Cheers @Sudhakar_Subramanian
Part of me hoped ITC remains stagnant for the next one or two years so that i can continue adding to it but can slowly see market perception shifting towards it instead of against it due to no surprises in the tax regime and the wheat beneficiary + backward integration and huge cash reserves giving it some leeway to survive a tough few quarters or years. I won’t be surprised if a lot of smaller FMCG players become ripe valuations for an acquisition too considering they will struggle with input costs while ITC will be as resilient as ever . Let’s see how it plays out. I may have to get over my rs. 200 to 210 mental block and start adding at 220 to 230 now lol.
Side note and some unrelated thoughts:
Added piramal enterprises in the onslaught on Monday. Built 1/3rd of my position at rs. 1890. The reasons are well documented in the piramal thread. This is a case of borrowed conviction for me since I’d forgotten all about it and only got interested in it again via the thread. Was interested in it last year but it ran like crazy and i stopped tracking it. Considering I’m pretty comfortable tracking nbfcs(ugro, Edelweiss) and am comfortable tracking shift in strategy when it comes to a loan book(for eg decrease of whole sale loans + movement to retail etc) and i am comfortable with pharma companies this was a no brainer especially considering I’m a fan of the promoters.
Overall pretty happy with how resilient the 2 PFs have been last few weeks and I’m happy I came out of slumber and began adding during the onslaught since the war broke out.
I am a bit worried about oil prices and inflation… However, my main worry is i won’t have enough cash to add more if the market does break to lower levels since one needs to keep an eye on the long game and even though the world feels like it’s ending all of these moments are transitory and do pass at some point. We have been in a bull market so long and i stayed away from adding to my positions for nearly 6 months while things were overvalued that I’ve gotten a bit too excited about this bear market and i may have used all of my remaining capital a bit too early.
I much prefer uncertainty and sane valuations over crazy valuations and blue skies.
Wanted to know your views on the recent ITC run up. I was adding it in the range of 210-220 but now it is above 250. Would you still be adding at this price or would wait for 220-230 range.
@Gaurav_Bhandari
I personally won’t be adding more unless it drops back to 200 to 220. We had a brilliant 2 year window to add it at a throwaway price and I’m pretty happy with my stake in it now since i made full use of it. If it ever does come back to that range or if the business improves considerably il consider adding. At my average buying price of rs. 200 I’m happy to hold on forever… if i add more at too high a price then frustration could sink in when it does inevitably consolidate /underperform. Will always be one of my favorite companies and main investments in the stock market… but only at a reasonable price. For now il look at other options. Currently studying PTC India as a dividend bet in place of ITC in my wife’s PF. Seems to be a fantastic opportunity brewing
@Rahul_Singh
The problems with the financial services subsidiary has led to it being available at CMP though. And the cg issues in the subsidiary don’t reflect the governance in PTC as a whole and will probably end up being a blip in the long run. I’m being a bit greedy here and waiting for a yield of 11 percent before investing just to cover any unforeseen risks in the subsidiary.
Added more into krsnaa diagnostics today. Didnt double my holding since it still feels like there’s some way to go until a base forms but at a price of just under 500 it seemed as good a time as any to add some more. The rest of the diagnostic sector has seen some sort of buying/base and i can’t see krsnaa available at much lower considering covid isn’t a major part of their revenue anyway. The entire sector is interesting but i prefer concentration so hence why just gone with krsnaa again. The next few years look really exciting as an owner here. That being said i did a bit of research on how PPP contracts play out in our local government hospital and the process is a bit shady with politicians involved but im comfortable with it at current pricing and i have no problems averaging a good company on the way down in a bear environment instead of waiting for a reversal.
Also building up my wife’s cash to deploy. PTC is interesting as a dividend bet since ITC is no longer as underpriced as before… however, it feels a bit irresponsible to deploy it with the CG issues under the financial arm(recently finished an 8 episode podcast on Enron and I’m terrified about CG issues in the energy sector lol). Waiting a bit until there’s more news there before deploying it. If it does reach a rs. 60 to 40 range i will deploy though since i would feel the potential returns would cover the risks at that price point.
Vaibhav global has been a bit of a pain with no signs of recovery at all. Currently down nearly 50 percent there. I do feel it’s a good buy at current price since valuations have cooled to levels i didn’t think I’d see and the long term story is still robust so i won’t be selling. May start building a position for my wife here instead of PTC so i can average down our holding here a bit.
The only other non portfolio company that interests me is lux industries. It’s near buying range now and is fantastic regards every metric. The insider selling issue has provided an opportunity here but again it doesn’t fit my wife’s portfolio profile and i don’t have the cash to build a position just yet. Hoping valuations stay depressed for a few more months so i can build a position here too. When it made its run to 4000+ i thought I’d missed the bus and I’m glad to get a chance to add it near 2000 again the insider selling issue is a red flag that I’m willing to overlook in exchange for a margin of safety long term)
Note that i have the patience and temperament and no debt making it possible hold on to these companies for a few years at the least and my investment style of buying companies like krsnaa , lux , ptc etc during their own mini individual bear markets may not suit everyone. Vaibhave global was the only company i know i overpaid for(40 pe!) And it has come back to bite me… so I’m just going to continue sticking to the style that works for me.
Hey,
I was going through the kpit message board and I noticed you got in early at a 1000cr valuation.
You had the foresight to see early into their game plan and trusted the management.
Was just curious, how do you see it playing out from here? You still have it as a core holding?
@nosh
I actually built a position in KPIT at rs. 60. I dint really have that much conviction though and just used it as a swing trade to double by money in a few months since it was seriously undervalued(at my selling price of 120 it had already risen nearly 4 times from its low and considering the problems regards CG and margins i thought it was overpriced… i was wrong though). Infact i used the April to August period in 2020 for a lot of these swing kind of bets and doubled my money overall and then poured the money i made into my long term bets ie Laurus and Deepak. I do have slight regrets selling post a double but that was my strategy back then during the covid madness(and kpit really dint have a great name/track record back then) but I’m happy overall since even though kpit flew… so did deepak and Laurus. I personally stay away from sectors that are investor darlings(unless I get in very early… and the EV theme is priced to perfection right now) since there is a lot of froth that builds up so I’m not too keen on the EV theme currently and im not even looking at kpit now. It’s still that risky sub 1000 crore mcap company for me and all the positives I noticed back then were still far away in the future from playing out. Since I’m staying away from the EV theme until valuations cool and For IT i have a large, nearly 10 percent stake in intellect design arena so im not really looking at any IT companies including KPIT at present.
The main tracking point back then for me was margin expansion … I’ve not really tracked it since then… if their margins have expanded to tata elxsi levels (i think their depreciation was too high) and their interest costs have gone down it may still be a good bet but it’s not for me at current levels especially when my mind is stuck with it being a 1000 mcap company lol.
Makes sense.
Appreciate your thoughs.
I haven’t tracked KPIT closely but lookin at it on the surface, it’s trading at 6-7 ttm sales so not that frothy you would imagine?
Again, I am not too aware of the future prospects.
Intellect looks good, doesn’t it?
The amc and saas element of it’s revenues are climbing up all the time and it looks good. I am eyening a position in it.
@nosh
Intellect is one of my favorite companies on the stock market. I did not have much experience regards IT companies 2 years ago so even though I’m a fan of concentration I’d gone with a basket approach with KPIT, Expleo and a couple others until i got comfortable with the sector… i found Intellects business model a lot easier to understand vs all of those and once I got comfortable enough i went all in and sold my entire IT basket and put all the money in intellect and added later too after a couple drastic falls giving me an average price of rs. 500 and a good MOS. The other companies did go on to even 3X but I’m far more comfortable holding intellect long term vs any of the rest.
Im a huge fan of Nick sleep and Zakaria (who learnt from the usual buffet and Munger) and i personally love companies that have a long term destination like they did and I’m a huge fan of concentration. I like promoters who make sacrifices in the short term to ensure that their companies are anti fragile in the long term since my investment horizons are as such. Arun Jain fits this profile perfectly for me(CG issues aside… which I’m taking a leap of faith and trusting him) and the vision and plan he has for intellect over the long term fits my investment style perfectly. Infact there are only 4 promoters from the small caps(some aren’t so small anymore though) that i truly admire… Dr. Chava, The deepak family, Sunil agrawal and Arun Jain(idfc had a larger mid cap size mcap when i got in so I’m not putting vaidhyanathan in this list). I’ve put my money where my mouth is too with these 4 companies ie Laurus , deepak, intellect and vaibhav holding 80 percent of my personal networth. I’m pretty sure Il be holding onto all my shares in these 4 companies for the decade… i love my remaining 20 percent too(ingrevia and idfc and ugro stand out) but they won’t determine my future wealth as much as these 4 will and while I’m a fan of all their promoters the aforementioned 4 just stand out for my style of investing and i find it difficult to drop the amounts of cash in the rest as I did in these 4.
so yes… i am bullish on intellect… but at current prices i wouldn’t add more. It’s going to be a long and painful journey and there will be more opportunities to add(I’m personally all in already so won’t be adding more) until the business reaches its final form with amc and saas contribution providing stable and predictable income. Currently it’s still a bit misunderstood and can see some pain when a few quarters don’t go their way.
Sorry for the long post. Would rather write about my mindset regards intellect than repeat Paras regards their business model from my previous posts/the official thread
Very Interesting.
It seems like you have majority of your money riding on top quality companies with huge runways and superior return ratios.
Hopefully intellect will turn out to be your Costco over the next decade or so!
Thanks for your Inputs, will follow intellect closely!
Cheers.
Just a random post on MOS and my recent adjustment in investing style. Of late I’ve been trying my best to be as contrarian as possible ie pick up companies the market absolutely hates with OK to good management at dirt cheap valuations while they are in their own bear market since all good optionalities get priced out. And tbh i think this works well within my framework. Last few months I’ve loaded up on the following companies in both my and my wife’s portfolios
Edelweiss: There’s an element to this kind of investing that makes you second guess everything. I knew all of the problems and still got a bit spooked seeing them on display in the recent article on the main thread. Seeing it go up 18 percent today after all of the second guessing has been one of the best feelings in my investment career. Deep value buy with loads of problems… but i can see them being fixed over the long haul + demergers
Car trade tech: Was getting absolutely hammered in the charts. Built a position here the day the market crashed post the ukraine Russia war commencement at under rs. 500. Got a nice MOS here now to handle what will be a volatile few quarters
Strides Pharma: Another beaten down company with everything seeming to go wrong. Promoter started buying and so did i under rs. 350. I’m glad i ignored it during the market craze last year and even though it’s credit ratings are now negative I’m glad to sit with it at this price and wait out the good optionalities in the future.
PTC India: High dividend yield with a problem of CG at it’s finance subsidiary. Will be building a position here in installments as it goes down. Started around rs. 78 two days ago for my parents
Piramal: Started a position here sub 1900 around the time of the ukraine war. Pretty popular company so this isn’t as contrarian as it looks. However, when it was crashing it felt like there was no floor to it falling so I’m pretty happy i took the plunge in all that uncertainty of the war.
I’ve also been building positions in Krsnaa diagnostics and Zydus wellness who are getting absolutely battered. Recently I’ve been studying Lux industries and Bajaj consumer though im waiting for a bigger MOS in each. Bajaj consumer especially is a tough one since it’s obviously a struggling company… but there’s a lot of good there.
The logic has been simple… all of the companies are in their own bear markets but have a few good things brewing too that will play out on a long enough timeline(insert joke about being dead) and they have been beaten down to a point where there is no good priced in. Considering my investment style of holding for years at a time and the fact i love owning and following struggling companies and watching for improvements quarter on quarter until there’s a ray of light… these kinds of bets suit me perfectly. Considering majority of my and my wife’s wealth is already fixed in the 4 companies i mentioned above + ITC and the reits I’m now taking a few more risks and actually enjoying the process of investing even more. Adding on the way down while the charts breakdown makes a lot more sense to me then adding on the way up when my future returns could be compromised. Only time will tell how this strategy ends up playing out. Will keep just 10 to 20 percent of our overall networth in bets like these combined until I’m more confident.
Hello Sir,
I am big fan of investor’s who bet big and have concentrated portfolio!
Me too in a process of developing a concentrated portfolio, I have reduced from about 35-40 businesses to 15 businesses now, details here Businesses with ‘MOAT’. Investment Strategy & Discussions
50% of my portfolio is made up of Gland, Deepak, Laurus & KPR mill.
Can you help learn the key points to build concentrated portfolio,
Yes, conviction is one of the key things, is it just driven by quarterly/yearly numbers or do we need to have in depth knowledge of products/industry or rough idea about business will do, being an engineer, presently not in a position to understand chemistry fully which is major portion of my portfolio now!
Key performance parameters to track from quarterly numbers/annual numbers. Or we should go by how story is panning out?
What should be the cash position for adding during correction or we should be fully invested?
how to review the performance of different business in the portfolio, some may do well some may lag behind for few quarters, which one to add or which one trim?
Any systematic approach you can guide or gut feeling sir?
But, after my ongoing readings of Common Stocks Uncommon Profits Phil Fischer, 5 rules for successful Investing Pat Dorsey , The Warren Buffet Portfolio Hagstrom recommended by Donald sir.
@Anand_Investor
Rshankv is right. One of the key steps is reading so you can find your style and understand the mindset of the greats. Read every kind of book you can read regards investing so you figure out your style. It could be value investing, growth, technical etc… until you know your poison you will get poisoned. Once you pick a style then go further to understand the temperament needed to execute it. Buying and selling is easy… holding is the tough part. Reading also helps increase your circle of competence… i dint know anything about pharma /IT/chemicals so i read as much as i could and now those are my main sectors. I’ve read enough to stay away from commodities like steel and cement and even during this supercycle i dont have any exposure to those companies and I’m comfortable with it. It has also helped me stay away from every ipo that comes out(and pick them up for cheap later like krsnaa and car trade)
That being said… i have an advantage of having run my own businesses ever since i passed out of mba college(which was an advantage in itself since i did learn quite a lot there). Once you see your own business play out first hand everything makes sense.
For eg my business went through covid headwinds but i knew first hand that it would rebound due to the brand name created in my state + word of mouth + relationships with the college heads etc. I knew that it was a matter of surviving and the lack of debt + cash in the bank would make me survive and my competitors fail. It also made my business more lean since i cut out a lot of fat that I’ve learnt to live without now(for eg i shutdown an entire classroom and remodeled my existing one and save X amount per month due to it… i let go of my sales and marketing team and i handle it myself without issue now hence saving me costs etc). I could see things like network effect/branding/good balance sheet/turnaround story etc playing out first hand. So when i look at buying a company i look at it from the same viewpoint ie sustainable business model, a promoter who knows what their doing, a long term plan, cash in hand , high margins etc.
Sometimes i need to compromise here and there to get a value buy but as long as i can see the next 5 to 10 years and understand the promoter vision I’m comfortable. I hate overpaying since I’m then at the mercy of the worst folk ie investors whims and fancies … so i try to buy as cheap as possible so that it’s the business itself that decides my faith and not investors(this leads to some sacrifice in quality but it’s worth it for me). I then track the usual ie quarterly updates, concalls, annual reports and don’t really bother about macro factors unless they give me a good entry point in a company im tracking.
Some of the things I get wrong is:
I’m almost always fully invested. I’m slowly working on a plan to keep cash in an FD to make myself more antifragile but i always find an idea and end up deploying it. Ideally I’d want 1 years of business and home expenses tucked away in an FD/Reit/ITC type instrument so that i never need to dip into my PF if things go wrong(right now business is good… but who knows what the future holds)… that is something I’m working on. Right now I only sit on cash when everything seems overvalued and i can’t find a bargain… I’ve made the mistake of adding in my existing companies at high valuations too(vaibhav lol) and i dont plan on repeating that. So I’m slowly improving in this facet too.
I’m also a bit too afraid of valuations and i don’t own any of the safer large caps due to this . It’s something im trying to get over but i just can’t do it yet.
I’ve yet to figure out microcaps too and I’m hoping my ongoing experience with ugro teaches me well so i can venture into those in the future with higher allocations.
Basically, temperament and a plan is everything. One can get easily distracted with news and macro factors and leave a position. My whole investment philosophy is based on increasing and then staying within my circle of competence, Buying good companies with good promoters at a fair price, controlling my temperament and following my plans without giving in to fomo . Also, i try my best not to second guess myself. So i write down all the pros and cons of an investment in advance and don’t let emotions play a factor later. Tbh I’m not even sure it’s about the money for me anymore… i just want to be right in the long term and enjoy the process of seeing a struggling/average company turn into something great and inadvertently compound my money. This makes me stomach short term issues and problems very easily(for eg the huge drop in Laurus hurt my networth a lot but i dint really feel anything at all apart from annoyance that I couldn’t double down since I’m overexposed there already). I do have a plan to be financially free over 5 years… but that seems like a side effect of this process more than my main goal.
Yes sir,
it definitely helps, Thanks for the insights.
I am reading books and in process of figuring out my natural tendency /investment temperament as you rightly stressed on.
I agree sir, Temperament is one of the biggest challenges anybody will face in market.
I will also start writing my assessments before investing, which is now happening after investing to build conviction.
all the best for your goal of financial freedom in 5 years…
will follow you
As per usual i end my hermitage away from the markets on the day my companies ,especially, Laurus labs releases its results since it accounts for majority of my personal wealth.
It’s been a few quarters of pain since the heavy highs of last year for Laurus… but I’m glad that they are finally coming out of it.
Very well chuffed with the result and I’m very excited about the 1 to 3 years. Was going to wait until the concall… but the investor presentation had enough info for me. The increase in cdmo/synthesis and decrease in arv api dependancy over the last few years is startling. Revenue and even profit this quarter were about where i expected and will only improve over the next few quarters as financing costs come down and cdmo grows further and APIs slowly come back. Laurus bio performed really well too.
Will edit and add more here post the concall… but as of now Laurus will continue to be my largest holding.
Edits post concall and Bloomberg interview:
The good days are back. I know some people dont like the targets given by Mr chava… but i dont mind at all. Everything said is backed with reasons for the same. With Ebitda margins of 30 and Revenue of 7200 crores I’m quietly confident of a 1400 to 1500 range FY23 which would translate to about 300 to 350 crores in Q1 and Q2 and 400 crores each in Q3 and Q4. Considering the capacity coming in line and the higher contribution by cdmo i don’t see this as unreasonable at all. What’s even more exciting is the contribution expected by Laurus bio in FY25(won’t be meaningful until then… but will grow due to debottlenecking). There is a lot of capex planned this year which will lead to growth in FY24 and FY25 will be the inflection point wherein cdmo can stand on its own and bio should contribute meaningfully ie id assume atleast 5 percent. Gross margins will be in a better state too as dependance on arv falls further by then to under 50 percent. There will be ups and downs over the next 3 years but the overall direction looks fantastic and is an easy hold for me. A lot of people are talking about FY23 being priced in… but i suspect the market is just waiting to see if Dr chava does indeed walk the talk since there are a lot of words spoken on a daily basis and it’s real world execution that matters and it’s not like the PE is at 60+ to capture the insane growth expected for FY23 yet.
On a side note:
Personally, I’ve been spending my time and money building a huge emergency savings buffer so that im antifragile regards my PF and i would never have to dip into it. Should be done creating this safety buffer by end of this FY so I’m not expecting myself to be active in the market for the rest of this financial year, apart from tracking quarterly results of course. It’s weird seeing money grow at 6 percent a year knowing I’m losing a small battle with inflation… but it’s well worth the peace of mind and anti fragility that will be developed. It also will act as a lumpsum amount to invest in one go if the sensex does indeed crash due to inflation/war. So losing a percent for the above benefits ie peace of mind + emergency lumpsum if there’s a 2008 esque crash seems very well worth it
The results for my second largest company in my PF(approx 23 percent) ie Deepak Nitrite are out.
My main tracking point with them is always how well they juggle their products 4 divisions in tricky environments. This is just a WIP and i will flesh it out post the concall
Basic chem is back on track post covid even in an inflationary environment has maintained good growth and margins which i wasn’t really expecting.
Speciality chem has grown well and is the main division i track. Margins at 33 percent too vs the fall to 26 last quarter. Very happy with this.
Performance products is the joker in the pack. Post it’s near zero contribution last year it looks like it’s stabilising over the past 2 quarters. We saw the base last year and know high this can go in favorable conditions.
Phenolics continues increasing revenue contribution… but as expected margins have fallen a bit so we could be reaching a small down cycle here.
Overall, it will be interesting to see how the next few quarters play out here. Is it overvalued at CMP? I honestly don’t know. I haven’t really added to my Allocation since rs. 600 so i have a big margin of safety here to accommodate for a down cycle in phenolics and PP and it’s a company il be holding for years to come since I’m comfortable with the way they navigate the commodity cycles. I would just like to add this: it still blows my mind that just 2 years ago everyone was tracking dasda prices and the fate of deepak nitrites stock prices depended on dasda + a few commodity chemicals. Fast forward two years and we ve reached a point where dasda prices don’t really matter on the downside anymore (but will definitely contribute on the upside) and they have a stable, growing spec chem engine and a monster in phenolics(though upside here could be capped for a bit until downstream products come in). All in just the last 2 years . Not only did they not collapse post dasda price collapse… but they’ve grown their profits to 1000+ crores per year too. I would give a long rope to this kind of management since they are masters at their game.
Anyways , The concall will tell me more.
It’s been a busy day today with Intellect design arena also announcing their results… It’s the 3rd largest company in my PF so i will write my thoughts about it
The market proves how unpredictable it can be. Here is what is known… intellect design arena is trying to increase its license linked revenues ie saas, license, amc… until they do so the results will be lumpy. This quarter was a good quarter by all accounts and so was the whole year.
License linked revenues are now 57 percent of the total pie and should cross 60 in this fiscal! This is exactly what i was waiting for.
You cant compare a business like this QoQ due to lumpiness, but you need to look at it YoY and it has grown. Gross margins are good too. Overall very happy with the result and will watch the concall later when recorded… though tbh I’m not expecting big changes since last quarter.
I’m assuming the market reacted badly to them apparently losing their contract with a Russian linked bank in Germany… i don’t know how true this is… but even if it is… Shouldn’t this have been obvious? Anyway, the market works in mysterious ways and imo at CMP it’s a steal considering what’s afoot regards higher margins and predictable revenues a few years from now.
Anyway, so far it’s 3 on 3 for me. Laurus, deepak and intellect all ended FY22 satisfactorily and i am looking forward to a good FY23 and beyond for all of them (Oracle too had a good quarter with good dividend and ok growth… i am pretty happy with idfc first too)
Btw post deepak nitrites concall I’m even more amazed by how well they did considering the hugely inflated input costs. As things cool down and their capex comes on stream in FY23 things are going to look good for Deepak. @Chins covered this perfectly in the forum of deepak nitrite so i don’t need to type it all out.
