Ishaan's Longterm Portfolio

[ishu]

Thank you for commenting and you have raised a valid point. D-Mart has, is and will face stiff competition from the likes of Reliance Retail or some other Retail outlet giant but one should also consider the market opportunity here. The consumption growth in India is so huge that there is enough room for 2 players.

One major competitor is Reliance Retail. They have also opened their stores in many places but they are mainly located in urban areas or in malls, etc. There one business model is to convert local kirana stores into their branded stores and expand, but the kiranas are not so keen about this. They feel like they have lost their identity. Hence their growth in this space is likely to hit some bumps. Secondly the crowd that Reliance Retail or Smart Store attract is of the high income bracket. They are not affected by inflation or care about prices as much as families with tight budgets. To be honest, many Reliance Retail stores are empty, since their major sales might be coming from the online mode. They hardly have invested in buying land and building their flagship stores like D-Mart. One can see from a mile away, a white building with hundreds of families flocking in every second to benefit from the lower prices. Reliance Retail does have an upper hand when it comes to owning brands and their digital infrastructure but D-Mart has also been working on its Apparel and GM segments and also has digital infrastructure for online shopping.

Now why D-Mart has better prospects than Reliance Retail or any other giant, is that they have a working business model in place. While other players are figuring out how to go about building their own chain of retail stores, D-Mart is investing its earnings from the old stores to build bigger better stores, with huge capacities, which is absent in other retail stores. Their growth not only facilitates their profit growth but also helps to bring down the price of goods that they order, since with every extra store, they have to order more. With less than 300 stores all over India, I am sure there are so many areas and people who have just heard about these stores. They are yet to see it themselves and enjoy shopping the highly discounted goods.

Apart from this, as I said in my previous post, D-Mart benefits from the increasing purchasing capacity of middle and low income group families. It is them who are flocking to these stores every weekend. I may be wrong about some things but I am positive about D-marts prospects as a major retail store giant.

[ishu]

It’s been quite a while that I updated my portfolio. After the interesting Q1, I am very satisfied with all the companies in my portfolio. There are some who have had a muted quarter but we all know the reasons for such a muted results.

1. Starting with ICICI Bank and HDFC Bank, both gave amazing results, not only Q-o-Q but also Y-o-Y. There PAT might be lower than last quarter but that was mainly due to unexpected growth in debt returns which forced the banks to buy more bonds which is mandatory for all the banks. Since the buying of bonds directly affects the Profitability, but this might be one time effect since bond rates have started to stabilize. I expect banks to post consistent growth for next 2-3 quarters, owing to rising interest rates, robust lending growth and resilient consumer sentiment.

2. HDFC LIFE posted muted results. Although their premium growth and NBM has been really strong and one of the best in the industry, their PAT failed to surprise me. I may be wrong but I believe that is mainly because of the kind of markets we saw for last 6 months. These insurance companies have been supporting markets for a long time which affects their profit. Now that FIIs have returned, we can see some profit booking by domestic institutions. Apart from the not so sure theory, I believe the industry is growing and is showing no signs of slowdown. I expect consistent returns of 10-15% for this year.

3. Bharti Airtel showed lower PAT but there were many positives like highest RPU of 183, growing subscribers, strong B2B business and new headwinds like 5G auctions and reduction in debt. I believe we might see some short-term pressure given the recent auctions but the ARPUs and Revenue is strong and might show impressive growth not only for next few quarters but next 2 years seem to be very happening for this Airtel.

4. Now all the FMCG companies( HUL, TATA CONS, MARICO, GALAXY SURF), in their interviews and concalls had said inflation biting into volume growth but price hikes have led to a healthy 10-15% growth in PAT. With inflation coming to down, we can see volumes picking up and it is very unlikely that the companies will reduce the prices of their products, which in turn will drive the topline as well as bottomline for the next 2 quarters. I have bought these companies at very low levels, so if there are some sudden negatives in future quarters I won’t be alarmed at all.

5. IT firms ( WIPRO and KPIT TECH), as expected posted muted results, although KPIT announced better results than what the market was expecting. The pressures were mainly related to attrition, slowing western economies and lower growth in new projects. This is a very short term trend. We might see some underperformance or consolidation in large cap IT, while KPIT has been very strong and can outperform its peers. They posted highest ever profits and revenue in the last quarter, baring the concerns the market had from IT firms, they seem to be unaffected by the headwinds.

6. M&M and Olectra Greentech surprised me with their deliveries of vehicles, new bookings and launches. We all saw the successful Scorpio launch and now the figure have crossed 1.5lakh in total. Mahindra has received more than 18000cr worth of bookings. Once the deliveries start, we can see good realizations in terms of profit. Their new EV platform launch and announcement were well received by the market. The stock price has not failed to surprise. Given the new bookings and positivity around the stock, I am happy to hold this stock for next 2-3 quarters. Olectra’s results showed growth on the back of higher deliveries of buses and the management in their concall mentioned about increasing their production capacity to meet demand and deliver more than 1800 buses in the next 12-18 months.

7. Both KEI and VGUARD showed a dip in their cables business because of higher inventory cost and slightly lower topline growth. This is might be a one time effect, with slowing inflation and the demand for EHV and HV cables being steady we can see better results in the following quarters. Vguard’s performance was muted because of shrinking margins and lower than expected revenue growth. The prospects for both the companies are really good, and their stock prices have shown the same.

8. IEX was affected due to price capping by Central Government and also faced some heat due to HPX launch. The management however is positive about the future and their IGX has turned next positive and can be another growth engine in next few years. Last few months the volumes on these exchanges were low since the price per unit was very high. We can see some moderation in coming quarters. Tata Power also posted good results, with PAT growing consistently.

9. Angelone as expected showed slower subscriber addition growth and lower equity volumes. This was expected but their FnO and Commodity segment continued to grow steadily. We can see some consolidation for the next few months, but given the rally we saw last month, things might turn positive for the Angel.

10. SBI Cards posted amazing results. Their fee income, market share in online payments and total credit card increased at a steady rate. With consumer sentiment stronger in India and the onset of festival season, credit card spends can go even higher. Given the current scenario, next 2 quarters can be really positive for the firm.

[ishu]

PORTFOLIO UPDATE!!!

1] DEEPAK NITRITE

Since all the excitement of China plus one strategy in Chemical Sector gained traction, I started scouting for good chemical stocks. I tracked TATA Chemicals, Aarti Industries, Deepak Nitrite, etc. but always the valuations and expectations of growth were so high that it did not make sense to invest at those valuations. In the past 1 year, the chemical stocks which ran up a lot during the covid times started correcting due to war factors, overvaluation and negative sentiments for the whole sector. But the exciting thing was that their sales and profits did not fall as drastically as the stock price. From the whole space I liked Deepak Nitrite, mainly because the correction was more than its peers but the fundamentals did not deteriorate.

Now coming to their products, 70% market share in phenol and sodium compounds is quite impressive. This may be a bit wrong, but growing investments worldwide in Sodium Ion Batteries for EVs might be positive for this company. Their increasing number of clients in India and in the Middle East will drive the topline growth consistently. Many of the chemical companies in India are their clients from Biocon to Aarti Industries. Thus any domestic growth will also benefit this company.

Now, there is no argument that this company has been a good compounder and that the management has been able to give good returns to its shareholders, even during covid times, their performance has been phenomenal. But buying this company at the right valuations is very important. Their Q1 performance was really impressive since they crossed the 2000cr revenue this quarter but the margins were under pressure due to inflation and macro economic concerns. Considering their margins at 17% and their avg margins for the last 5yrs coming at 22-25% means there is scope for improvement. A gradual increase in topline and normalization of margins is really important for the performance of this stock. Looking at the macro economic conditions, we can see some pressure on margins in next quarter at then they might normalize in later quarters. With commodity prices cooling down, crude prices below 90$, we can see improvement in margins. Considering that they maintain the Q1 topline numbers for the whole year, the topline for this year comes at estimated 8000cr, which is 17% higher than last year and considering 20% avg EBITDA margins, EBITDA comes at 1600cr, which is 60% higher than last year. Considering the Avg EV/EBITDA for last 5 years at 18.6, we come to a market cap of 28000cr. So the price per share comes at 2117 per share. So at current price, I think the valuations are quite reasonable.

Now coming to the other points that make this a good buy are their Greenfield Capex Plans, Low Debt-Equity and Positive tailwinds for the sector. Buying a company at 28 times PE with an avg profit growth of 87% in the last 5 yrs and estimated growth of 30% this year, is quite a good opportunity to invest. I have bought the stock at 2150 level but just one quantity. Will decide on making further investments after the Q2 results.

[ishu]

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 BANK1] 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 BANK1] 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 LIFE1] 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 AIRTEL1] 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 UNILEVER1] 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. MARICO1] 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 CONSUMER1] 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 SURFACTANTS1] 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 INDUSTRIES1] 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 INDUSTRIES1] 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. WIPRO1] 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 TECH1] Avg price- 552
    2] No.of shares- 5
    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. IEX1] 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 POWER1] Avg price- 220
    2] No.of shares- 15
    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&M1] Avg price- 960
    2] No.of shares- 3
    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 CARDS1] 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 HEALTHCARE1] Avg price- 1820
    2] No.of shares- 2
    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. ANGELONE1] Avg price- 1860
    2] No.of shares- 2
    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.

19. OLECTRA GREENTECH1] Avg price- 630
    2] No.of shares- 2
    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.

20. LARSEN AND TOUBRO
    1] Avg price- 1850
    2] No.of shares-2
    3] With Indian government speeding and increasing the capital expenditure every year and also the incremental business from Middle East will benefit this company greatly. Also they have made great strides in the Green Hydrogen space and I believe if India wants to become a pioneer in this space then LnT will be very important for achieving this goal.

21. DEEPAK NITRITE
    1] Avg price- 2100
    2] No.of shares- 1
    3] The valuations are reasonable and it has been a compounder with steady growth for many years. The management is very confident and clean with their business. Improving profit margins and stedy topline growth will be key triggers for the stock going forward. Also they have huge capex lined up, with a view to become an important domestic producer of chemicals.

22. AVENUE SUPERMATS
    1]Avg price - 4038
    2] No.of shares-1
    3] The valuations of this stock will always be really high, so instead of valuations its better to focus on the opportunity it can capture in the Indian Retail segment. Dmart follows a PRODUCER-WHOLESALER-RETAILER model of distribution and is able to provide variety of products at competitive prices. It currently has just 300 stores nationwide and its revenue per sq.ft is 35000rs. What excites me is, what if Dmart has 1000 stores in coming years and are able to maintain their revenue per sq.ft. Also their Online Delivery model has started to grow and accounts for 2% of their overall revenues. An increase in this segment will be key beneficiary for increasing the margins and profitability.

23. MOTHERSON WIRING
    1] Avg price- 87
    2] No.of shares- 4
    3] Their focus on High voltage harnesses for EVs will be a growth sector going ahead.

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, HUL 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.

THIS IS THE UPDATED PORTFOLIO!!

[asarun]

Given the total value of your portfolio, you are spread too thin. @hitesh2710 gave you some great suggestions earlier - I think it will help you if reflect on that more deeply. It is fine to make a few investments, but my suggestion is that you prune significantly to no more than 5-6 well researched ones and accumulate steadily over time, while watching their business performance. It is fine to diversify to 20 odd stocks when your portfolio size is much larger.

[ishu]

Yes I did plan to reduce my holdings in largecap stocks, which are a part of Largecap Mutual Funds or even ETFs and reinvest those funds into Quality Midcap and Small Cap stocks, but as you know market hasn’t showed mercy to anybody 's portfolio for the last year and currently most of my largecap investments are either at breakeven or in unrealised losses. As soon as the marker recovers, I will be rebalancing my portfolio by exiting big Large cap Positions and shifting those funds to Large Cap Mutual Funds and limit my portfolio to 10-12 Midcap and Smallcaps.

Also all my new investments are into Small Cap or Midcap companies, be it KEI Ind, Polycab, Vguard, Olectra, KPIT Tech and most recently Deepak Nitrite.

[ishu]

PORTFOLIO UPDATE!!

MOTHERSON WIRING

Came across this stock by accident. Recently the company got demerged from its auto ancillary promoter to focus completely on its high voltage harnesses specially for EV customers. Information in the Public Domain is very limited so will have to read some concalls to get better understanding but I liked the theme, so just buying 4 stocks for dipping my toes. Will invest more after more clarity from the management.

[Caution_Investor]

Ishu brother - since I started investing just before COVID and you just after COVID, I am little more experienced But your thesis/reason for buying a stock is much better than myself, hence I am curious to know your view…

With respect to stocks in same sector for example:
ICICI Bank V/s HDFC Bank: HDFC Limited will be merged into HDFC Bank. As per analysts this will bring lot of synergy and cost reduction etc over long term. Hence could HDFC be a better bet than ICICI? OR ICICI is right now is growing faster than HDFC. I feel over a long period of time both of the banks will grow more or less equally - so why not select one rather than both?

KEI V/s V-guard: (as per screener data)
KEI
PE: 30.8 | ROCE: 23.8% | RoE: 19.2% | DE: 0.17% | OPM%: 10-11%
Sales CAGR 10Y - 13%, 5Y - 17%, 3Y - 11%
Proft CAGR 10Y - 31%, 5Y - 32%, 3Y - 27%

V-Guard
PE: 39 | RoCE 21.8% | RoE 17.4% | DE 0% | OPM: 9-11%
Sales CAGR 10Y - 14%, 5Y - 11%, 3Y - 11%
Proft CAGR 10Y - 16%, 5Y - 9%, 3Y - 11%

KEI Better RoCE/RoE. Far better Profit Growth. V-Guard faces very high competition in FMEG segment where KEI too is entering. So why not invest in KEI only?

In FMCG you have HUL, Marico, Tata Consumer and there is DMART too. I feel DMART is a smarter bet than FMCG’s as growth in HUL, Marico, or TATA consumer indirectly benefit DMART. So, if given a choice, I will have only DMART.

Likewise Wipro V/s KPIT where KPIT is more focused into Automobile but Wipro is a laggard even among large cap IT stocks. Why don’t sell Wipro and put that into KPIT only?

Lastly, instead of IEX, Tata Power, SBI Card, Metropolis, AngelOne, L&T, Deepak Nitrite - could you buy a consumption discretionary theme like QSR or Metro Brands or Manyawar or TITAN etc which I feel have high growth prospect over a long term.

You have a long way ahead and I wish you all the best

[ishu]

Thanks for taking the efforts to reply to my posts. I will explain all the points one by one.

Firstly, all the largecap names like ICICI Bank, HDFC Bank, LnT, M&M and Wipro are the stocks that I would like to own from the Nifty Index. I don’t buy ETFs since, I like to pick my own stocks. Also, except for M&M and HDFC Bank, I have accumulated all other stocks during the covid crash so I am anyways sitting on huge gains and I don’t intent to cash on them since they are fundamentally good stocks which I bought at lower levels.

Now your question about banks. If you have noticed, in last 18 months, say from the onset of second wave in India, ICICI has given more than 60% returns and also also 2 dividends in between while HDFC has given negative returns in the same period, including any dividends if any. I agree that after the merger, HDFC will have major growth opportunities given their huge customer base but I believe this won’t happen in next 5 years. So, having 2 banks, is only beneficial since periodic outperformance of each bank will benefit you.

Now Vguard has has good market share is stabilizer sector which I believe will be a huge growth opportunity given the shift towards premium appliances and increasing use of high voltage products in our day to day life. So, Vguard is a pure FMEG play, where as KEI has not FMEGs expect their home wiring cable business. My hypothesis behind buying KEI, is the requirement for high voltage cables for building transmission lines, charging infrastructure. The growth expected in this segment for next few years is a minimum 10% CAGR which is beneficial for a company like KEI. So my thesis for these 2 stocks are different and hence I own both of them.

Now all the FMCG names I was able to accumulate at lower levels in the last 6 months when FMCG companies were facing margin pressure and were quite beaten down. The capital gains are amazing but the dividend yield on my investments in FMCG are higher than the normal levels since my buying price is very low. And as for D-mart, I feel the need for such stores are much required in India adn since Indians love discounts, we will keep going to Dmart. Also their E-commerce business will help improve their margins for the same products.

As for Wipro, I had bought it at 270ish levels in September 2020 and since then the growth has been amazing. Yes, the recent negatives are a bit concerning but I feel the companies will manage to sort this problem. I also plan on booking profits in Wipro once the stocks rebound and buy TCS, INFY, etc to diversify into the whole IT space. As for KPIT, its a really small company so I am not comfortable in investing more into KPIT than a largecap stock like Wipro, TCS or INFY. But I am also very optimistic of the business they are in and hence I will keep adding more of KPIT going forward.

I don’t understand the QSR space and all the other company’s you mentioned. IEX and Tata Power are for the renewable sector growth in our country and also the growth for charging infrastructure which will require an intensive management system and this business can be a good cash flow business. And I guess consumption discretionary products you mentioned, are always bought with a card. No one walks with that kind of cash in hand. So I believe SBI Cards has good growth opportunity, even with the onset of UPI. Metropolis is my bet on the growing diagnostic space, even though there are many entrants, I choose to be with metropolis. Angelone is my bet on increasing trading activities in India. Their client base is majority of experienced traders so their profitability is not affected a lot incase of a downturn and if one thinks market will go up in the long term, I think one has to bet on these stocks. Also the dividends for Angel are quite impressive. Deepak Nitrite is obviously a chemical play which I believe will grow steadily for years, given the government focus on domestic sourcing and reducing imports.

I hope this helps.

[manhar]

@Caution_Investor
Hi actually you asked ishu this question but I would like to put my view as well.

I feel in the next 5 or 8yrs most probably ICICI will overtake hdfc bank in market cap terms and become the largest bank in India. Below are the reasons why I think so,

1. I have a view that banks which will have more granular advances and more towards retail and MSME will outperform banks who are more towards wholesale. If you see ICICI in last 2 to 3yrs have slowly moved towards retail segment and has been consistently outperforming HDFC bank from last 6 to 10 quarters. Why is HDFC not changing its MIX then?. HDFC is the leader in the wholesale segment and it is extremally difficult for a bank of HDFC size to change its entire MIX. ICICI took 3 yrs and a recent example is yes bank which took 2.5yrs.

2. One of the major reason for bank to get better valuation than competitors is PROMOTER. because of UDAY KOTAK kotak bank gets primum valuation. HDFC was getting this because of ADITYA PURI who left the bank.

3. Technological advancement is bound to happen in banking over the years. I feel ICICI is ahead of HDFC in terms of technology as well. ICICI is also more innovative and has a better product offering than HDFC bank. Banks who focus more towards retail customers will outperform and ICICI is exactly doing that. Like if you see ICICI mobile banking app is better than HDFC ( you can verify this by their rating in play store or experience yourself), ICICI investment related products are better than HDFC ( ICICI direct),

You can clearly see ICICI last 2yrs stock performance also beats HDFC bank

One last point I would like to add. A bank more towards wholesale is likely to have better financing margins and a bank more towards retail is likely to have better cross selling. If the economy is going to grow and per capta grows then the bank with more retails will have a significant gain in cross selling resulting into more profits.

[ishu]

Did not think of it this way before but it makes sense. Thanks for sharing your views.

[Caution_Investor]

@manhar You have explained it nicely and I agree. I was just thinking if @ishu could narrow down his portfolio little bit by consolidating stocks in same sector…

Like at one point in time I was very bullish on Pharma sector and had Divis, Cipla, Dr. Reddys, Laurus, JB chem, Indoco etc and slowly narrowed it to Just Divi’s and Laurus though Cipla outperformed Divis

I feel in the initial phase of our investment, as we start researching every stock seems great and feel like owning all of them but with limited capital it is very difficult to select one over the other and guess with time and experience I may overcome this dilemma.

[ishu]

Absolutely correct. That’s why I first focused on buying large cap quality stocks to safe guard my portfolio in case of a meltdown and now steadily investing mid cap and small cap. It’s a bit psychological, now that my large chunk is protected by large caps, I can now take some risky bets to generate an alpha.

[ishu]

Some recent events in my personal life has instilled my faith in our economy. These are not investment thesis or sort. I just wanted to share my experience.

A few days back my mobile started malfunctioning and it cost me 1500rs to repair it and the very next day my laptop started malfunctioning. This time the cost came up to 12500rs. This time I did not have provision for such an emergency. I did keep some balance but it wasn’t enough. So I realized the need to have a separate account, different from my savings one. So I started to look for 0 balance accounts. To my surprise which started as a 15min search for a 0 balance account, ended up with me having a bank account within 15mins. The kind if service I got amazed me. Now I will receive my debit card and all next week.

Now second incident happened really early in the morning. I left my house at 6am in the morning and this Rickshawala came up to me and asked me if I had money in my bank. I got scared since this was a strange incident. But he desperately asked me to recharge his data balance because somehow he forgot to do it yesterday. He dropped me off till station for free and gave me the recharge money plus some extra cash. The kind of desperation I saw on his face for data, made me so positive about the whole data thing.

So recently I started counting EVs I see on the road. Which used to be like one in a week or so shot up to more than 20 a day. This is so good for the whole EV industry. With the importance for charging infrastructure growing each day, cable industry, RE generating companies,etc will have huge potential to grow in coming years.

These are really small incidents but do instill your hope in Indian Economy. In this time of uncertainty, I felt good and extremely positive of staying invested in the market. I do have some concerns of inflation and the whole oil crisis scenario but challenges only makes one strong. So staying invested the whole time. Do not want to miss any opportunity.

[ishu]

PORTFOLIO UPDATE!!!

1] WIPRO
The IT major announced okay set of numbers yesterday. Ofc the stock movement today, does not encourage any investor to buy this stock, but one needs to understand for a meer 1% margin fall the company looses almost 20000cr market cap even though the valuations are below its long term averages. The positive thing is the topline growth which has not been in negative, but it won’t benefit much if the margins don’t stop contracting. All the IT majors have talked about slowing attrition rate, so this will be a metric to watch out for next quarter. Holding this stock for next 2 quarters. I have immense faith in a company like Wipro. And any hardships faced by the company will only make it stronger.

2]ANGEL ONE
With highest ever quarterly revenues of more than 700crores, it has been a bumper quarter for Angel even though the markets have been pretty scary for the last one year. EPS crossing 25 this quarter and PE ratio way below its long term average of 22, this can be a good buying opportunity. With estimated PAT for this year of 800cr and Pe of 20, we can see a conservative stock price of 1800 if there is no major downturn in the market. But looking at the data composition of Angels active client base, a majority of their earnings come from Options and Commodity which are generally traded by professionals and these traders do not leave the market when there is a downturn. Also with increasing positivity around Indian Economy, we can see more and more investors coming into the market. Ofc the growth will slowdown but it wont be negative. Holding this stock till next quarter.

[ishu]

PORTFOLIO UPDATE!!

1] AVENUE SUPERMART

Topline growth and bottom line growth was very impressive. I strongly believe given the inflationary pressure on the all the FMCG products, consumers are making smart decisions and trying to find better price opportunities. This helps a company like Dmart since its economies of scale help them to offer attractive prices to consumers. So an inflationary environment has helped Dmart in some ways. In their presentation, the management talked about highest ever Bill Value but the footfalls are below the prepandemic levels. So basically, less consumers are spending so much more that the total sales are higher than the prepandemic levels. Imagine if the footfalls normalise in coming months, it will lead to a huge push in their earnings. Some segments that have suffered are discretionary spending and Apparels segment. These will normalize once the inflation eases. Also in their earnings call, I would like to find out the growth in Dmart’s E-commerce segment and its share in the total revenue.

With 2 consecutive quarters of 10000cr revenue, we can safely assume this performance to sustain and with 5% NPM, my estimated pat comes at 2000cr on 40000cr revenue. So at avg 140PE valuations, the stock price comes at 4450rs. This is a very conservative approach.

Their current quarter NPM is at 6%, so my highly optimistic estimate is 5350rs per share.

Holding this stock and looking to buy more.

2] HDFC BANK

After a good 3 quarters, HDFC Bank has announced amazing results. NII has grown by an impressive 18% and the loan growth has come at 23% with deposit growth at 19%. Many are of the opinion that, next quarter is going to be tough for banks, but for now HDFC Bank has given a nice start for the earnings season of banks.
Will hold this till next quarter results.

[ishu]

PORTFOLIO UPDATE!!

WIPRO

I know in one of my recent posts, I said I would hold Wipro for coming quarters but after some deep analysis, I found some disheartening facts about Wipro. Nothing bad about the company. It is reasonably valued and a good buy at this price but it does not suit my investment goals in the long term.

Wipro is 2.5 lakh crore market cap company. It has a diversified business but their growth has been somewhat unimpressive. After the CEO changed, investors including me felt really positive about the company’s future. Their recent acquisition made this belief even stronger but the numbers do not add up the way they should. With Sales and Profit growth CAGR of just 8%, this would not give me my expected returns. Growing at 8%, we won’t see a lot of price growth or PE expansion. Also since it is such a huge and mature company, the chances of it giving multi bagger returns is very less.

That’s why I have decided to sell all my shares of Wipro and will be Invest in KEI Industries and Deepak Nitrite after their Q2 results. I am tracking both these stocks very carefully and would take any good opportunity of adding these stocks. Some reasons to choose these stocks are-

1] Deepak Nitrite is a 30000cr marketcap company. With sales growth of 30% and profit growth of >50% and current valuations at mere 30pe give a good opportunity to buy. The only thing to look out for is their margins. If in Q2 their margins contract, any growth in topline would be redundant. But still, the chances of this stocks doubling is more than that of Wipro.

2] For Kei Industries, a 13000cr marketcap company, their future looks strong given a strong demand for high voltage cables and also housing cables. With increasing focus on Renewable Energy and widening the transimission infrastructure in our country, KEI, Polycab,etc are bound to benefit. Also the chances of this stock doubling are much higher than any other stock in my portfolio. It has already given 40% return in the last 10 months. It touched the high of 1600 few weeks back. This kind of outperformance will only continue if their quarterly numbers are consistent.

[ishu]

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 BANK1] 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 BANK1] 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 LIFE1] 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 AIRTEL1] 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 UNILEVER1] 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. MARICO1] 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 CONSUMER1] 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 SURFACTANTS1] 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 INDUSTRIES1] Avg price- 1200
   2] No.of shares- 5
   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. KPIT TECH1] Avg price- 552
    2] No.of shares- 5
    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.

12. 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.

13. TATA POWER
    1] Avg price- 220
    2] No.of shares- 15
    3] Reasons- We all might have Tata Power for some obvious reasons so I am gonna just skip the reasons for this one.

14. M&M
    1] Avg price- 960
    2] No.of shares- 3
    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.

15. 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.

16. METROPOLIS HEALTHCARE
    1] Avg price- 1820
    2] No.of shares- 2
    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.

17. ANGELONE1] Avg price- 1860
    2] No.of shares- 2
    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.

18. OLECTRA GREENTECH
    1] Avg price- 630
    2] No.of shares- 2
    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.

19. LARSEN AND TOUBRO
    1] Avg price- 1850
    2] No.of shares-2
    3] With Indian government speeding and increasing the capital expenditure every year and also the incremental business from Middle East will benefit this company greatly. Also they have made great strides in the Green Hydrogen space and I believe if India wants to become a pioneer in this space then LnT will be very important for achieving this goal.

20. DEEPAK NITRITE
    1] Avg price- 2100
    2] No.of shares- 2
    3] The valuations are reasonable and it has been a compounder with steady growth for many years. The management is very confident and clean with their business. Improving profit margins and stedy topline growth will be key triggers for the stock going forward. Also they have huge capex lined up, with a view to become an important domestic producer of chemicals.

21. AVENUE SUPERMATS
    1]Avg price - 4038
    2] No.of shares-1
    3] The valuations of this stock will always be really high, so instead of valuations its better to focus on the opportunity it can capture in the Indian Retail segment. Dmart follows a PRODUCER-WHOLESALER-RETAILER model of distribution and is able to provide variety of products at competitive prices. It currently has just 300 stores nationwide and its revenue per sq.ft is 20000rs. What excites me is, what if Dmart has 1500 stores in coming years and are able to maintain their revenue per sq.ft. Also their Online Delivery model has started to grow and accounts for 2% of their overall revenues. An increase in this segment will be key beneficiary for increasing the margins and profitability.

22. MOTHERSON WIRING
    1] Avg price- 87
    2] No.of shares- 13
    3] Their focus on High voltage harnesses for EVs will be a growth sector going ahead.

My portfolio is very diversified, hence 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 2 years. In my portfolio I have companies where I own very less number of shares.

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.

THIS IS THE UPDATED PORTFOLIO!!

[ishu]

PORTFOLIO UPDATE!!!

1] KPIT TECH
It was expected all the IT companies to give a muted results this quarter but KPIT on the other hand has given really good results. Revenue has grown from 591cr to 745cr Y-o-Y and from 686cr Q-o-Q. The PAT has dropped this quarter due to higher tax and also a marginal fall in OPM due to salary hikes this quarter. The attrition for KPIT is quite low and the turnover ratio is also low. Being in a RnD sector the impact of Recession might not be as severe as it is expected on the large cap IT companies given the type of business they are in. Increased investments in Electric Vehicles will drive the topline for the company and operational efficiency will drive the bottom line. All in all good results.
Would add to my existing positions if there is a small correction or a consolidation. At 56PE this feels like a bit risky zone. Considering estimated Annual Revenue at 3000cr and EBITDA at 540cr, the 5yr avg EV/EBITDA multiple is at 19, which gives us a market cap of approx 10000cr. The price per share comes at 374rs. Also my DCF analysis shows estimated price per share at 348rs. Hence any correction towards 500-600 can be buying opportunity but it will be a momentum buy rather than a value buy.

2]KEI INDUSTRY

Personally my expectations were a bit high because of the amazing results by Polycab but KEI didn’t show the growth I expected. Revenue this quarter came at 1600cr and PAT was 107cr not much growth Q-o-Q but Y-o-Y growth is really good. Revenue has grown 18% Y-o-Y and PAT has grown 16% Y-o-Y. There was slight fall in margins but its very negligible. The Domestic Cable business showed good demand while the EHV segment which is mainly related to Infrastructure business which takes a hit during the monsoon has been quite low. Historically, Dec and Mar quarter is a strong quarter for KEI while the monsoon months are a bit muted.
Holding KEI till next quarter. Any major fall due to these muted results will be a buying opportunity.

3] INDIAN ENERGY EXCHANGE

Again a muted quarter due to monsoons muted demand but there is no degrowth. Revenue has fallen Y-o-Y but has been constant Q-o-Q. The stock price has also corrected significantly from 120 PE to 40 PE. It is still not clear what the future looks like but once Diwali starts we will see energy demand going up and trading volumes increasing on the exchange.
Will hold till the December quarter.

4] TATA CONSUMER

It has been a decent quarter for Tata Consumer. The volume growth has been really muted. There is actually some degrowth in UK business, while the foods and Coffee business have grew more than 20% but it is mainly price driven rather than volume driven. It is very crucial for the volumes to grow since price driven growth is not sustainable in the long term. Yet the Revenue has increased 10% Y-o-Y and PAT has increased to 389cr from 286cr last year and 276cr last quarter.
I have no intention of selling this stock for atleast a year since now the growth is price driven but eventually when things get better which I hope they do, the volume growth will bring more sustainable growth in the long term.

[ChaitanyaC]

So you have 22 stocks in your PF, and in some stocks you have purchased single digit shares. My question is, did you think about investing in lesser number of stocks with more allocation, than following 22 stocks with single digit share allocation in many of them? Or you are purchasing shares in a lot of stocks which you are interested in, learning about their businesses, coming out of them if you are not satisfied, and as you gain knowledge and experience, you will consolidate your PF to fewer stocks and increase allocation?