Malkd's Core Portfolio

Q&A: Questions & Answers Portfolio Q&A
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I beg to differ. Individual stock discussions are great, especially at the level that occurs in VP, but even better is a detailed account of a persons stock portfolio, the research methodology, the thought process going into buying, selling, holding - when done with honesty and candor - as in this thread and several others. It is an invaluable guide to the overall investment approach, the various styles possible, the rationale and goals, the expectations - and just simply the overall experience. there are multiple threads on this forum which are quite invaluable from that perspective, especially for those new to investing.

imho, threads like this and others are quite necessary and what differentiates value picker from a stock advisory report. Basically, itā€™s like experience for free.

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If they want to, sure why not? There is in fact a separate category for such threads: portfolio q&a.

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Also, just because its created doesnā€™t necessarily mean it will be pursued with vigor. As usual, in the internet world, content is king. If your thread provides value, it will be read, if not, too bad.

And as @sahil_vi pointed out - the section is designed for that exact purpose - ā€˜Portfolio Q & Aā€™.

Edit : and I think this series of responses is a digression from the overall thread itself, so this will be my last post/response/opinion on this aspect of the overall conversation. I have said my piece.

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Holding company discount is ther due to the current structure. Reverse merger will break the structure and there wonā€™t be a holding company and hence no holding company discount.

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I am new to stock investing (investing based on research) ,have made very bad past mistakes(yes bank,dhfl,reliance capital) but was to young so didnā€™t lose much but with the recent crash and bull markets have made decent money thanks to this community and also this thread ,almost 1 year of experience i found that holding good fundamental stocks for long has profited much more then swing trades and i have not been taxed yet.Thanks to this post i have been giving thoughts on what i want and what my money could be in the next 10 to 15 years so have decided that i will put my money in concentrated bets, with long long runways and no chasing short term gains ,i have also added idfc (product i use), irfc(similar to your itc bet just cheaper and safer ), embassy reits(a little skeptical on this will explain) in the recent crash whats your take on astec at the moment i am getting anxiety keeping the stock the earnings have been growing so has been the stock i think it is safe till q4 as it is the best quarter but stock can take serious beating if 1 or 2 quarter results are bad (why not reduce stake and wait and add or see how it goes)?

About embasyy reit

Vatika Tower B - One On One.pdf (4.0 MB)

@sahil_vi ca can also give your views ,so i work in real estate and this project from vatika
they are guaranteeing 8% return with 12% increment every 3 years ,lease period is 25 years ,project completion is 2023 2 years so they will pay 16%(8%return for 2 years upfront)the lease is of 25 years ,lessor is google and in the brochure it does mention first right to google but what i have been told that there is a 99% chance it will be taken by google as you can look at other google campuses (as other parts have been taken by google)and google doesnt allow others to be on the campus plus there are other reasons as well which i wont be able to share on the forum (ahem ahemā€¦ i assume people investing in real estate would get it) the things i didnā€™t like was minimum investment is almost 84lakhs(after 16% discount of 1 cr ) ,working with the group i have seen these investment are safe bets and can be sold after completion for a decent capital appreciation comparing this to investing in embassy reit what advantages do you think it has over this ?

my points for investment
1)more diversified risk in the form of various properties (google is big but anything can happen and if the space becomes vacant not only do you lose ROI but also have to pay maintenance)
2)only 1 time capital appreciation but in case of riet has a long long runway(track record in Us)investing in multiple propeties capital gains shared with investor
3)partial tax free vs fully taxed rental income
4)low liquidity coupled with huge intial invesment ,stamp duty payments ,prices are linked to demand and supply ,miliions can invest 64000 to 80000 but not very few can put 1 cr plus so prices can soar in case of embassy specially at current valuations.
5)better returns in future with funding,capex etc(unsure but if managment proves its worth).
6)1% commision to sell, not able to sell partially ,cant invest divdends back into it

my points for
1)long track record of vatika compared to embassy reit coupled with google lease more secure then various tenants in embassy reit.
2)sure short gain if and when project get completed ,no fluctuation in prices embassy linked to share market.
3)i dont know if it should be a point but for me seeing ,touching it feeling it that you own a piece of land instead of digital asset in hand gives more security,plus less tracking concalls,presentations.

my investment would be for the long term i cant afford the asset in stand alone but can with family members(can lead to complication if someone want to exit) ,i am in for the long run and see embassy beating this project in the long period of time not sure but i am willing to take the risk with age on my side it can compound very well.

so my question to you is i cant personally see the assets in banglore ,pune and other states (maybe in the future)but still i wont be able to access value as my circle of competence is delhi ncr ,So my question to you is what are risk involved in buying embassy reit at the current moment?.since you guys have done more research then me. (not a buy sell advice but just clearing some doubts and anxiety lol)

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will we get shares or we will be given money in the form of dividend?

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Liquidity. I can buy 60k of reit. I can sell it every day at a fair price.

If anyone is guaranteeing returns they are also guaranteeing expenses for themselves. The company could go kapoot in which case it is not clear how they would honor their agreement. In real estate the builder/trust quality is very important imo. Does vatika group reveal itā€™s financials ?

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@rakuā€¦ You say you canā€™t afford the place on your own. Iā€™d be wary of combined ownership even if itā€™s family since friction can always occur with anyone over a period of decades like this one. also, incase you decide to sell your stake due to emergencies etc youā€™d need to appease your family too before doing it.
You can afford embassy any day of the week howeverā€¦ and it will be all yours and everything you ever decide to do with it will be your own decision. The fact itā€™s liquid and linked to the stock market makes it an even better bet. Say you decide to store about 20 lakhs in Embassy. In a few years it may be selling at 20 percent above NAV. You could always book partial profits at those levels and invest it into other opportunities you come across or use it as an emergency fund for whenā€¦ life happens. Also, concalls and presentations and annual reports make this more attractive imo. There really is no such thing as guaranteed returns with a business. With embassy youā€™d be getting all the info you need to see if your investment is on track to provide returns or not.
And finally youā€™d literally own a piece of embassy offices so you can always visit Bangalore and touch and feel it and even tell people you own a part of it :slight_smile: ā€¦ touching and feeling is overrated anyway. All that happens is youā€™ll see your flat/plot aging in time and increasing maintenance costs (though not applicable to you here). Also, Embassy is set at 8 percent returns from FY23 at CMP(soon to be majorly tax free too) and should increase at 15 percent every 3 years too and while not guaranteed it does look reasonable to expect that to play out.
What could go wrong is the usual mismanagement, corporate governance etc and a year in loss due to whatever reason means 0 dividends so this isnā€™t a debt instrument by any means but those factors look unlikely at the moment.
That being said youā€™d know about the Vatika tower investment better than anyone. Iā€™m biased since Iā€™ve just been looking at offices for purchase last few weeks and Iā€™ve realised how much of a better deal embassy is compared to the options here in goa lol.

Btw if you are looking for an alternate investment to diversify have a look at RITES. Great business with good Margins and huge order book and yield of nearly 7 percent of CMP. Thereā€™s a rumor of government sale overhang on it currently so itā€™s literally at the same levels of March last year and could drop further if the sale is announced. I already am overweight in it in my wifeā€™s portfolio but will be buying a huge chunk for my portfolio too if the government does divest causing it to drop in the 200 to 220 range.

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How do you know?..

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In this quarterly result season good distribution will happen in the name of good results, followed by sell off by end of April and May.

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Although I have no idea what would happen, but if what you say is true and already knownā€¦then market is very forward looking, the sell off would happen much before what one would know/expect, if at all it were to happen the way one know/expectā€¦
Disc. I know nothing about short, medium term market directionsā€¦

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@PraveenKG are you talking about the market in general or a company in particular (Rites?). I have a system of deploying cash whenever the market crashes within a given quarter and a company I want to buy crashes to and reaches either itā€™s 50 or 200 DMA or lower if fundamentals are intact (for eg IDFC first yesterday). I donā€™t like timing the market and have to deploy my cash monthly/quarterly at max. If the market dips further il be buying in the next month/quarter anyway. As long as I donā€™t overpay at crazy valuations Iā€™m fine with this system. Being systematic and staying in the market is key for me as Iā€™ve posted above

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They were ready to show the rental agreements ,i doubt they would refuse to show there balance sheet if you are a serious investor,they have made multiple projects in the past all on the same road belt as i stated earlier money in real estate is made through capital appreciation big names like dlf and other developers who held land banks in gurgram10 to 20 years back there prices have sky rocketed due to gurugram becoming a part of delhi ncr and there are no such big land parcels available in delhi to make such huge campuses ,coupled with metro nearby and major residential and commercial developments that have happened,the whole belt known as NH8 is full of these commercial towers occupied my blue chip companies although one thing is still unclear in these times when banks are offering such low intrest rates why sell such a lucrative deal ,there are other expenses they have to pay as well ,employees that show the site,there is 2% to 2.5 % brokerage. To that answer i got they hold more land banks purchased at extremly low prices and money will be use to fund these projects .You dont pay full payment upfront thanks to rera there are risk involved if the developers go bankrupt that is a possibility and its a game of supply and demand most people here in delhi dont trust devlopers bcz of past mishaps and are happy with 3% ROI by investing in delhi itself as it is much safer and less complicated but it can change .This particular site i have myself and construction is going on in full swing ,i would advice you look at the brochure again 3 parts are already completed and sold which i personally visited.

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Hi @Malkd,

I also invest in a company when the stock goes below its 100 DMAā€¦but a dilemma Iā€™m facing is sometimes it doesnā€™t go below the 100 DMA and continues to riseā€¦in that case would you continue to SIP monthly and deploy a large amount whenever it goes below identified DMA or youā€™d not SIP but wait for that stock to go below that DMA.

Itā€™ll help if you can shed some light on it. Iā€™m asking this from a minimum of 5-10 year of investment horizon.

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Hey @Gaurav_Bhandari ā€¦ I donā€™t like adding cash at high prices in Small/Mid/Micro caps. So I always wait for DMA levels. When owning a 10 to 12 stock portfolio there will always come a time when atleast one of them crashes to DMA level in a quarter. Itā€™s all about patiently waiting until then.
However, with safer large caps Iā€™d invest in them via SIP anytime thereā€™s even a minor dip in the stock market. Hence why I have ITC and IDFC first(same with an instrument like REITs/Rites) so that if none of my other companies reach DMA level il just deploy cash into them instead of sitting on the sidelines. I believe they are safe and undervalued even at 50 percent higher levels than they currently are so will gladly buy more of them in every quarter during minor dips if no other opportunities arise in a month/quarter.

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Agreed. When something feels too good to be true ie a heads I win tails I donā€™t lose much scenario pops up then itā€™s the best time to bet big. Iā€™m anticipating 2 such scenarios popping upā€¦ Nesco at near 2500 crore MCAP and Rites at under 220. Il be keeping spare cash in hand this quarter just incase I get a chance. IRFC sounds good and Iā€™m not suggesting a replacement but rather a supplement ie RITES as an alternative investment incase you want to spread your risk a bit with a similar yield instrument.

Iā€™ve slowly realised that getting dividend yield may be bad for tax purposes but if you get an asset that gives you enough cash per year via dividends to cover all expenses it lets one sleep better at night and helps protect your core portfolio since no profit booking would be needed in emergencies (like covid) to spoil the process of compounding.
Iā€™m convinced that my huge initial bets in Laurus and Deepak have set me up well to grow my networth over the next 5 to 10 years as long as I never sell a single share of those 2(Xelpmoc and Expleo etc will barely move the needle considering low investment so Iā€™m not going to chase speculative bets). so now Iā€™m working on building up a good yield to cover all my business and work expenses via ITC/Embassy/Rites/Invits etc so that I can protect those two investments and let compounding occur in my core portfolio. IRFC looks interesting. Will have a further look. Thanks.

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Have you talked to anybody who has invested in Vatikaā€™s projects earlier. They can stop payment of rent anytime if the property becomes vacant. You will have to pay the maintenance charges anyway. I will not believe them.

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Hi Malkd,
while i found your strategy to be great for using REIT as a proxy to direct commerical real estate investmentā€¦
ā€˜Fraudā€™ ot ā€˜corporate governanceā€™ is a huge risk.
I dont mean that there is a corporate governance risk currentlyā€¦
What i mean is, practically one would be exposing hell lot of money to a single name and any bad news on that front would probably lead to even Lower circuits on the exchange or a big difficulty to exit.
The same in a self owned real estate is mitigated to a large extent if due diligence is done.
The above would not matter much if exposure to REIT is a small portion of the overall networth, but matters a lot when it is a significant portion of the networth. It would then hit one like covid has hit. Basically a ā€˜unknown unknownā€™ risk.

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Cheers @Harsh04 I understand the risk. Will be splitting my investment across Embassy and a few other REITs once Iā€™m convinced about them(in time thereā€™ll be enough info regards Brookfield etc) though il be starting with Embassy for now. Since il be building a position slowly il have plenty of time to distribute the funds across other options too. Infact my dividend yield will probably end up being spread across REITs/Invits/Rites/ITC etc to spread the risk even if it means a smaller yield in return. You are rightā€¦ I donā€™t mind concentrated bets when the rewards outweigh the risksā€¦ since an REIT is meant to protect my portfolio I agree it makes more sense to spread the risk across companies instead of just one. Cheers.

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I remember sometime back you had mentioned that for div yield, you do not consider REIT as nothing better than ITCā€¦It seems now this thought has changed a bit. Is it because now you understand REIT better or because now you comparing it with physical commercial RE and vis a vis that itā€™s looking better and hence deserve your investment. Why I ask this is because if only for div yield then REIT may have better equity alternatives where div yield can grow better and chances of stock upsides is also betterā€¦so is the comparison overall and still REIT deserved a place or itā€™s only with commercial physical RE now?