Irshad Portfolio

Q&A: Questions & Answers Portfolio Q&A
1

I am posting my portfolio for feedback from esteemed valuePickrs .

It has been great learning experience for me since I joined ValuePickr. Kudos to Donald for maintaining such a marvellous forum.

1 Repco 9%

2 Ajanta 7.5%

3 Shilpa 6.5%

4 Pi Industries 6.5%

5 JB Chem 5%

6 Alembic Pharma 5%

7 Kaveri4.5%

8 Polymed 4.5%

9 Muthoot Capital 3.5%

10 Lumax Auto Tech 3.5%

11 APM Industry 3.5%

12 Infosys 3%

13 Greaves Cotton 3%

14 Supreme India 2.8%

15 Gruh Finance 2.8%

16 Pidilite 2.5%

17 RS Software 2.5%

18 VST Ind 2.5%

19 Accelya 2%

20 Amara Raja 2%

21 Dhanuka 2%

22 Mayur Uni 1.5%

23 Dynemic 1.5%

24 Cummins 1.3%

25 Eclerx 1.3%

Total Approx 90%

Approx. 10% of stocks comprising of those in which I want to book profit or loss at the earliest ( Half of this comprising of Astral).

As can be seen easily, its predominantly valuePickrâs picks. Its also influenced by Ayush magnificent blog.

I am thankful to Tony who helped me get rid of many non performers through his Technical insight.

Will appreciate views from all respectable boarders and especially from our ultimate doyen HiteshBhai.

Your views are solicited on allocation also.

Irshad

2

irshad,

stock selection is good but it seems like a mutual fund. too many 2-3% bets.

I think the top 4-5 high quality high conviction (not necessarily in the order listed by you) bets need higher allocation.

And while re adjusting try to look at valuations at which you are buying those stocks and then decide. Stocks bought at wrong or exhorbitant valuations tend to provide poor returns.

regards

hitesh.

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Thanks Hitesh Bhai

Its really useful.

hitesh.

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Thanks to HiteshBhaias kind advice and after my own due diligence, Iave revised my portfolio as below and seek comments from esteemed fellow boarders. These allocations are as per cost price and not at CMP.

1 Repco@290 11%

2 Ajanta@974 11%

3 Kaveri@3809%

4 JB Chem@118 9%

5 Shilpa@290 6.5%

6 Pi Industries@227 6.5%

7 Alembic Pharma@199 5%

8 Polymed@327 5%

9 Muthoot Capital@83 5%

10 APM Industry@20 4%

11 Lumax Auto Tech@91 3%

12 Greaves Cotton@57 3%

13 Mayur Uni@289 3%

14 Gruh Finance@230 2.5%

15 Pidilite@261 2.5%

16 RS Software@142 2.5%

17 VST Ind@1450 2.5%

18 Accelya@560 2%

19 Amara Raja@294 2%

Total Approx 95%

Approx. 5% of stocks comprising of Dhanuka (149), Dynemic (20), Cummins India (400) and Eclerx (610).

Exited Astral, Infosys, Supreme and a few other stocks completely.

I want to add Mayur and Eclerx aggressively if there is big correction in them.

Ajanta is a recent purchase, mostly within a couple of month or so. I used to have a small quantity of it but after VPickr latest recommendation I studied it into detail and got more conviction. Stake is increased significantly in Repco, Kaveri and JB Chem. Muthoot Cap allocation in increased just before it shot up. Allocation is also increased in APM Ind, and Mayur etc.

Allocation in Pharmaceutical sector is 36.5%, which might be on higher side but I am comfortable with it. I request all for their opinion on this. My logic is that although they all are from the same sector but catering to different segment and having different kind of product range and not exposed to similar kind of business risk. While Alembic is most exposed to USFDA risk, Ajanta is in better position in this regards. JB chem is least exposed to this risk as they are well diversified and their exports are mostly to south african and south east asian countries. Polymed is in the niche business of manufacturing disposable medical devices and perhaps the only company in this segment, with a well equipped R&D facility. Regarding Shilpa, I came to know about it through Ayush blog (http://dalal-street.in/) , I studied it and convinced with the story. Many brokerage houses are very bullish on it. If it gets necessary USFDA approval it may be in different league.

My experience with equities are slightly more than two years and with this forum less than a year. But my learning graph is enhanced considerably since I joined ValuePickr. Once I used to have around 50 stocks in my portfolio but thanks to ValuePickr, which helps me to segregate the chaff, and now I have less than 25 stocks in my portfolio. The more I get understanding (of my foolishness:- )), the more I am convinced that a concentrated portfolio is desirable for a decent return. But it needs a lot of conviction, and it will come only with continuous learning and experience.

I request all and especially to Hitesh, Hemant, Surya, Rudra and Subash who are proactive in reviewing a novice portfolio; to have a skeptical look at my portfolio and comment over it.

Irshad

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Hi Irshad, My views.

1). While you did the right thing by selling infosys etc, you shouldn’t have sold astral. Agreed, it looks overvalued. But considered their past record and the scalability of business, this is a company to hold until the growth slows down. In the long run, these are the kind of stocks that make a difference to one’s net worth.

2). Your portfolio is very good with all solid companies. The allocation also looks good. You can expect healthy returns. I dont like Apm and Greaves though.

3). I think It would be good to have a few fast growing very high quality companies . ( I call them fast growing stalwarts). The likes of Page,Gruh… etc ( Not necessarily at this valuation)

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Gautham

Thanks for your candid comments. The reason for selling Astral was precisely overvaluation (in my opinion) and purchase price was at higher level; So I thought to play it safe. Reason for adding APM is that it seems to be on growth trajectory and paying good dividend. Greaves Cotton is undervalued since long time so I added in anticipation. Gruh is there in my potrfolio but makes a small part as Repco (similar busness) is there in large quantity. I wanted to add Page a year ago, but certainly its valuation as of now is beyond my comfort level.

Irshad

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Gautham

Thanks for your candid comments. The reason for selling Astral was precisely overvaluation (in my opinion) and purchase price was at higher level; So I thought to play it safe. Reason for adding APM is that it seems to be on growth trajectory and paying good dividend. Greaves Cotton is undervalued since long time so I added in anticipation. Gruh is there in my potrfolio but makes a small part as Repco (similar busness) is there in large quantity. I wanted to add Page a year ago, but certainly its valuation as of now is beyond my comfort level.

Irshad

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Irshad,

Portfolio posted above is diversified but a good one.

It should provide good returns

Not much idea about apm, greaves, lumax, but rest of them seem okay.

hitesh.

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Time to update portfolio status.

Investment journey remains extremely fruitful since I came across ValuePickr.
Below is top 10 holdings of my portfolio as of 1st Jan 2016. This is extracted from my broker (new) website.

chart (8).jpeg1200×800 49.3 KB

Next four holdings are CCL Products and Prima Plastic (3.5% each), and Torrent Pharma and Vidhi Dyestuff (3.2% each); thus top 14 stocks comprise of 80% of portfolio. Next 20% of portfolio comprises of long tail ( less than 2% allocation each) which are basically work in progress. Whenever some idea attracts me I add a minor quantity of it as ‘out of sight, out of mind’ holds true for me. And this works out well for me as below chart for yearly return (sans dividend) shows.
chart (7).jpeg1200×800 31.6 KB

I am sincerely thankful to our HiteshBhai, who advised me about proper allocation, although I couldn’t follow his advice in entirety. The main reason being that in the last couple of years, I invested heavily in equities and it was a mental block for me to increase allocation to stocks which were already doubled and appeared expensive. But again its continual learning and a work in progress.:relaxed:

Thanks ValuePickr and thanks HiteshBhai.

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Good going irshadbhai. Most of the stocks in your PF are on a roll and should provide u with good returns.

All the best.

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Superb performance Irshad bhai.for 2016 will you be increasing the allocation for some tail stocks or continue with existing portfolio? Which sectors are you positive for 2016 ?amongst tail stocks which one you like?

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Thanks Hitesh Bhai for kind words.

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Thanks Vivek Gautam for your appreciation. If possible, I would like to increase allocation to Ajanta, Granules and Repco. But my top priority will be to increase allocation in Torrent Pharma.

In tail stocks I am optimistic about Waterbase and Asian Granito - I am sitting over handsome profit on them and may increase allocation on waterbase if price falls below certain level. Some of the tail stocks (Alembic and Shilp Gravure ) has turned multibagger for me and I am selling them partially ( and intermittently) in order to mobilise the fund towards construction of a more concentrated portfolio. Some of the stocks (PFS,HSIL) are just idling, doing nothing - and I want to short them at a suitable opportunity. In stocks like Camson Bio I am sitting over a huge loss. I am fully invested all the time; so need to sell something for a new buy.

In smaller allocation stocks I am optimistic on Prima Plastics ( my av. purchase price is sub 60); India Cements ( Av. purchase price around 70) and Vidhi Dyestuff ( Av. price around 20 - its already a four bagger for me).

I am very optimistic about pharma sector. Also believe that HFC and select Cement stocks should do well. In coming years ‘SMAC’ (social, mobile, analytics and cloud) will be a disruptive technological idea ; but how it unfolds is yet to be seen.

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What are the reasons u like Torrent Pharma? As per a recent Kotak report which came with a reduce rating due to v fast price erosion of nowdays due to increasing competition & dwindling pipeline.

Whats the investment thesis for Asian Granito & What do u like in ISMAC segment?

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Vivek, Thanks for pointing to that Kotak report. Today I tried to get the report, but it seems that its not available in public domain. However I got bits and pieces from the net. Let’s wait and watch. In the mean time let me outline why I like Torrent Pharma.
• There is no debate that pharma sector in India has a huge potential of growth.
• Torrent pharma is having its presence in India and international market (USA, Brazil, Germany and other emerging market).
• It is ranked in top 15 companies in domestic market. Among top 5 in cardiology and CNS therapies and top 10 in neutraceuticals and gastrointestinal therapies.
• Its core competencies is branded market ( operation in India, Brazil and other emerging geographies), and Generics (regulated market – USA, Germany and UK).
• Revenue generation- 35% from domestic market. 21 % from Europe ( 65% of it is from Germany alone). 18% from USA, and 13% from Brazil . Around 7% comes from contract manufacturing. Rest is from other emerging geographies. Diverse avenues of business and hence more resilient
• Of late not performing well on domestic front, but now situation is improving continuously. Acquisition of companies like Elder helped in garnering lead brand like Shelcal.
• Despite being a late entrant in US market, managed to compete existing established player and managed to increase its market share exponentially during last five years.
• In the US market did very well on regulatory front as well. It launched generics of Cymbalta (US $6 bn brand size; before generics entered) in 2014. Torrent was one of the four existing players to get approval for a blockbuster drug ( generic version of abilify; market sizeUS $5bn ; before generics entered), that dozens of player had applied for. Recently, it has launched generics of Detrol LA (market sizeUS $300 mn; before generics entered). The competition in this product is low as well.
• What is most important is that its strategy of selective filings which augers well with sustainable growth in future.
• In order to ramp up the sales in US market, it has built up a large facility at Dahej, Gujarat.
• It has 19 ANDA filings pending with USFDA out of which seven are expected to be Para IV filings. If a few of them worked out it will be an immense trigger for growth.
• Decent numbers and ratios. PE ratio is lowest among peers.
• Detailed discussion in ValuePickr forum.
• Gone through Torrent Pharma AR 2014-15. Very insightful and encouraging.

What may be spoilsport :
• Delay in approvals (of USFDA)
• Thin US pipeline. Though it has 19 ANDA filings pending for approval; It does not have any complex drugs in its portfolio, which may have high entry barriers.
• Currency turmoil in emerging market like Brazil which contribute 13% of company’s business.
• Unforeseen issues with government regulated pharma sector like Germany.
• Over diversification by the management.

Regarding Asian Granito its fifth largest producer of tile in India. Since its inception in the year 2000, the company has increased its manufacturing capacity 40 times. I personally used their tiles two years ago and found them of outstanding quality which is at par with the best brand available in the market. I am sure it will reward its shareholder handsomely. When I purchased its PE ratio was half of that of the leading brands of the industry.

Regarding ISMAC - I am slightly sceptical about ‘I’ (IoT), that how much will be its gestation time in India; but I am sure SMAC is in budding stage. Unfortunately I don’t know much of its intricacies so no comment.

Regards

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@Irshad The intent here is not to hijack this thread and make it as a Torrent pharma one but I will be keen to know your view (since you seem to be one of those extremely successful investors, with commendable market beating returns)…
Here is the pointer to Kotak report
https://in.finance.yahoo.com/news/reduce-rating-torrent-pharma-expect-220800878.html
You can say that I have a vested interest to know your view since I am significantly committed to Torrent Pharma
Thx

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Thanks Kalyan, for the link, and kind words.