Ishaan's Longterm Portfolio

Q&A: Questions & Answers
1

I started investing in the markets after the covid crash and hence I am a part of a group of investors who haven’t seen all the colors of our market, although the markets have outperformed a chameleon in terms of changing it’s colors. This has resulted in a lot of confusion and to be honest, I need some help in validating my investments and investing approach. I am 19yrs old and I invest with an outlook of not more than 2yrs. I take my decisions based on the opportunities for the next 2-3 yrs. Here are the stocks I have invested in, along with the reasons-

  1. ICICI BANK

    1] Avg price- 738
    2] No.of shares- 10
    3] Reasons- This is a part of my largecap, stable long term investment. With banking being major
    part of our lives and it is unlikely that it’s significance to go down.

  2. HDFC BANK

    1] Avg price-1530
    2] No.of shares- 2
    3] Reasons- This is a part of my largecap, stable long term investment. With banking being major
    part of our lives and it is unlikely that it’s significance to go down.

  3. HDFC LIFE

    1] Avg price- 702
    2] No.of shares- 10
    3] Reasons- In India the youth population and the young working class is huge and their earning potential is much better than that of the older generations. They know the importance of insurance and hence don’t hesitate to buy health and life insurance. This is a great positive for Insurance companies, who will have increasing cash flows for years to come.

  4. BHARTI AIRTEL

    1] Avg price- 740
    2] No.of shares- 7
    3] Reasons- With growing internet usage in our country, data consumption is about to go through the roof. India has one of the cheapest data plans and we have a lot of room for increasing increasing tariffs. Now we are at 2$ ARPU. I don’t see any reasons why this number won’t go to more than 4-5$ ARPU.

  5. HINDUSTAN UNILEVER

    1] Avg price- 1982
    2] No.of shares- 1
    3] Reasons- I love their products and its a company who has been successful in maintaining their market share for years. I bought it just a few months ago because its valuations were lower than its 10yr averages. It was a great value bet and I hope to enjoy the dividends I receive.

  6. MARICO

    1] Avg price- 498
    2] No.of shares- 5
    3] Reasons- It has a range of products from necessities to luxury products. With increasing incomes we can see discretionary spending going higher. This gives an idea of the long term steady cash flows of this company.

  7. TATA CONSUMER

    1] Avg price- 752
    2] No.of shares- 4
    3] Reasons- I love their products and its a company who has been successful in maintaining their market share for years. It has a range of products from necessities to luxury products. With increasing incomes we can see discretionary spending going higher. Also its starbucks business is growing aggressively. With increasing acquisition of small FMCG companies, we can see huge product diversification.

  8. GALAXY SURFACTANTS

    1] Avg price- 2727
    2] No.of shares- 1
    3] Reasons- This company has a big FMCG corporations as its customers. Since I cannot buy all these companies, I invested in this one as a proxy play on all the large corporations.

  9. KEI INDUSTRIES

    1] Avg price- 1067
    2] No.of shares- 4
    3] Reasons- With increasing number of solar farms, electrification of villages and the highest ever demand for wires from Auto industry, Housing Industry and Power companies, it has great long term earnings potential. It has strong and increasing market share and great pricing power.

  10. V-GUARD INDUSTRIES

    1] Avg price- 206
    2] No.of shares- 14
    3] Reasons- The growth of FMEG in India is huge. This company has a variety of products ranging from stabilizers to water heaters and kitchen ware. With increasing discretionary spending, this company is likely to benefit from it.

  11. WIPRO

    1] Avg price- 640
    2] No.of shares- 10
    3] Reasons- The Indian IT service sector is poised to benefit from the worldwide development in IT. The cloud services and data management services are one of the best ones in India. There are some short term challenges but their overall longterm growth is quite intact.

  12. KPIT TECH

    1] Avg price- 552
    2] No.of shares- 3
    3] Reasons- The increase in spending on R&D of electric vehicles and the AD-ADAS system development and adoption is a huge a opportunity for KPIT. Their have big Auto companies as their clients who have invested heavily in this space and KPIT is a beneficiary of the EV growth and related services.

  13. IEX

    1] Avg price- 222
    2] No.of shares- 15
    3] Reasons- The increasing number of solar power plants will require a sophisticated market place for trading of the electric units. IEX has a monopoly in this space and with increasing solar output each year, IEX has great growth oppotunities.

  14. TATA POWER

    1] Avg price- 220
    2] No.of shares- 16
    3] Reasons- We all might have Tata Power for some obvious reasons so I am gonna just skip the reasons for this one.

  15. M&M

    1] Avg price- 921
    2] No.of shares- 2
    3] Reasons- The auto sector in India is undergoing a huge change. Indians now prefer buying SUVs rather than buying the entry level hatch backs and sedans offered by Maruti. Mahindra has an obvious advantage over other Auto companies in the SUV market because of their MOAT and huge fan following for their SUVs. With huge R&D spends and innovation in every product they launch, it’d market share is bound to improve in coming years.

  16. SBI CARDS

    1] Avg price- 850
    2] No.of shares- 4
    3] Reasons- Credit Card spends in India recently broke through 1.1 lakh crore and it will keep increasing. India is shifting from saving society to a higher spending society. This change will benefit the card companies. The avg spends per user is increasing annually and there is no reason for it to slow down. UPI can dent its growth a little bit, but if you want huge rewards on your shopping, lounge access and all, you will require a credit card.

  17. METROPOLIS HEALTHCARE

    1] Avg price- 2150
    2] No.of shares- 1
    3] Reasons- People are getting conscious about their health and preventive tests are increasing yearly. These diagnostic companies have high profit margins. Coupled with low penetration of organized diagnostic chains, we can see some market consolidation over the years.

  18. ANGELONE

    1] Avg price- 1680
    2] No.of shares- 3
    3] Reasons- Interest rates in India are at all time lows and with limited options to get higher returns, people have started investing actively in the markets. There are traders and direct equity investors, who trade and invest actively in the market. With investment options like the smallcase where one ca directly buy portfolio of shares which is managed by a managers, the number of investors will increase. Also the increasing positive attitude towards trading and investing will support Angels growth. Being the only listed discount broker, Angel can get scarcity premium as well.

  1. OLECTRA GREENTECH

    1] Avg price- 697
    2] No.of shares- 1
    3] Reasons- Their order pipeline is so strong for the next 12 months and if they are able to honor their contracts and deliver the said number of vehicles, apprx. 2100 the revenue amounts to more than 3500cr. Their revenues for this year total were less than 600cr. So if we take their EBITDA margins for this year, which are around 14%, the EBITDA on their order for 2100 busses comes to 420cr, much higher than their current 85cr. I will decide to buy more or don’t invest at all after their every Quarterly results.

Apart from these 18 stocks, I have some small positions in YES Bank, Aarti Drugs, L&T, Gujarat Gas and Ambuja Cements. Yes Bank is a turn around bet, Aarti drugs is into API and formulations ( 1000cr market cap), Gujarat Gas for increasing share of CNG vehicles and pipeline LPG gas connections to houses. L&T and Ambuja cements are Capex and infrastructure related investments. I might sell Ambuja cements after Adani’s acquisition.

My portfolio is very diversified and hance I can only have a very limited allocation in any single company with respect to my overall portfolio but I am okay with it. My portfolio has performed better than nifty and overall market for the last 3 months. In my portfolio I have companies where I own very less number of shares. Like metropolis, Hindunilvr and M&M. Any extra cash will be used to increase my exposure to these companies and will try to have 5% allocation for each investment.

We might have disagreements over my investments and investment thesis. I will appreciate the suggestions and criticism I receive as equally as the positive comments. I am new to this and I might be wrong and I am happy to accept the consequences.

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2

Is there a churn now in ur pf? angel one seems like its days seem to be over

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3

As I said, I review my positions after 2 years or if there is some news about some companies. Regarding Angel one. If we see their active clients, the majority revenue comes from commodity and options trading. Their income form equity trading is not a lot as compared to its peers like upstox and kite. Also I have seen people trade in Virar jam packed locals on Mondays. Retail people are not scared of investing and trading. We might see some fall in the momentum of growth but once the market start rising, this stock will start performing again. Also Angel’s investment in its research products and AMC feature, it’s heading towards becoming like a one stop market place for all investment products.

But I will track their quarterly results and management guidance. If I feel their outlook is very dull, I will think about trimming my position a bit.

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4

I don’t think AngelOne is a bad investment. If you’re talking about valuations then its a different thing, depends from person to person. Rest, angel should do well in the long term.

5

Your portfolio is good, you have got leaders from almost every sector. Only thing I’m not able to understand is your negligible allocation towards midcaps & smallcaps. You’re 19 so I’m presuming you have good risk capacity. Like for example, in banks you have covered the leader ICICI & HDFC. Now, you can have a small bank as well to get some aggressive growth exposure. Someone like IDFC having a great management would do the job. Also, I don’t see any paint sector stocks… can look out for both Asian paints as well as berger paints. Don’t involve in the debate that who is better, allocate to both. Will keep posting if I see anything else. Good Luck!

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6

I completely agree with you. I don’t have much exposure to midcap and small cap. I somehow don’t feel comfortable owning a company less than 5k cr in market cap. There are some exceptions, like Aarti Drugs in my portfolio, which is just 1k cr market cap company.
Also my allocation towards mainstream banks is higher because again I feel comfortable investing in banks which are big and are too difficult to fail. Still there is no guarantee that these won’t fail. But about investing in small banks, I feel its better to buy it below their book value. But I have my eyes on Indusind bank and AU small finance bank, but didn’t have the required funds to have a sizeable amount for my portfolio.
As for the paint sector, I am not excited about that space. Unless a company finds a way to make beautiful paints without using oil, I would like to stay away from it. Now there may be a question, " Why invest in any company? All are affected by crude, right?" Yes, but I find other sectors more exciting than paint, that’s all.
About my portfolio allocation in midcap and smallcap, I agree it is really low. I was a very conservative Investor few months ago. But now I have started to realize that any alpha generation would come only from these companies. I will be reducing my stake in ICICI Bank and sell of Ambuja Cements after the merger deal goes through and invest in the existing midcap and small caps or the midcap banks I mentioned. But not Angel One for sure.
I’ll surely consider your suggestion while balancing my portfolio. Thank you for taking the time and to comment.

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7

First of all, congrats on embarking on your investment journey so early.
Some suggestions I would provide.
Before investing any more money.

  1. Establish a valuation framework.
  2. If you can’t wait till then, invest in a passive fund instead till you are able to pick stocks yourself.
  3. Brush up on capital conservation frameworks and risk reward calculations. Opportunities always remain in market, we can always take our sweet time and invest only when risk reward balance is in our favor. Remember we ought to do our homework , actions can be taken when situations develop, just that we should be ready when they do arrive.
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8

Absolutely. I am working on sharpening my valuation skills. I have been reading valuation concepts explained in CFA course, it ranges from DCF Model to normal PE models. But I am still years away from mastering this valuation beast.
Thank you for your suggestion and the time you took to read and give me suggestions.
I will keep these pointers in mind hence forth.

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9

19 is a age to be more devoted towards building primary skills from where you can build corpus for investing.

With the fund size you have currently, it is better to go for trading rather than investing.

Investing is a slow grind and you will get bored in few years with negligible absolute returns (your percentage returns might be great, but percentage can’t buy you a holiday)

IMHO Investing should begin only when you can put in more than INR 15-20 lakhs to view some meaningful absolute returns to fulfil our growing aspirations.

I hope you understand the motive behind the message. BTW, your stock selection is very logical :slight_smile:

10

Thank you so much for the appreciation. I get the motive behind this message. No one can make great profits with just 80k investments, there is nothing to debate about here. My purpose of investing is I am not happy with returns I get in a FD, Bonds or any other fixed income security. Equity gives me a chance, a probability to generate returns more than our inflation or any other Fixed Income Investment, although the last few months paint a very different picture. :joy: :joy: We all have to start sometime with something, well then why not with 80k? :sweat_smile: :sweat_smile:
Also I have been learning intraday options trading for last 2 years. I have developed my own rules and setup for trading but its currently in testing process.
Thank you for taking the time to read and comment on my post. I will keep your suggestions in mind hence forth.

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11

So Mahindra & Mahindra announced their results today. Due to some problem with the BSE site I couldn’t get the reports and the press release. So this was a good quarter for M&M. There are some positives which I was hoping to see in their release. I will cover them one by one.

  1. Sales of XUV700- It is one of their recent launches and was quite appreciated by the whole SUV community. There were orders for 1000s within 50mins of it’s launch. That number has crossed 1.70 lakh open bookings. The semi conductor issue has started to subside and we might see faster deliveries too. With their new SCORPIO’X being launched, we might see some good booking number again this year. Not to mention the kind of shift, Indian Auto Industry is going through, from hatchbacks and sedans to SUVs, we might see some kind of market share gain by M&M. Also the variety of features these cars have from cruise control to AD-ADAS, we might see more Indian buyers running towards these brands;

  2. SUV Market Share- M&M achieved the number one position in the SUV market. They have a huge fan following for their Scorpio editions and now their new products are strengthening its market share even more. Not to mention once it releases its much awaited electric vehicle range of products, we might see more market share consolidation in the future.

  3. 3W Electric Vehicle Sales and Market Share- Their subsidiary Last Mile Mobility have garnered a market share of more than 70%, quite impressive for me. I have seen these vehicles in many localities. Mainly used by Mahindra Logistics guys, but we can see some growth in terms of 3W for Passenger Segment. That would be a real growth engine for this one.

  4. General Results- PAT grew 97% and the Tractor business also showed signs of growth over last fiscal. The total units sold were considerably higher than last year at 4.55 lakh. This growth might have come from increased preference towards SUVs and the increased 3W sales.

All in all these were good results and the guidance going forward is also good. Lower crude prices could also be a huge positive for this sector. The most important event for M&M going forward will be there born Electric SUV launch on 15th of August. If the buyers are impressed and the sales number are better than expected, kind of exaggeration, but we can see another Tata Motors like rally.

I do not see the need to value this firm on the basis of it’s earnings because each year they have some exceptional expenses which messes the whole valuation thing here. So I used the EV/EBIDTA method. Tell me if I am wrong in my calculations or I have put in the wrong numbers. I am still learning. Values are in Crores’

EQUITY - 47,122

ADD-
1)Total Debt- 46,835
2)Inventories- 26,000
3)Operating Lease- 11,595
4)Financial Lease- 2,432
5)Non-controlling Interest-9702

LESS-
1)Cash and Equivalents-3,487
2)Financial Investments-6,000
3)Equity Investments-700
4)Non-core Assets-2,338

ENTERPISE VALUE- 1,33,457

Now their EBITDA for this year is 14683cr. The EBITDA margins have grew at 10%CAGR for the last 10years. Considering they grow at a modest 14% this year, the expected EBITDA comes at 16500cr.
Now considering the 10 year median EV/EBITDA is around 11 ( Available on Screener ), their EV comes at 1,81,500cr. Divided by the number of Outstanding shares, my expected price target is 1400. Being even more conservative because of the challenges this sector is facing, I guess 1200 is fairly achievable. This values this company at 22 PE, which is also its 10 year median PE valuation.

My views might be different but I would appreciate constructive criticisms over blatant insults. Pls feel free to correct if I am wrong somewhere.
Thank you.

12

Most valuation frameworks which are covered in text books and so callled CFA courses are not usable for retail investors… Many valuayion frameworks turn out to be just justification exercises on why I choose to recommend this stick for investment… People choose the metric which can catch eyeballs of viewers or audience
.
Please imagine a typical CEO or CFO cannot accurately project earnings or cashflow with 90 % accuracy for one quarter…Do you think you as a retail investor can predict ten years cash flows with estimates, assumptions and so called bull case and bear case scenarios?
A retail investor can follow a simplified version of Peter Lynch approach aka invest in what you can and what you can understand… This know and understanding should relate more to economics of the business and less to operational aspects

This is all assuming you have a day job and continue to indulge in your passion of how to identify good companies…

Thanks and all the best…
Malolan

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I am aware that the valuation model in CFA books are completely worthless for a retail investor. The Peter Lynch way is the most trusted and guaranteed way to make money for a retail investor. But I am very passionate about working in Equity Research and other Investment Banks, that is why I am learning from the CFA books. And apart from the valuations I am trying my best to understand different business models, so that I can navigate through market cycles with ease.

Thank you for reading and replying on my post.

14

ANGEL ONE UPDATE!!!

  1. Nithin Kamath mentioned about slowing subscriber addition and active client base, since markets were in a downtrend. But I have experienced something completely different for the last 6 months. People have not given up trading. The interest has increased. I have seen people trade every day, in the jam packed local trains, in the gym,etc. I have received a lot of messages from my friends and family about stock picks and all. I refused to give them but that instilled my confidence in the growth of Angel One.

  2. Angel One has increased its subscriber base by 4.7% Q-Q and 97% Y-Y. I think both the numbers are good. Their market share in commodity trading which generates most of its revenue has grown from 43% to 45%. This might just be an effect of degrowth in Cash and Commodity segments. We can see this growth continuing in the future only if the commodity markets keep the investors interested.

  3. It is evident that ADTO in cash and FnO segment is badly hit in the last month but we could see it improving if the markets recover or even if the remain stable in the H2 of this FY23.

  4. It is interesting to see that number of orders have not taken any hit in spite of degrowth in Cash and Options ADTO. This could mean, pro traders are still in the market and that Angel’s competitive advantage comes from its commodity traders, which make up for most of its client base and are generally pro traders.

It is very much possible that I am wrong and client addition might see a hit in coming quarters. It will be a wise decision to wait for some months to get a clarity on this topic and also what management will do to increase profits incase of client addition slowdown.

Conclusion: I am positive about this industry but coming quarters will be very crucial for it, to analyze if broking industry can continue its steady growth or can it see a slowdown? I will sell one share out of 3 shares I hold. I will revisit my decision to buy in accordance with the response that market gives to these numbers.

15

FUTHER ADDITION AND ONE NEW INVESTMENT

  1. INDIAN ENERGY EXCHANGE-
    1] Reasons- I own it at higher valuations and wanted to avg down my price. Also considering upcoming monsoons and a possibility of power shortage, short term energy contracts will increase, which will benefit this stock
    2] Quantity- 2
    3] Price- 178
    4] Negatives- Any price capping and enough supply of power will dampen the demand

  2. MAHINDRA AND MAHINDRA
    1] Reasons- Technical Breakout above 1000. Also with increasing market share and any possibility of lower crude price will benefit this sector.
    2] Quantity-1
    3] Price- 1034
    4] Negatives- High crude Prices, Lower demand for PVs.

  3. OLECTRA GREENTACH
    1] Reasons- This company is trading at insane 150 times earnings valuations but if you look at their order pipeline of Electric buses, it is close to 6175cr, to be delivered in the next 12 months. Their Net profit margin is 6%. So 6% of 6,175cr is 370cr, which values this company at 16PE at current price. This is a good time to enter this stock given their expected earnings estimate.
    2] Quantity-1
    3] Price- 697 ( One might think, if I am so positive, why don’t I put a sizable chunk in this stock. That is because of the valuations and the estimates. I plan to add more stocks gradually after each quarter. That way I will get a better idea of the deliveries and how fats they are able to realize their orders.)
    4] Negatives- High valuations, lower demand.

Open to suggestions, but not to unnecessary and harsh insults or demotivation.

16

I beg to differ here…significantly…

No money is small when you agree to invest it. I think you could have not mentioned the number of shares as what really matters is what percentage of what we have, we have the courage & knowledge to invest…

Many behemoths have done a 10x in 5-10 years, some Tata group stocks have done 10x in 2 years…and these are very big, highly valued strong fundamental stocks like HUL & Tata Elxsi for example.

Starting with 80K in HUL in 2010 and having done almost a 10x over long term and investing proceeds in Tata Elxsi to do another 10x in next 2 years would be a 100x in approx 12 = 80 Lakh corpus… (all numbers are hypothetical and just to give a perspective)

This is all hypothetical and in hindsight and I myself can never dream to do such investing as I would not have sold an HUL…its just to give a perspective that 80k is not small and it can very well be 80 Lakhs by time you are 31 age (if you are 19 now)… and most importantly without indulging in any F&O/trading/unnecessary risks & complications…

You think very logically and from your post I can see much better than many experienced investors of even age 40…continue what you are good at and devise your own strategy, believe in it, grow with it, improvise it and never leave it…no matter how small is the capital available…

There is no short cuts & the grind is testing but so be it as I can see you are the one ready for it…

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17

Thank you so much for your kind words and encouragement. I will surely keep your suggestions in mind while investing.

18

Be watchful on IEX . Better to wait it to correct further and stabiise. Bear market has just started, don’t hurry to add anything. You would get lot of time, lot of companies at much cheaper prices in coming months.

If you can wait out for few months, you would get all your favorite companies at discount. Thought of guiding you as you seem to be very fresh in the markets and have not seen a bear market.

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19

It seems a good idea to wait but then that would be timing the market. I bought IEX to average down my buying price not because its valuations have become favorable. If it is a growth stock, we will see the EPS and EBITDA go up, which will bring the valuation multiple down. Now I have no idea when or my how big of a margin this will happen, so I have decided to invest only 1/5th of the amount, whenever I want to buy a stock. In this way I get 5 chances to buy the same company at lower valuations if the price starts moving up.

Thank you for your suggestion. I will keep that in mind going forward.

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20

NEWS UPDATE ON SBI CARDS!!!

Today RBI announced that, RUPay credit cards can be linked to UPI and can be used for normal day to day transactions. This is an impressive move by the Central Bank, since it will make it easier for credit card holders to transact at local shops say, Grocery Shops, Barbers, etc. I know it is stupid to think someone will use their credit card to pay for this services. Although it is a step in the right direction, there are 2 questions that need to be answered.

  1. What about the fee charged to the Merchants?

    When one transacts with Credit Card by UPI, will credit card companies still be able to charge these fees which makes a major part of their revenue. Lets say I pay with my credit card for my weekly groceries, it may cost 200rs. If credit card companies manage to charge this fee, the merchant will receive 4.5rs less than what he should receive for the goods sold. Now how does RBI plan to solve this problem where in, the merchant does not have to bear the cost of transaction by a Credit Card company and the consumers get the advantages of using a Credit Card for their payments?

  2. How will UPI integration help increase the avg. transaction value for credit card companies or their revenues?

    Personally I feel this will make 0 to some positive change in the value of transaction. Personally, I would prefer using my debit card for small transactions, say for buying groceries, pay a barber, pay for a uber/ola, etc. I wouldn’t want myself or the the merchant to loose money for this small transactions. This will be a dampener for the credit card companies. Small transaction makes up for a bigger share of UPI transaction than big ticket payments. Since credit cards are used for big ticket items, there is a possibility that this won’t grow as expected.

  3. It is not a question but my view.

    This step will surely increase credit card adoption if the companies some how manage to come up with a fee structure which won’t be a burden on anyone. This is gonna be very difficult since a major source of revenues of credit card companies is this. It will be very crucial for them to increase the number of transactions or the avg value of transactions in order to maintain and grow their earnings.
    There is also a possibility that many users will not register their credit cards, since they don’t want to overspend on things, given that it is very easy to use a credit card now.

Now coming to the reaction of SBI Cards to this news, it was in green, not much but it showed a little bit of optimism. That is a nice sign but we will have to wait for a con call, where the firm explains how will they approach this new opportunity and if it really would matter that much. Till then I believe the organic growth of credit cards in India is quite robust. We can see revenues going up, provisions and NPAs stabilize in coming quarters, which will bring the valuation multiples for SBI Cards down.

I don’t think its a negative or a very positive news as of now. So not gonna change any thing in my portfolio for now.

Healthy criticism, suggestions and Views are welcomed but won’t entertain any unnecessary criticism or insults.

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