Hitesh Randhawa Portfolio

Q&A: Questions & Answers Portfolio Q&A
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Hi All,

Invitethe comments ofiminent fellow boarderscomments on my portfolio and its allocation given below. I am still in the process of structuring my portfolio and hence there may belittle changes. Will make sure to update the changes to my portfolio here. Also, please take my portfolio as a disclosure on my part as my views may be biased with respect to my holdings.

Can Fin 13%

Mahindra Cie 11%

Gati 8%

Avanti Feeds 7%

Firstsource Sol 6%

Ashiana Housing 6%

AIA Engineering 5%

PTC India Fin 5%

Repco Home 5%

Yes Bank 5%

Transport Corp5%

Jyoti Structure 4%

Alembic Pharma 3%

Aurobindo Pharm3%

Torrent Pharma 3%

CCL Products 3%

Natco Pharma 2%

Dynemic Product 2%

Fluidomat 2%

Acrysil India 2%

Note: Some notes FYI.

1)Pharma - Ihave 4 pharma stocks and total allocation to Pharma sector is 11%. But I treat them as 1 stock i.e. I prefer diversyfying my Pharma allocation into few stocks due to US FDA related uncertainties (which are not easy to track).

  1. Logistics - It is a proxy play on e-commerce mostly (due to no direct listed players) and a bet for the long term. I prefer treating logistics as micro and macro play. Gati and TCI are micro plays. Macro play would be something like Ports sayGujarat Pipavav (yet to add). These are very long term bets from 10 year perspective.

  2. Jyoti Structure - I am betting on a turnaround here and the current balance sheet or numbers may not paint a rosy picture due to debt on its books. But, I feel if company can take care of its debt position than it is available at throw away prices. I have a cushion of 50% as I had invested at Rs.20 levels and CMP is Rs.30 and hence that gives me the comfort to hold on to my bet.

  3. Mahindra CIE - Actually I hold Mahindra Ugine but that will eventually get converted to Mahindra CIE due to merger and its allocation post conversion may go up by 2% due to 17-18% arbitrage opportunity that exists between Mahindra CIE and Mahindra Ugine. I saw the arbitrage opportunity and have made 50% on my investment and I see another 17-18% of existing arbitrage opportunity,but eventually, my betis on Mahindra CIE and its future.

  4. I understand that the portfolio may have many stocks i.e. 20 stocks but as I said that is due to diversifying risks in Pharma by having 4 stocks (which I consider as 1 stock) and 2 logistics stocks (which I again consider as 1 stock). Number of stocks also rises due to existence of Micro caps like Fluidomat, Dynemic andAcrysil as in princple I don’t allocate more than 10% of my overall portfolio to Micro caps and out of this 10% I prefer dividing my allocation between 4 micro cap stocks. But in the medium term, endeavour would be to bring the totalholding down to 10-12 stocks.

I am a novice in the stock markets but with deep passion for them. A bit reserve to contribute to this forum as there are many experts here but I surely do look forward to learn and contribute.

Would appreciate yourviews on my portfolio and its allocation above.

Thanks,

Hitesh Randhawa.

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Hitesh,the pf seems a bit too tilited towards cyclicals,especially financials.Make a choice & try to weed out the ones you have less conviction in.Make sure governance practices are good at Jyoti Structures…seems a bit high risk to me.Btw,why not exit with a 50% gain,when the going’s good? The industrial end of the economy is far from mended.Otherwise,the portfolio looks good with some ‘spice’ from micro caps.

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I think the allocation to stocks like gati, first source, etc seems to be a bit high in the context of the diversified nature of the portfolio.

Stock selection seems okay.

Personally I think there might be better choices than some of the picks like transport corp, FSL, Gati, Yes bank, Jyoti str etc.

But since you have put up the investment logic I think that should be okay.

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Sagar and Hitesh, thanks for your comments. Appreciate it.

@ Sagar- Yes in term of sectors BFS is almost 26%. I although try not to concentrate on sectors. Canfin is a major part which I have been holding from 125 levels, Repco from 50 levels, Yes Bank from 250 levels. Canfin and Repco I have conviction but due to undervaluation have allocated more to Canfin. Yesbank is more like having some large cap (Although technically it may not be a large cap) in the portfolio which gives stability to the portfolio and decent returns over a period of time (also I feel valuations will catch up in future with its other private sector peers).

Had been tracking Ajanta, Alembic, Kaveri Seeds, Mayur, Tata Elxsi, etc. as well but could never garner the guts to buy them as they just kept going up and up (definitely need to learn a many things on this front). Therefore wasn’t able to get in to these stocks after the kind of run up they had.

Jyoti as I said is more of a bet and had the comfort level to hold on because of the entry price.

JYOTI STRUCTURES, is looking to reduce debt on its balance sheet. It has debt of about Rs.1000 Crs. on its books with debt to equity of almost 1. Total outstanding debtors are about Rs.2000 Crs. with average debtor days standing at around 240 days. Of these Rs.1800 Crs., Rs.450 Crs. is help up as retention money due to some environmental issues and another Rs.400-450 Crs. is due from SEBs (which is again slow moving).

It possesses capabilities to execute turnkey projects covering the entire gamut of Power Transmission business. I think that such players who can bid at a global level, may well benefit from the revival in developed economies also. Jyoti has also set up a manufacturing unit in USA which is one of the biggest and most advanced manufacturing units in North America with state of the art technology and is in a better position to cater to global demands.

AION Capital Partners (joint venture between Apollo Global Management, a leading bulgebracket alternative assets manager with $113 billion of assets under management, and ICICI Venture, one of Indiaâs oldest private equity players) has invested Rs.300 Crs. in Jyoti Structures few months back and would infuse further funds subject to certain performance milestones being met in future (I wonât be surprised to see further equity dilutions in future). Presence of AION Capital in the board gave me some confidence with respect to corporate governance.

At CMP of Rs.29.30, it is trading at a Price to Book of 0.33, PE of 3.50, has a Market Cap of Rs.240 Crs. which is 1/11th of its 2013 revenues of Rs.2800 Crs, ROCE of more than 25%, Div. Yield of 3.75%, has an order back log of 1.7x current revenue.

Above things about Jyoti make me hold on to this bet on it, despite knowing the current limitations that it has on its plate (along with headwinds that the sector faces). Debt reduction is the biggest trigger here.

@Hitesh - Thanks for the comments again. Actual allocation to TCI and GATI was less but after current run up in both of them their contribution has risen to present levels. But on the face of it I won’t be able to justify my investments in them with the help of normal parameters that we use :slight_smile: Have been reading a lot about Flipkarts and Snapdeals of the worlds and lot of PE activity that has been going on in e-commerce and logistics space. Treating TCI and GATI as plays whose stories may unfold in the future (which I believe would take very long time and that’s why thinking of 10 years from now) and as a story which may not have been entirely discovered till now. I find MCX also very interesting from 10 years perspective after reading about global exchanges (growth, volumes and valuations) and global commodity volumes and Indian commodity volumes. Although it would need to come out of its existing problems first and if it can then there may be something big in MCX. You have made me think again about FSL. Will give FSL a thought. I hold it from Rs.15 levels and it had debt issues which it was able to take control of after management moved in the hands of CESC. It is able to service its debt obligations comfortably as of now. There have been major equity dilutions and I think that they would consolidate their equity base in long term with the help of some buybacks or something. But you have made me think if I would like to own this as a business when there are other better opportunities. Because the first thing that I try to look into a stock is that If I would like to own it as a business from long term perspective.

Thanks for your views. Will keep updating stuff here and try to contribute to the forum in general as well.

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Apologies, Repco have been holding from Rs.250 levels and not 50. It was a typo error. Not sure about how to edit the comment that has already been posted and hence clarifying with a new comment.

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Made some minor changes to the portfolio. Allocation at CMP as on today. Can Fin Homes 15% Mahindra Ugine 11% Gati 7% Ashiana Housing 6% Firstsource Sol 5% Avanti Feeds 5% Yes Bank 5% Repco Home 5% AIA Engineering 5% Transport Corp 5% Ajanta Pharma 5% PTC India Fin 4% Kovai Medical 4% Aurobindo Pharm 3% CCL Products 3% Alembic Pharma 3% Torrent Pharma 2% Fluidomat 2% Dynemic Product 2% Jyoti Structure 2% Acrysil India 2% 1) Mahindra Ugine has moved up well and arbitrage between Ugine and CIE has reduced to 6-7% from 17-18%. 2) Avanti, Gati, CCL, TCI, Ashiana have given very good upmoves amongst the above holdings. 3) Added Ajanta Pharma and Kovai Medical. 4) Added a little bit to existing position of Can Fin. 5) Booked 50% profits in Jyoti Structures to make way for other additions. May re-enter if I get it again at 25% below CMP. 6) Exited Natco Pharma - Timely exit before the drop. Felt that on a 1 year forward basis COPAXONE adding to the topline and bottomline was largely factored in at the current price and hence decided to exit as looked expensive. Also wanted to add Ajanta without making too much of a fresh allocation towards Pharma as a sector. Therefore started thinking of moving out of Natco as from the existing holdings wanted to hold on to Aurobindo, Alembic and Torrent. 7) Will look forward to exiting FSL in future and not now as I believe it has been consolidating at these levels for sometime now and a break out above 30 should take it to 35 levels. May consider exiting at those levels. 8) Portfolio still continues to be diversified and consists of 21 stocks at present. But will be exiting FSL later and as I said at the begining of this thread that I consider 4 pharma stocks as 1 and 2 logistics stocks (Gati & TCI) as 1. That is my way of spreading risks in sectors where things can change very fast and require constant monitoring. 9) Few other stocks that I am gathering more information on are : Ambika Cotton ASM Tech B & A (Tea Plantations) FIEM Inds Infinite Computers Rapicut Carbides Unique Organics Vikram Thermo

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Made some minor changes to the portfolio. Allocation at CMP as on today. Can Fin Home 15% Mahindra Ugine 11% Gati 7% Ashiana Hsg 6% Firstsource Sol 5% Avanti Feeds 5% Yes Bank 5% Repco 5% AIA Engg 5% Transport Corp 5% Ajanta Pharma 5% PTC India Fin 4% Kovai Medical 4% Aurobindo Phar 3% CCL Prods 3% Alembic Pharma 3% Torrent Phar 2% Fluidomat 2% Dynemic Prod 2% Jyoti Stru 2% Acrysil 2% 1) Mahindra Ugine has moved up well and arbitrage between Ugine and CIE has reduced to 6-7% from 17-18%. 2) Avanti, Gati, CCL, TCI, Ashiana have given very good upmoves amongst the above holdings. 3) Added Ajanta Pharma and Kovai Medical. 4) Added a little bit to existing position of Can Fin. 5) Booked 50% profits in Jyoti Structures to make way for other additions. May re-enter if I get it again at 25% below CMP. 6) Exited Natco Pharma - Timely exit before the drop. Felt that on a 1 year forward basis COPAXONE adding to the topline and bottomline was largely factored in at the current price and hence decided to exit as looked expensive. Also wanted to add Ajanta without making too much of a fresh allocation towards Pharma as a sector. Therefore started thinking of moving out of Natco as from the existing holdings wanted to hold on to Aurobindo, Alembic and Torrent. 7) Will look forward to exiting FSL in future and not now as I believe it has been consolidating at these levels for sometime now and a break out above 30 should take it to 35 levels. May consider exiting at those levels. 8) Portfolio still continues to be diversified and consists of 21 stocks at present. But will be exiting FSL later and as I said at the begining of this thread that I consider 4 pharma stocks as 1 and 2 logistics stocks (Gati & TCI) as 1. That is my way of spreading risks in sectors where things can change very fast and require constant monitoring. 9) Few other stocks that I am gathering more information on are : Ambika Cotton ASM Tech B & A (Tea Plantations) FIEM Inds Infinite Computers Rapicut Carbides Unique Organics Vikram Thermo

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For some reason the post is getting updated as shown above despite giving appropriate spacing between sentences, etc. Tried reposting it, but got same prob again as above. Not sure what to do and how to delete one of the duplicate comments above. Not sure if any problem with the site or something?