ValuePickr Forum

Malhar's Satellite TechnoFunda Portfolio

Hello everyone. My portfolio consists of two parts-
a) a long-term portfolio of quality growth companies for 10-15 years (core)
b) a short-/medium-term portfolio of companies with strong price-volume action along with fundamental catalysts for 6-12 months (satellite)

This thread is about the latter. In this part of my portfolio, the strategy is-
Technical charts on weekly and monthly candlesticks
Fundamental triggers like sector tailwinds, upcoming capacities, product launches, change in management etc.
(Slightly higher weightage given to technicals over fundamentals e.g. 60:40)
Cut all losses at 10% without exception (may re-enter if there is revival after hitting SL)
Trail the stop loss
Follow CANSLIM approach
Do scuttlebutt
Heavily influenced by Mark Minervini and William O’Neil
Cut losers and average up the winners

Stocks with thesis:

Ambika Cotton (CMP is ~ Rs 2024):
Price Volume Action on weekly chart-

and monthly chart-

Sector tailwinds (China+1)
Export oriented (out of ~ Rs 390 Cr turnover so far in FY22, ~ Rs 290 Cr was from exports i.e. ~ 74%) Debt free
Target of Rs 800 Cr revenue for FY22
Upto 28 Sept 2021, company had sales of Rs 390.25 Cr and Q1 FY22 sales was Rs 184.07 Cr hence Q2 turnover will be >= 206.18 Cr (390.25-184.07)
30K spindles capacity coming up (source for all numbers here is AGM)
Rise in cotton and cotton yarn prices

AGM Links-
Video Recording: 33rd Annual General Meeting of Ambika Cotton Mills Limited held on 29 Sep 2021 - YouTube
Transcript: Proceedings of the 33rd AGM of Ambika Cotton Mills – Ambika Cotton Mills Limited

Canara Bank (CMP is ~ Rs 187):
Price Volume Action on weekly chart-

and monthly chart-

PSU banks have tailwinds: a) number of PSU banks has reduced from 27 in 2008 to 12 now b) all PSU banks have cumulatively made a pre-provision operating profit of ∼ Rs 9.8 Lakh Cr in last 6 years, and a cumulative provision of ∼ Rs 11.5 Lakh Cr in last 6 years, leading to a net loss of ∼ Rs 1.2 Lakh Cr (this shows the level of clean-up in PSU bank loan books)


Lenders will benefit in economic revival
Provision coverage ratio of 79.68% as on 31 Mar 21 (source), and further improved to 81.18% as on 30 Jun 21 (source)
Raising of capital in Dec 2020 (source)

Major collateral is real estate, and real estate recovery may lead to provision write backs
Has major deposit gathering ability (people talk about CanFin Homes brand but what about the parent- Canara Bank?)

PSP Projects (CMP is ~ Rs 501):

Capex cycle recovery
Management has guided for revenue of 1600 to 1800 Cr for FY22 (source), whereas current market cap is 1846 Cr
Post completion of Surat Diamond Bourse, company will qualify for larger projects


Strong order book as per AGM commentary

Dishman Carbogen Amcis (CMP is ~ Rs 2024):



Vitamin D opportunity

VST Tillers (CMP is ~ Rs 3400):


New product launches (27 HP tractor, 17 HP single cylinder tractor etc.)
1000 Cr revenue target for FY22
3000 Cr revenue target for FY25
Exports opportunity

Indian Hotels (CMP is ~ Rs 214):


Covid situation revival can act as tailwind

IIFL Securities (CMP is ~ Rs 112):


Beneficiary of retail investor participation

Allocation in these stocks is more-or-less equi-weight

Intended holding period is anywhere between 6 and 24 months (not fixed). Will post on this thread only when there is a portfolio update (e.g. exit/addition etc.) or to answer any questions. I have no rigid return expectation from the satellite portfolio; idea is to at least marginally outperform the core portfolio to justify the higher churn and related costs. Thank you. Looking forward to feedback/suggestions. Views invited.

Disclaimer: Any analysis posted should not be construed as investment advice. Any posted analysis is not a buy/sell/hold recommendation. I am not a SEBI registered investment advisor. Please consult your financial advisor before acting on any posted analysis. The author shall not be liable for any losses incurred by readers while acting on any posted analysis. The author has holdings (and hence a vested interest) in all companies posted and the analysis may be biased. This post is for educational purposes only.

11 Likes

Great work Malhar , Very in depth analysis

Seems a good approach Malhar, since you mentioned about CANSLIM ,do you plan to devise a point system and keep weightage for both fundamentals and technicals to arrive at specific points for each of your buy .
Isn’t a mathematical model even be more advantageous.

Thank you. That seems like a good idea- I hadn’t thought of that. Will try to develop something around this.

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Hey Malhar! Good work. Any rationale for 10% stop loss? Maybe adjust that number for high beta stocks?

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Thank you! William O’Neil recommended 7 to 8% SL in his book ‘How To Make Money In Stocks’. I have rounded it off to 10%. Plus, since I am not chasing stocks to any levels, it seems rational that since my buy price is reasonable based on technicals, the stock shouldn’t fall much. For high beta stocks, your logic is correct, but I want to enforce some ‘ground rules’ in my system, hence will cut losses at 10% without exception. If the trend reverses after hitting SL, I can consider re-entering.

2 Likes

Great approach Malharji. I mimic similar approach with LT (10-30 years) and ST/MT (3 weeks to 24 months). Just my opinion on your method, by sharing a bit more detail about my method to show that you are right on the money doing what you do.

My ST/MT picks are based on various forums recommending ideas that are based on FA, AGM, Bulk Buying, Sector Analysis, CANSLIM, and Screeners. I then add the TA factor based on DTL, UTL, CMF, RSI and SnR. On the top of all of this, I add the SIP factor during buying and selling. If stock keeps performing, and has merit to enter the LT, then it will be moved into the LT 10 year holding category.

Like your approach very much since it has the main macro similarity. The only downside of all of the above is that it is time consuming, but, I happen to have the time since this is all night time activity for me (when Indian markets are open).

Stopping here to pass the moderator approvals. Please post any questions, and be happy to answer.

KKP

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I don’t deserve ‘Ji’ please :pray:
Thank you for your kind words
Yes, our approaches seem to be very similar. It will be interesting to hear how you compartmentalize the ST/MT and LT; do you use separate demat accounts for both etc.?

I have incorporated a watchlist alongside the satellite portfolio. The thesis is that since I am taking strict exits on SL, there should be watchlist stocks where I can deploy funds in case SL is triggered in any stock. As of now, my watchlist for ST/MT satellite portfolio comprises of the following companies:
Century Ply- ancillary beneficiary of real estate cycle + good price volume action
Atul Auto- good price volume action
IB Real Estate- beneficiary of real estate cycle + good price volume action + management change

Disc- small tracking positions in all

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Yes, I have been asked that before, and I am sure that you have struggled with it, as much as I have also.

I do have two accounts, but it is hard to have something like Tata Elxsi suddenly go from being a Trading stock to entering the LT Portfolio. Then you are stuck for buying the stock in the wrong account.

It is more of a mental note that I keep it, but right now 75% of my LT positions are sitting in Account 1, and I do very little trimming to it. And, trading positions are sitting in Account 2.

I will figure out how to migrate from one account to another at ICICI demat and it should be easy although have not even made 1 phone call in doing so.

KKP

2 Likes

I figured that much but let me share my 2 cents here. Maybe it ll help.maybe not.
I myself had a fixed stop loss for technical bets but When I transferred the same system for techno funda bets I noticed it working against me because of longer time frames. Over the next one month Something like an IBREL or delta corp falling 10% is par for course but Pidilite falling 10% will worry me. Blending technicals with fundamentals is after all blending objectivity with subjectivity. So why not be subjective with your stop loss. It can be a function of your stocks average daily range. Just try it some time. If it doesn’t work then no harm done. It’s only money :smiley:

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Thank you for your valuable inputs.
This idea was covered in Mr Mark Minervini’s book Trade Like A Stock Market Wizard, the relevant excerpt is “You may have heard that in setting a stop loss you should allow more room for volatile price action; you should widen your stops on the basis of the volatility of the underlying stock. I strongly disagree.” He then goes on to give more evidence and a detailed explanation on why you should have a fixed SL (not variable based on volatility).
Given that my investment style for techno funda is heavily influenced by him, so far I am adhering to his principles.
Having said that, I will most certainly consider your viewpoint. After all, the mind is like a parachute in that it works only when open :slight_smile:
Are there any particular companies from the ones I have written about above, where you feel the fixed SL will be a problem? (you mentioned IBREAL and Delta Corp as volatile stocks where it may be a problem, similarly are there any from the ones I have mentioned above?)