Malkd's Core Portfolio

[Malkd]

@Aniesh7
I can’t speak for aurobindo. They have had a poor history with usfda. Alembic will recover. Just procedural observations so post 15 working days from 5th Feb we will get the verdict and hopefully it is positive. Either way if horizon is 5 years then this will just be a usfda panicky blip.
However, if the FDA clearance is delayed there’ll be a huge amount of pain in the short and even medium term. Good chance for new entrants to accumulate slowly and in tranches if they have the stomach for what could be a year plus of pain. Unfortunately I’ve already overallocated so I can just watch these disgustingly low prices and just wish I’d invested in tranches so I could buy more now . Btw FY23 to FY 25 will be the year for alembic… a lot of drugs going off patent and their capex will come on line and R&D spends will ease off a bit hence adding to bottom line. However market is forward thinking so this might be priced in over the next few quarters itself since there could be upward surprises regards injectables /overperformance etc so I’ve got in early and il be waiting until then at what I consider cheap prices to make full use of that. They are a class company that I have no issue holding for very long period of time but its not a good option if your timeline is just a few quarters/1 year

Instead I’m just holding Alembic patiently and ignoring the price and used my cash to load up on ITC today in the crash . Dividend chasers always crash ITC post ex dividend date by more than the dividend amount. Not sure why this happens in these days of taxes but it’s always a chance to accumulate ITC at cheap so I’ve taken advantage today.

[Aniesh7]

Yes Alembic is far better bet than Aurobindo, no doubt.
I don’t track ITC coz of it’s cigarette business . N it Hotel Business which r seasonal
It’s FMCG is growing . It grew from ₹500 crores (in 2005) to ₹13,000 crores in 2020, profitability is still a concern.
In fact, this segment only has margins of about 2–3% when some of its peers have margins of 15–20%. So even though the FMCG business brings in a quarter of the company’s total revenues, it only contributes to ~3% of ITC’s profits.

Wen it will demerge their FMCG business I will surly get in just like I bought tata consumer. But demerge as per management it won’t happen…

But valuations are good… n it’s a pure value play plus dividend…

[Malkd]

Cheers Aniesh7. I am a blind investor in ITC so that will never change … btw in the latest quarter Fmcg margins upto 9 percent. Revenue almost 60 percent of cigarettes. Cigarettes look safe with no additional taxation(and with vaping banned) so cash cow looks safe for a while if a bit muted.
I’ve learnt never to underestimate a sleeping giant like ITC. With the synergies they have with their various verticals and With the cash they have and the cash they generate they can afford to spend both organically and inorganically to grow and the story can turn in a positive direction at any moment and it already is considering their product basket they’ve created in a very short time period along with improving margins. All it takes is a catalyst and there are a lot of them that could play out any moment (demergers, acquisitions, illegal cigarette takedowns etc).
In short:
It’s basically A behemoth with FCF and Loads of cash in hand targeting and slowly succeeding in a high valuation sector like Fmcg while being protected in its main cash cow via regulations(there will be no new listed competition for cigarettes considering the nature of business) while allowing investors to compound wealth with the knowledge that it will still be standing 30 years from now and giving them high dividends too as rewards for their patience in the meanwhile. Unfortunately I’m too pigheaded with ITC to ever change my mind lol. Il be adding on dips up until it breaks it’s all time high. Hoping I get a few years to do so

Edit: also managed to add my first tranche of astec life today. Been waiting patiently and finally managed to add at a 26 percent discount from all time high and near 200 DMA and at oversold RSI at rs. 1006. Short term supply chain issues and cyclicality brought it into my buying zone. Will be adding more tranches as the quarters Pass by and the story here gets confirmed. Don’t want to be trapped at high valuations by going all in too early.

[narenarora]

Hi @Malkd
Regarding Alembic shareholding
Am sure you would have noticed decline in promoter and FII holding over last 4 quarters. Promoter holding has fallen from 72.97% to 69.78%

Are you aware of reasons behind this?

Regards

[Malkd]

Hey @narenarora
This was discussed in the alembic thread around May or so. Linking it here:

Alembic Pharma (Oral Solids ==> Injectables, Onco, Derma, Opthalmic)

As shared by Hitesh sir here: The selling was by “UDAY EDUCATION SOCIETY” and possibly for their charitable purposes. This link also shows that Uday education’s most liquid holding is Alembic Pharma (so it was not possible for them to sell Alembic shares as far as I understand). My 2c are that I think it is difficult to read too much into this and tie this to the buying of Alembic shares by Nirayu.

The selling by Uday education trust was an overhang and I’m assuming that’s the reason for the change. Since then there was a QIP done at 932
which brought in some strong domestic players too so FII selling have not really bothered with.

[Malkd]

Final portfolio now looks like this(Adopting a tranche based system from now on so I don’t feel fomo when a stock runs up AND I can wait for stories to improve patiently AND not lose too much if they fall apart).
It’s divided into 2 portfolios… Mine and my wife’s. My portfolio could be considered a bit risky and the aim is 20% CAGR returns per year atleast and my wife’s is the safer portfolio with the aim of 15% CAGR and capital protection (She’d kill me if I lose her money )
Portfolio 1(Mine):

Pharma Basket:
Laurus Labs (15/15 Tranches completed)
Alembic Pharma (1/5 Tranches completed)
Granules (1/5 Tranches completed)

Chemicals:
Deepak Nitrite (10/10 Tranches completed)

Fmcg:
ITC (6/15 Tranches completed)

Jio/Retail/Energy:
Reliance (1/5 Tranches completed)

Solar energy:
Borosil Renewables (2/5 Tranches completed)

IT/BFSI:
Intellect design arena (2/5 Tranches completed)
Expleo (2/2 Tranches completed)

B2C Retail:
Vaibhav Global (1/5 Tranches completed)

Agriculture:
Astec Life sciences (1/3 Tranches completed)

Auto Ancillaries:
Racl geartech (1/5 Tranches completed)

Construction and Steel Proxy:
Apl Apollo (Bought Tricoat… got App Apollo after merger) (1/3)

B2B tech platform:
Just Dial (1 of a possible 3 depending on performance of JD Mart)

Will be buying near 200 DMA or atleast on huge crashes for the big guns who have safe long term stories(ITC, Reliance, Vaibhav Global) , won’t be adding any more of the ones who’s tranches are completed(Laurus, Deepak, Expleo) and will buy as the story improves QoQ and YoY with The rest on dips( Astec, Borosil, IDA, Racl, Apl Apollo, Granules, Alembic, Just Dial)

Should take me the better part of 1 to 2 years to finish my tranches. Once done with all my tranches il add into the outperformers on dips.

For the safer portfolio il be SIPing in the following on days of dips and crashes like a zombie for my wife’s portfolio:

Portfolio 2(Hers):

Unorganised to organised Consumer play:
Relaxo

Insurance:
ICICI Lombard

Platform Tech:
Info Edge

Wires/Cables/FMEG:
Polycab

Pharma/NBFC:
Piramal Enterprises

IT BFSI:
Oracle Finserv

Fmcg:
Tata Consumer Products
ITC

Jio/Retail/Energy
Reliance

Railways:
RITES

Watchlist ie post moratorium:

Banking:
Idfc first

Total 22 companies I need to keep track of though most of the ones in the second portfolio don’t need too much man management. I cannot add any more though so will be concentrating on the above companies for the foreseeable (unless something unbelievabe pops up)

Note: Edited since I’ve decided to transfer RITES shares to my wife’s account. We decided its better if I go risky and she goes safe with her porfolio

[Aniesh7]

Good. All the best .
Btw you don’t invest in IPO ?

[Malkd]

I don’t like IPOs in general since the whole process is a bit crazy…
Basically, Certain investors want to get out of it so they offer us good price for them to EXIT. This is already a best case scenario pricing for them and We barely have a chance to get any allotment at this price anyway. by the time the company gets listed there’s a premium attached to it due to market frenzy due to retail which makes it even more overpriced!
It may work but I personally feel we have enough companies in the stock market as it is so any new ones can wait and prove themselves first. I like under the radar stocks who are making small changes to their business models which gives them the potential to get discovered by market frenzy in the future. IPOs by nature start off with market frenzy so I just don’t feel comfortable. It has proven very lucrative for some but it’s just not for me.

That being said I will consider any tech/platform based IPOs that come out though since I’ve missed the boat on most of the ones in the market currently though I can’t even imagine the premium and frenzy for these:)

[Aniesh7]

@Malkd

That being said I will consider any tech/platform based IPOs

Yes No harm in going for quality companies with growth .

Nazara Technologies Ltd Is one such Upcoming Ipo In near future.

[Investor_No_1]

@Malkd

Will be buying near 200 DMA or atleast on huge crashes for the big guns who have safe long term stories(ITC, Reliance, Vaibhav Global) , won’t be adding any more of the ones who’s tranches are completed(Laurus, Alembic, Granules, Deepak, Expleo, Rites) and will buy as the story improves QoQ and YoY with The rest on dips( Astec, Borosil, IDA, Racl, Acrysil, Apollo Tricoat)

You have a very interesting approach of “tranches”. What this means is that you are very clear on the allocation and structure of your portfolio even before you have built it. This is good.
I remember reading in your thread earlier that you had another long term portfolio of some industry leaders (well known names) - a portfolio you completely sold off I think before or during the crisis to come up with this new one.

Curious what would have been the comparable return profile in last 1 year if you had held on to most of those names (of course the best ones while removing the weeds) and incremental capital that you put into the new ones would have gone to same old ones (best performers) during the crash lows? Thanks

[Malkd]

@Investor_No_1
Back in end of Feb/early March 2 things happened… it was pretty evident covid would affect the economy post what was happening in Italy. The sensex was crashing daily AND my business was on the verge of being shut down too due to covid(schools had begun shutting down in Italy and it was only a matter of time when I suspected the same would happen here). I had been holding a portfolio and adding in SIPs since 2011 with the likes of asian paints/hdfc etc… ie mostly blue chips. With the realisation that I may end up without any cash to average down since my business would be in trouble if covid reached india and the USA I decided to do a mass selloff and luckily managed to sell everything by the first few days of March. Back then the covid panic was unlike anything I’d seen in the previous decade and seemed for worse than the likes of ilfs etc. My plan was to invest back in at near rock bottom and build my portfolio again slowly as visibility came back AND keep money aside to keep my business afloat.
So in hindsight i feel like a made a good decision destroying my portfolio.
While I slowly began building my portfolio again it struck me how over the years I’d become complacent and had stopped attending concalls and even stopped bothering with annual reports since things were always so rosey with blue chips and I was happy with my 12% or so CAGR. Covid made me realise how overvalued some companies can become and also how I’d need to re evaluate my investment decisions.
Since then I’ve made it a point to not overpay and understand the companies I invest in indepth and have clear long term growth drivers.
Hence why I began studying and now have my new portfolio. I’m no longer complacent and I honestly feel safer than I’ve ever felt with my blue chips. It’s also lead me to Laurus Labs and Deepak(I have most of my networth in these two companies) so I won’t complain.
Considering I’m now moving into riskier and riskier territory with under the radar companies and the fact that business is almost back and track leading to monthly cashflows instead of a lumpsum to work with I’ve adopted the tranche system so that

1. I can average down after the first few tranches(I hate being helpless and watching Alembic/Granules at these low prices)
2. I atleast have some skin in the game early so that if a company runs up too high quickly atleast I won’t feel too bad for missing out entirely (Racl)
3. If something terrible happens atleast I’d just lose 1 tranche. I’ve realised Most of these companies have long term stories and they aren’t going to become multibaggers overnight. There is a LOT that can go wrong. So I’d rather add as their stories improve rather than just put a lumpsum at a “cheap price”
4. It’s easier having a tranche system in place since like I said il by deploying cash monthly instead of a lumpsum and this will give me some structure. Planning ahead means that I can do this easily even when work is in full flow too.

The main thing is I am enjoying investing again and thinking of them as my businesses and growing with them. The thrill of owning deepak/laurus and seeing them turn from 5000 or so MCAP small caps to being entered into the midcap 150 purely based on fundamentals and not market frenzy has been worth it alone …
Im now just looking at them as businesses I own that I want to do well long term that I’ve bought at fair prices which will allow me to benefit if they do succeed and I’m just ignoring stock prices(apart from when I have to buy ofcourse) and this strategy and mindset is helping me hold my nerve and plan long term. So, I’ve had no regrets so far and now am excited at the possibility of a 20%+ CAGR over the next decade(atleast there’s a possibility now) to the certainty of a 10 to 12 % cagr if I invested in my previous stalwarts(and not knowing how they’d do it… just that they would) even if the returns over the past year would’ve been similar

[Aniesh7]

Hi Malcom . what made u to invest in Intellect design arena ? Other that structural tailwind

Even I’m tracking it n planning to buy. Ur views will be helpful on this.
Valuations r also reasonable.

[Malkd]

@Aniesh7
I understand the banking and financial services sector thoroughly but by nature of leverage involved I don’t like investing there. I do not understand how to valuate technology based companies but wanted to invest in them desperately.
The BFSI IT/Tech sector seems the perfect marriage of both for me.
I get the growth and tailwinds in Bfsi with the additional benefit of no leverage and the pros of digitisation and free cash flows. After a bit of studying it became easy for me to understand the digitization aspect of this sector and when it comes to the product side IDA is a clear standout when it comes to growth and I now understand enough to stay invested/exit if needed. Their products are being adopted and after a long period of development pain they are all set to monetize. Betting on a virtuous cycle of huge profits and cash flows next few years, leading to development of the next products without debt, leading to even more profits and cashflows over the next decade.
I firmly believe digitisation of banks and growth in overall Bfsi is thr theme of this next decade alongside pharma, chemicals and renewable energy so after studying it I’m creating a Oracle (for safety and dividend pay though growth will be slow being one of the market leaders), IDA (dark horse for growth and product monetisation who I’m banking on taking up a lot of market share over the next few years) and expleo(for services and testing) basket to ride it.
It also helps that valuations in these 3 companies (arguably even IDA considering forward FY 22 valuations) are very reasonable and not the crazy high valuations in the rest of the digitization space.

Disc: invested around 5 percent of my portfolio ie 3 percent in IDA(will add more over the next few quarters/years) and 2 in Expleo and will be adding ofss to my wife’s safer mid/large cap portfolio soon.

Note: I understand tech. I just don’t trust moats of certain companies at high valuations. I’ve been handling digital marketing for nearly a decade and the thought of investing in anything apart from Google and Amazon at super high valuations scares me. IT I’m still a noob. But slowly getting a somewhat satisfactory understanding of late.

[Patrioticindian]

What a coincidence me too exactly travelled in the same trajectory like you during covid crisis watching italy/us and sold and bought twice during early march in search of finding bottom. Earlier my adventure with small caps and stalwarts with frequent churn did not make any returns for the past 6 yrs before that also struck by 2008 gfc when i used to invest only in mf.
Fortunately with some basic fundamental research i was able to find Laurus/polymed/Solara/Syngene and (Aurobindo/Glen.jb/jubi/biocon which all I have exited with small profit ) and now as i evolve I finally decided to make very concentrated pf of 5 to 6 stocks to create real wealth by holding them long atleast 5 yrs(trying very hard for less churn ) One of my biggest regret was buying Deepak Nitrite at 350 during march 24 and selling it a week later on march 30 for 365 by thinking it is commodity chem. Later only to realise they are trying hard to become diversified chem co with top notch management.
I am listening to market which is not appreciating Granules/Alembic due to commodity nature of their products with US presence, reminding me market is right most of the times. I have lightened my positions in Granules/Alembic and started buying DN around 1300 !. Next trigger in DN would be downstream chemicals expansion.Laurus is already a crown jewel with 50% of my networth locked in & planning to build position in DN with atleast 25% networth. In the next 5 to 10yrs if someone wants to create serious wealth then Laurus and DN (deadly combination with all ingredients ) are must own gems in my opinion.
Your tranche system is good to improve patience and avoid fomo which most of the investors lack including me.

[Malkd]

@Patrioticindian
There is just something about Deepak. It’s the only company that ticked all of the boxes for me the first time I began studying it. People talk about innovation in the tech space but what Deepak innovates with chemicals is just unbelievable. The management is hands down the best I’ve ever seen in any company. Their capital allocation decisions and long term planning and handling of cycles just blows me away. It’s one of those companies that I’m certain il be handing down to the generations after me. I do not want to mess with compounding here… i loaded up at 500, 600 and 700 and now I’m just going to let compounding work since I won’t be selling. It just screams permanence of capital to me.
The next time we have a recession this is the first company il be loading up on again.

Laurus is similar though the next few years will set the course for me to decide if il be holding it for decades or if it’s a 5 years exit.
Some part of me wishes I’d put all of my networth in these two companies and called it quits(though I do have almost 65 percent in these 2 companies).

I have been tempted to sell part of my stake in alembic and granules but I’m convinced by their fundamentals long term too but if I had to choose just one pharma company it would be Laurus(so hence why holding 2 more with large stakes seems a bit pointless however convinced I am). I am a stubborn holder though and usually exit only if I feel the fundamentals change or if I question the promoters (Kaveri) or if something is so overpriced I can’t quite understand it(SBI cards) or like I did in march when an unknown threat like covid made me feel the world would end(I can handle manmade recessions… something from the natural world just spooked me no end). That being said I hurried my tranches with them thinking I wouldn’t get a chance to invest again at those prices but considering both of them look like they’ll be available for cheap for sometime I have considered selling a part of my stake in alembic/granules and reducing them to one tranche and adding again slowly over the next few years like I’m doing with some of my other companies since I am losing a lot on opportunity cost currently and cash is always finite.

If I do a deep dive the only other company I feel as strongly about regards permanence of capital+returns long term is ITC(though obviously management of Deepak/laurus wins hands down here) though I don’t feel the urgency to invest everything in a short span of time here like I felt with Laurus and Deepak … so il be doing it slowly but surely over the next few years.

In close 4th would be borosil renewables and if you haven’t looked at them I’d recommend you have a look. I am utterly convinced the promoters of borosil are fantastic having watched and read everything they have ever written or appeared in. I am also convinced that even though they are dealing in a commodity they are going to have probably the fastest run to the nifty 50 from any small cap stock considering the demand for solar and their growth plans. However, you never know with the government and renewables so I’m being cautiously optimistic here and haven’t put my full amount in yet.

Vaibhav global is probably a close 5th but I’m waiting to see what products they add before going all in and hoping valuations cool off a bit (though I suspect it will run up more than give a lower buying opportunity) so I can load up my remaining tranches (the money is tied up in alembic/granules and hence my opportunity cost problem)

I have a feeling that Those 5 companies above ie Deepak, laurus, ITC, Borosil renewables, Vaibhav Global will cover most of my networth and will all be in the nifty50 and coveted by everyone over the next few decades and if i had a Warren buffet type punch card I’d probably punch those 5 companies in…
But since Ive kept a mental punch card of 15 companies Im investing in the 10 other companies(+5 including my wife’s though those have permanence and safety of capital as the major criteria only) in my portfolio too all of whom I feel very strongly about but need a few more quarters/years worth of convincing (except for reliance… that’s just pure fomo haha… I’ve added my first tranche just so I don’t get annoyed if it rises too quick… I may never put my remaining 4 tranches into it)

[Aniesh7]

Thank for your time.

Coincidently even my top two bets are Deepak and laurus lab.
Good to know there are few people in the same boat

Followed by relaxo, Astral Pipes , Varun beverages and Tata consumer

[shardhr]

@Malkd

I blv u have fair bit of understanding of Agri-processing cos. - e.g. Kaveri.
And by reading up\analyzing u get a fair bit idea abt mgmt of the co. as well.

Hv u considered Avanti Feeds as an investment pick? If yes, the wat factors keep u frm not investing in it?

[Patrioticindian]

Was able to increase my stake in DN today sold Granules/Alembic and took position in DN@1330. Seems tranche system won’t work in DN as it is rising vertically from 700 to 1400 !, only time will tell it might give 10 to 20% correction which I dont want to take chance (fomo ) DN is presently 28% of my networth!. In my opinion DN is fully valued and their future expansion is getting pricing in. Within a month or two DN management will publish their blueprint for the future expansion. their Q3 concall made to beleive their capital allocation skills are simply superb and outstanding.With the third generation management they have the potential to be on the top 10 or top 5 chemical co in the world within a decade.Iam fully aware the returns in the near term may not be like the last one year, but if someone is willing to hold for 5 yrs DN can easily do 15 to 20% cagr.
Your pick Vaibhav Global also I was watching from since march lows , no doubt very good co. I thought their sales are tied to lockdown and I feel in my opinion online sales cannot extrapolated might dip after covid as people might venture out.
ITC cannot be a compounder as they dont have reinvestment options of their profits. I have gone through Borosil , but I am not able to build conviction. So far Laurus was doing the heavy lift in my pf negating all my misadventures , now I have DN to assist . Presently Laurus plus DN is 78% of my nw. For some they might feel it’s risky but most of the sucessfull investors have built their fortune through concentration eg. Coco cola for WB and Titan for RJ.

[Malkd]

@shardhr. I don’t follow Avanti feeds. Regards agriculture I’ve decided I don’t want to be exposed to it directly ie the mercies of regulations and seasonality. So Ive invested in astec instead which has the additional Tailwinds of a high margin crams business and the chemical sector to make up for the faults in this sector.

@Patrioticindian
There is an argument to add Deepa nitrite at all levels next few years on dips if you plan on holding for a decade+ so good luck. ITC at worst it derisks my portfolio with stability and dividend yield. I’m hoping Vaibhav global sales go down so I can get another entry point. And borosil has huge risks considering the nascent sector that is solar so hence why isn’t for everyone. I took the opportunity of rises in alembic/granules today to trim my holdings a bit so I can re invest again in tranches as the quarters go by and il be using the cash generated to build my other holdings for now

[Aniesh7]

Btw are you tracking any stock related to E vehicle boom in India??
Especially Auto ancillary.

I don’t prefer cyclic sectors n was not much convinced of E vehicle progress in India atleast for next 5-7 years. But government push , fuel price n tesla entry.
Reliance starting with battery manufacturing, Maruti, tata and M&M as well.

So things have started to brew up.

So thought of tracking few quality names.

Disclosure: Motherson sumi on watchlist