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Malkd's Core Portfolio

A major positive for just dial as they rope in CMO from Magicbricks which is leading real estate website…He is very well experience and a good addition… Only shows how one man can swing charts in tier 2 companies…but scope to improve is what also warranties future rerating…Nice that you held on to your conviction and added during crash!! I coudnt do that as yet again I got swung towards looking at Pharma/Chemicals and lost out on SIPing opportunity at right cost in area of my competence :slight_smile: I corrected that and SIPed on to couple of technology & consumer durable that I have conviction on and already hold, rather than trying to analyze pharma and other Marcellus picked small caps :slight_smile:
Disc: Tracking position in Just dial. Not a buy/sell recommendation. Just sharing thought process and appreciating the ability to held on to your own convictions and adding during crash…

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@Investor_No_1
I know what you mean. For eg The recent drawdown in Neuland labs was tempting for me. In fact whenever chemical companies or pharma companies fall I get excited the most. I’ve imparted a few tricks to get me to ignore fomo and all of the noise in the market since it feels like there are “can’t be missed” options every day.

  1. Invest heavily into one company per sector and overallocate in favorite sector:

I have removed all chances of me even investing in any pharma and chem companies due to my huge allocations in Laurus, Deepak and Ingrevia(I have cheated a bit and considered this as life sciences and not chemical lol… It was too good to miss out on at 241 Rs). I Dont think il be able to add another share in pharma/chem for another few years since those will remain overweight in my portfolio for a while.
I basically have pharma, chemical, Fmcg, banks, nbfcs, IT Bfsi, renewables, railways, Reit/Real estate, B2C Platforms, B2B platforms, Invits all blocked now regards new companies so I have to look elsewhere(or within my portfolio) for opportunities and it helps expand my knowledge about other sectors and improve my knowledge about my PF companies if nothing else(if there’s a dividend play involved I allow it for eg oracle and Intellect and I would love another Fmcg company alongside ITC too. If something unbelievably low valued like ingrevia pops up then that’s fine too)

  1. Keep a list of sectors I always want to ignore:

I’ve put all of steel/sugar/oil and similar commodities on this list and I’m not a fan of auto(except for a few Ancillaries), telecomm and airlines. So I just ignore anything in this sector(I recently got a bit interested in godawari and then watched it crash due to iron ore prices and realised I’d never be comfortable there). I may come back to these later after I feel my portfolio is complete with the sectors and allocations I want but I’m years away from that.

  1. Keep a list of sectors that I’d want to probably invest in:

I’m currently studying the following spaces: AMCs and Insurance, Consumer Durables(electronics), IT Services(non Bfsi) , Entertainment, Textiles(ideally with an apparel line). No other sector apart from the ones I own and these excite me as of now so I can concentrate and learn as much as I can here. I have already shortlisted some companies here but i don’t know if and when il ever invest. Again, this isn’t fixed. If I get something really unbelievably cheap in another sector I’m willing to take a bet at times(real estate was in my no go list until Embassy came along for eg)

With the above rules in place the stock market becomes a small manageable space for me to work in. I’m probably missing out on a lot but if I look at everything I feel il gain nothing lol.

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What’s your opinion on intellect design? it looks like one of the rare product companies in IT space in India & they are growing their saas & licensing revenue every year.

I am very bullish on IDA… And it already takes a spot in my core portfolio. Thanks to rshankv I managed to build my entire position in the early 400s and it won’t be leaving my portfolio Anytime soon . I don’t know if the current valuations offer much safety though until a few more quarters of performance support it. They won’t grow at an exorbitant rate. Just steadily and consistently but the visibility looks fantastic and there’s a long runway ahead. The Entire IT Bfsi space looks like it has tailwinds that a got a bit delayed due to Covid 2.0.

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which are the other IT bfsi companies on your watchlist (india & US) ?

I found intellect very late ( entered at around 750 after the results ) but IDA looks promising , if we compare with valuations of SaaS companies in nasdaq

I also own oracle financial services but mainly since I expect the Bfsi tailwinds to benefit them too(wouldn’t know until the annual reports lol… Management doesn’t communicate) and the high dividend yield which gives a good support under Rs. 3000. Apart from IDA and OFSS I dint really look at any other companies in this space. Sorry. If you find any do let me know. This space is one of the most interesting ones for me at the moment.
Edit: I was invested in expleo in this space. Found it too risky so took the profits and ran. I’m quite happy with their results today though I won’t be investing again since I’m consolidating my PF and already overweight with IT Bfsi with Intellect and Oracle
Cheers

other than intellect , i’m very bullish on KPIT (electric car & ADAS are the emerging technology fields ) but recently reduced my investment because stock seems overvalued

Disc: invested from 90 levels

Infosys through Finacle is the direct BFSI competitor to OFSS- in fact, all major Indian banks (and financial institutes) are Infosys clients (SBI, ICICI, KMB) with HDFC Bank being the sole major Indian bank using Flexcube.

@arunjacob
That’s the one that got away for me. I just did not have the required conviction. Bought at 60 and sold at 100. Then bought again as a technical bet at 96(promoter was buying then) and sold at 120. I’m going to regret the selling bit for a while. I did the study and posted in the kpit thread but back then I was literally building conviction alone and with a lot of speculation. Out of sheer annoyance with myself i doubt il be investing again unless it somehow drops below 120 again lol. It had all the right green shoots. It was a good Lesson learnt anyway.

@Sun_P thanks for sharing. I’ve somehow always ignored the big IT giants. I think it’s time I look at them in more detail. Cheers

And maybe have a look at Expleo as well. Gave some correction today after a bad quarter (only due to forex losses though. Otherwise, the results were very good).

researchbytes? hv found them pretty good. and the bse site? i think its a rule now that cos have to put up transcripts of analyst calls on their website n send a copy to d exchange as well.

I’ve recently invested in a small nbfc called ugro capital. I have covered this in detail in the ugro thread.
Rarely am I so convinced about a company but when I am I usually bet the house on it since I am a strong believer in concentrated portfolios.

I have done this 4 times so far… Laurus labs which now takes up 50 percent of my PF, Deepak Nitrite which takes up 25 percent and ITC and Embassy offices(at 306) in my wife’s capital protection PF but all of those were established companies with above 5000 mcap minimum when invested. Now, I have also bet big on ingrevia, Intellect etc but they all had an initial amount under 10 percent and were mid sized too.
I had considered setting aside 10+ percent for ugro… But then I sat back and lay aside a few scenarios and adjusted my capital allocation accordingly:

  1. It becomes a 10000 mcap company in 5 years:
    I am very bullish on this company. All I have left to do is to track npas and I as long as they stay steady this is very much possible. I invested at around 700 crores so this would have been nearly a 15x return. In fact if they pull of their growth targets with npas staying on track I won’t be surprised with a 50x return in a decade. The problem is the abundance of IFs in this thesis.

  2. The npas spiral and corporate governance issues pop up:
    This would lead me to panic and remove my Money early. There will be a few scary quarters on this journey and there will be some grey areas corporate governance wise and I do not want to give in to this fear and sell early. So if I put too much in here to start with it wouldn’t be ideal

  3. The business improves but valuations dont:
    There’d be a huge opportunity cost here waiting on markets to value it above book value and a huge amount tied up would again leave me a bit kneejerky.

So I created a specific rule here which I will apply to all similar microcap punts from now on… Imagine how much money I’d be comfortable with at 10000 cr mcap and put the amount now that would multiply to that amount in a few years Or a decade.
So for eg if I’m comfortable investing Rs. 10 lakhs in a company at 10000 crore mcap then invest Rs. 70000 in the company at 700 crore mcap.
This would mean I wouldn’t panic since the amount invested would be relatively small, I wouldn’t feel any kneejerkiness opportunity cost wise since the amount would be little relative to the PF, and finally if I’m right il have 10 lakhs in this company when it hits 10000 crore mcap. This means I get to participate in a risky 15x multiplier without losing any sleep. So I use this to build a long term idea into my PF instead of falling for greed. The other alternative was putting in double my money and then removing half when the price doubles and letting the rest run for free(it’s subsequently risen 25 percent since I began investing and is nearly at book value so I did not get to do this). Il be applying this rule(and the 2x variation) to any microcaps I invest in from now on and creating a separate microcap PF and holding until they grow into atleast 5000 cr mcap companies before putting them into my PF. The number of ideas I’ve let go off just because I was scared to put 5 percent of my PF etc has led to a lot of misses. This way I can foray into microcaps without any Fomo. When an idea pops up il do the same as with ugro and wait it out for it to grow into my portfolio.
Note: it took all the restraint in the world to not just bet big with ugro… I’m glad the price ran up and prevented me from doing so. Sometimes staying in the game is more important than amassing huge risky wealth quickly.

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Sir
I am a silent reader of your portfolio thread from past few months and learned a lot from this. I am also convinced about Ugro capital and want to accumulate it slowly. Since you are following up the company very closely, what will be the accumulation price range for thisbas per your openion.
As of now no positions in Ugro.

@prabhatshaw
I don’t know about what price anyone should accumulate since it depends on amount being risked etc but personally i would only buy at a big discount to book value. I am not someone who can stomach too much downside for too long so I like betting big once and not averaging later. For this entry price requires huge consideration. If I’m sure I’m getting a buffer it becomes all the more easier to hold them long term since its far easier holding a company when you have a 25 to 30 percent profit rather than watching it fall by the same amount leading to more averaging down or exiting the position especially when it’s a risky company in a risky sector like this. Personally I kept a limit of 100 when buying since thats what I feel the risk entails with ugro in its current stage. If they execute well and without npas rising etc over the next few years i wouldn’t mind adding higher too but not now in its current startupesque phase.

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what are your views on itc results?

i was expecting a dividend of 3 rs but 5.75 doesn’t make sense there dividend payout is more then 100% do you see this as a REDFLAG?

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@raku
I was expecting a minimum of Rs. 5.2 so I’m happy. Considering they face 10.15 last year I expected more this year and they did that with 5 + 5.75 and I expect a slight increase every year and that’s just part of the investment thesis. They have enough cash to maintain this yield and higher every year even if their profits get hit in a given fiscal year… This is why itc allows patience when holding. If they weren’t generous with their dividend all of a sudden I would’ve found it a red flag. So I see nothing wrong here. Overall I’m happy with the result for the whole of FY21. Everything looks on track long term and the result for q4 wasn’t blockbuster which im fine with and in fact what I hope to see for the foreseeable. Personally, all I want is average results and no demerger news etc for a year or two since I want atleast another year or two to finish accumulating it via Sip. The longer itc stays around Rs. 200 the better for me. Its the only company I own that I cheer average results and dips.

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i see itc as a desi berkshire hathway specially there fmcg business ,they can buy brands and scale them up at a levels which is not possible for a lot of people or companies .

Although divdend being enticing i wish they choose the berkshire hathway or the apple way of not to please the shareholders with divdend but with growth ,money invested in the fmcg buisness plus with the current situation there could be a firesale in the near future to buy a lot of these business and times like these cash is king.

i am not against divdends but 120% divdend payout didn’t make sense .

@raku
Thats the thing. They are one of those rare companies that can do both. They can pay dividends and still have more cash than most companies in India to grow both organically and Inorganically. For other companies its an either/or situation… Not for itc though. Cigarettes are finally back on track this quarter and with it surviving the world’s biggest ever pandemic involving lungs and a struggling government without bans and taxation have put them on strong footing so they must feel comfortable paying us investors with their cash cow safe. That being said I’m one of those firm believers in ITC so it would take nothing less than a satyam esque scandal for me to lose even a little conviction here. I doubt il ever get a chance like this to buy a blue chip Fmcg company at depressed valuations with a dividend yield safety net for what I believe is just a temporary pitstop in its long term journey. Anyway, I’ve had debates for as long as I remember regards ITC even on this thread further above so would prefer not discussing it further. All I know is 5 to 10 years from now the debate regards ITC will be settled in one way or the other. Until then we ll all just be running around in circles :slight_smile: I’m just keeping my head down and adding as much as I can while I get this opportunity and ignoring all the noise.

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Update:
My small cap/micro cap and dividend portfolios have new additions.
Added Tips industries on Friday around Rs. 825. I used to own a music studio which I had to shut down a few years ago so this was right up my alley of businesses I wanted to own and the demerger of the film division means this is going to to be a very profitable decade for them. I am annoyed with myself that I dint foresee the changes in the industry earlier and I’d assumed there were no good music plays listed but I’ve corrected that now and followed my microcap rule for allocation. Will be adding deepak fertilizers soon… Its currently in asm list and above 200 dma… Hoping I can pick it up near 200 dma levels since price rise seems to be strangled until asm lifts. It’s a no brainer for me considering I hold the governance of the deepak brothers in the highest regards and its in my favorite space ie Chemicals and gives me a bit of differentiation into agriculture too plus just feels like I’m adding more into my deepak holdings at lower valuations(I literally consider them the hdfc of the chemical space).
Also, began adding mindspace into the dividend portfolio at ipo levels since I track Reits anyway and getting nearly 6.5 percent post tax returns is rare(will be much higher next year onwards too)

Core portfolio(Will always consititute 90 percent of my portfolio) :

Laurus Labs (Pharma)
Deepak Nitrite (Chemicals)
Jubilant Ingrevia (Life sciences)
Intellect Design Arena (IT Bfsi)
Vaibhav Global (B2C Omnichannel)
Idfc first (Bank)

Small/ Micro cap portfolio(Will make sure I invest a max of 10 percent of my portfolio in total here at all times… If they run up after investment and hit core portfolio allocations organically il add to the core portfolio):

Borosil Renewables (Solar play)
Just Dial (B2B Platform)
Deepak Fertilizers (Soon)
Ugro capital (Nbfc)
Tips industries (Music)

Dividend plays portfolio(100 percent of my wife’s portfolio… On her instructions I transfered her small allocations in Laurus, Deepak to me and sold Praj after its recent run up at nearly 7X)

ITC (Fmcg)
Embassy offices (Reit)
Oracle (IT Bfsi)
Rites (Railways)
Indigrid (Invit)
Mindspace (Reit)

Portfolio has now reached the max number of companies I can track(though some overlap sectors and some don’t need much tracking so there is still some breathing room) . Will take something really special to enter this list (tracking Rpsg ventures closely along with others but I may have missed the boat on these ie Angel, Edelweiss, Racl, Pix, Redington, Acrysil)

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Any particular reason for not considering PNB Gilts as part of the dividend portfolio. I bought in at around 70 levels but made the mistake of adding at current. However, even at current levels dividend yield is at a solid 8+ pc. And looks like a pretty safe zero capital loss kind of stock.

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