As of now I think although downside might be limited upside triggers are not too evident

@Rudresh

I dont invest in startups. Not my field of expertise.

@cabunny i havent tracked sakar healthcare.

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Hi Hitesh sir,
@hitesh2710

Did you track iex. The company is having 4% market share in electricity trading where as in foreign countries 40% is traded on exchange. This is pure operating leverage business.

Thanks,
Raghu

@hitesh2710
Hiteshbhai what’s your view on sun pharma s latest results and on biocon results and new adverse news of resignation

@hitesh2710 Hello Hitesh Bhai. Hitesh Bhai, What’s your view on Kanchi Karpooram? Kapoor prices are high right now, and their 5x expansion is now live.

It could be a good time to enter the stock to multiply money in a short span and then exit it when the new capacity would be maxing.

@HIMSHAH

Sun pharma seems to be gradually coming out of the woods. But one would need to listen to concall and see how management sees the path ahead. Most big pharma companies have put up a good show this quarter, barring the odd DRL, where once the impairments are out of the way, stock price can see a sharp move. Again need to listen in to concall to make a sense of when these impairments are going to go off.

@Ajjugattu I dont track IEX.

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@pankaj_xxxx

The prices of commodities like camphor can move either way very fast. So while evaluating companies like Kanchi Karpooram one has to account for the volatility in prices of the underlying product and raw materials involved.

Trying to get in with the hope of multiplying money in short span of time is easier said than done. There are no free lunches in the market and there are often mines laid out by the markets which we need to avoid while trying to go too fast.

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Hi Hitesh sir, would like to get your views on Laurus both in terms of future prospects and technicals.

Do you think they will be able to keep growing at a high pace in future?

Also, how does the stock looks technically? It has knack of falling after good results.

@fundoo

Laurus has a remarkable track record in terms of both topline and bottomline growth over past few quarters. Its rare to find companies which can show such fast growth. Usually maximum money in a stock’s journey is made during its fast growth phase. Usually there is strong disbelief when a company grows so fast. The usual queries raised are those related to cash flows, balance sheet issues, or promoter issues. The other question vexing investors in such growth stories is how long is this growth going to last?

Listening to the concall post results provides a clear idea about where the company is going. It seems Dr Chhava has mapped out the growth path of Laurus and is going on that path with sure footed approach. With acquisition of Richcore, he has put a foot in biiologicals space. My guess is next he will try to acquire injectable assets. He is trying to put in building blocks for long term consistent growth. The only worry sometimes is “Is it too fast”. But as long as numbers keep coming through, as investors we remain assured about the company’s prospects.

Ajanta during its strong growth phase also suffered from similar issues. Even with very strong quarterly results, the stock price used to correct and that too when valuations were sub 10 PE. But over a period of time as the numbers keep coming, market participants come around to accepting the company as a strong growth story and give appropriate valuations. So Laurus correcting immediately post quarterly numbers is nothing new. And a lot of punters take ultra short term positions in the run up to results and because of whatever reason if the stock does not go up, they are the first to bail out of their positions at whatever prices.

Technically the previous major top of Laurus was at 340-45 range from where it fell down to post a bottom in the region of 250-60. Now after taking out its top during the latest upmove it seems to be taking support at 340-45 region. But we still need to see for few more days, After posting a bottom at 255, Laurus has broken out of a cup and handle pattern above 340-45, with target of 420 plus.

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Thank you for the detailed post on laurus sir, do you track icici bank?? The numbers are good from the last few quarters. Please give your views.

Thank you Hitesh sir.
This analysis, coming from YOU and on top of that from an experienced doctor means that there is big growth going forward.I remember 2.5 years back, in response to my query on speciality chemicals, you mentioned GMM Pfaudler as ancillary play when it was just picking up its popularity and was at around 1000 bucks.
Keeping fingers crossed, lets hope Laurus has a same trajectory :slight_smile:

Couple of days back, Madhu Kela also mentioned bullishness on the stock and his liking for the promoter.
He mentioned how the growth trajectory looks similar to Divi’s.And Mr Kela is a pharma investment veteran from Reliance MF days. Of course, a good due diligence is required before buying a substantial chunk.
The current market cap of Laurus is around 18000 crores.
Do you think it can reach 1 lacs crores like Divi’s?

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Sir any view you have on neulands? The market cap is very small and the company is confident about 20% growth for next few years.

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