Malkd's Core Portfolio

@Investor_No_1 … I do not know much about amrutanjan healthcare tbh. I just had a cursory glance at it some time back and it was trading at a PE of 30+(now 40). I honestly like having 2 growth drivers for small caps ie a PE re rating and earnings growth so I had immediately dismissed it and never delved deeper. So I don’t have any knowledge regards it tbh. The numbers of late look good but I never delved further due to the valuation. At high valuations I’d rather just go for a large cap (like I’ve done with sbi cards who is now at a worrying 85 TTM PE!). The only other medical related company I’ve looked at deeply is kovai medical. The only reason I’ve not invested in it is it overlaps with my business and my parents business and I’ve made a rule where I don’t want to be invested in anything me and my family are already invested in since the headwinds would be double when they do occur lol. I’d suggest looking at it though if you want something healthcare related. Looks like a gem.
@Rohit_Dubey I usually like companies that add a new growth driver. But cupid seemed to be a bit late to the party and we need to rely on trusting the management for handling the new venture well and Im not fully convinced yet. The projrected return on capital for it looks good but I’d rather wait and see. Honestly I’ve resigned myself to being late to the party with cupid rather than being early. The day it closes above it’s all time high of 400 would be the point when all its issues regards succession, us FDA, corporate governance, new ventures, tendors etc would probably be cleared and that’s when I’d bet big on it. I just don’t see much incentive in buying right now at 200+ and sitting back and waiting for the issues to clear up. If it falls to 150 it may be worth a punt but id rather bet on pharma/chem/agriculture/FMCG during corona since I’m expecting a crash in most other sectors in the run-up to the US elections and due to the state of the economy in general… and post corona there’s a whole list of other stocks I’d rather bet on. I love the management and the business model but I don’t think il be able to bet more than 1 to 2 percent of my portfolio in it and the lack of conviction makes me want to look elsewhere.
Edit: I stand corrected regards cupid. Check the latest post by Dinesh in the cupid thread. Corporate governance issues explained. Medical devices explained. Also, there’s no reason for us fda approval and start of female condoms to begin in FY 22 not to happen and the potential is huge. And considering how amazing the management has been in communicating with shareholders I’m sure that there’ll be no succession issues either since it looks like it’s in their dna to be shareholder friendly. Gone to the top of my list of buys. Will take a small position when I free up some cash since I’ve used all of my allotted investment cash and add more as and when I get funds available.
Edit: Began a small position in Cupid today at 215. Just 200 shares. Had a little freed up cash so begun my journey with it. Couldn’t resist after the fall. Technically it’s a good bet too since it broke it’s 2 year high a few days ago and formed a nice little cup and handle. The potential is huge and the Cupid thread posters are amazing. Had to choose between the happiest minds IPO Vs this and chose cupid

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I think I’ve passed the limit of edits for my main portfolio post above. So mentioning my new addition here
Cupid (Average price 216) 1 percent
Sometimes the market surprises me. Here you have a company who have confirmed orders for their condoms of 168 crores for the rest of this year making them covid safe(last year was 160 crores over 4 quarters). They have a growth driver and diversifier in medical devices on the way. They have 5 million in sales in the us on the cards in just a few years pending an fda approval for their highest margin product ie female condoms. They have a dividend policy that will give around a 26% payout. They belong to a duopoly and have a huge WHO based moat with 5 year entry barriers. Good promoter. There are a few issues(succession, fda approval) but which companies don’t hAve any? And it’s still available at under 8 PE. I’ve made a rule to myself that I won’t allot more than 1 percent of my portfolio to sub 1000 crore cap companies since I’m still new to micro caps and I don’t want to get Burnt(plus my money is tied up in other investments) and decided I need years of practice in this space before committing more for the sake of capital protection. But imo this looks like a quality no brainer and the conviction I’ve gained for it is pretty scary and I was willing to bet a lot more but had to stop my self and stick to my rule.

Looking at your analytics which helps me in tracking such companies which are out of box as I am a new bie to the world of investing @Malkd Hats off to your knowledge
Thanks
But Again a Fundamental doubt what are your sources for gathering such information. Can you please mention
Thanks

@Dhanesh_Chauhan It’s the posters on VP that are the geniuses tbh. I usually start of by picking a sector and studying it. I then spend time on screener to short list companies in that sector. Then I check the business they do and if I understand it. First I look at the biggest and highest valued companies in that sector and understand how they got big… and then look at smaller companies for signs that they’ll do the same too. Then I go through annual reports and concalls and whatever company videos I can find of companies that stand out(not YouTube videos by “investors” since I’m yet to find a stock that someone on youtube isn’t bullish about. CNBC and brokers and youtube are just noise I’ve learnt to ignore). I keep a set template… Good business with secular growth, undervalued(Around 15 PE and under is good enough for me) and growth drivers that are yet not priced in by the market. I then write out my whole thesis including where I see the company in 10 years(this prevents me from taking short term punts. I like buying in sectors with tailwinds so I get an MOS quickly). Then comes the main test… to check if there’s a forum for the company on VP and how well it’s being tracked. The members on VP are far more qualified and experienced at analysing balance sheets and understanding issues etc than me. Only after that final test do I gain conviction. Sbi cards was a leap of faith from me though and I’ve got an MOS now… the rest all had a VP backed community. Tracking a company after buying it becomes so much easier with a forum since we can discuss results/share news/keep patience in a company on days they crash (the toughest thing to do). However, I always try to follow that order… I gain my own conviction and then double check with the forums to make sure it’s correct(Laurus i did the reverse though). I’ve avoided many traps due to this too.

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Hi Malcolm, thanks for sharing your investment rationales in so much detail. I really like tracking your pf and learning from it. Isn’t it very difficult to find good companies available at < 15 pe? For example even from your current pf, my guess is that laurus, granules, sbi cards might have been difficult to buy below 15 pe. Also, wouldn’t it be difficult to deploy incremental capital (say a fraction of monthly salary) in these same names due to their steep run ups? How do you plan to deploy incremental monthly flows into these pf stocks ?

Thanks,

Sahil

@Malkd Right , I completely agree that VP posters plays a major role in picking up the right stock.
But in fact I have joined this VP platform nearly a couple of months ago but the exposure which I have received by just reading on various topics.
I have just turned 18 this year and started investing my current portfolio consists of nearly 49% ITC (expect a good dividend return in coming years )
22.5% Deepak Fertilizers (Just for sanitizer market being enlarged to 30000 Cr in 2 to 3 years)
15% HDFC Life as I believe it to be next hdfc bank (sorry but I have personal sentiments for this stock no such research )
So I was looking for one more stock that may help me in just dividend or price appreciation
But looking at your contribution in VP
I am ready to hold idle cash for some time in picking up the right company and investing in it
Thanks

Hey sahil. I track your portfolio too and due to it I got convinced by RACL! Under 15 PE is difficult. But almost all the stocks I own I managed to get them around 15 including deepak and laurus. Sometimes when I look at a stock it just feels wrong to be trading at a certain price. Sbi cards was one such example. At 500 I studied it’s supports and realised the market wasn’t letting it go below 500. I wanted it during the IPO but ignored it and when it touched 500 I thought of it as a safe large cap and took the plunge. Now that most of these companies are trading at a high valuations I don’t think il be adding any more to any of them. Hence why I took huge bets at the price I got them at. I realised I wouldn’t be able to add on the way up unless they are a safe large cap like ITC. Once I get my margin of safety I don’t mind how high their valuations are as long as I have a nice 20 percent MOS. They can rise and fall as much as they want as long as I have atleast 2 supports between me and the cmp. Sbi cards is overvalued at 85 PE. I have considered profit booking but my MOS is now 50 percent so I don’t have any issues letting them run. I just love having two price drivers when buying though… ie pe rerating and earnings growth… so hence why deepak over alkyl, laurus over divis, itc over hul etc. I don’t mind already owning them when they are re rated or highly valued though since my target is 5 years minimum. Basically the businesses and future prospects excite me more than the stock price after i buy a company. I spend so much time studying them that I now want to be a part of these jourenys they are on and the profits are a side effect. Like I’ve said earlier… switching my perspective to buying businesses over stocks has changed my whole mindset. I will not be adding more to them though since I’ve allocated enough (I disastrously tried averaging up suven pharma and lost my MOS and fear took over and I sold).Next year il research more stocks and invest in those instead of investing in these again unless their valuations fall back to under 15 due to a bumper sustainable quarter etc. If I don’t find a good company next year il just be putting the money in ITC. The main aim is compounding. I’d rather let compounding take care of my investments by investing a big amount once since I’ve realised that with good companies the only wealth destroyer will end up being me. It’s difficult to find good undervalued ones as it is like you mentioned so once found I do not want to let go unless something goes terribly wrong

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Congrats for starting at 18. If I was your age I’d invest a huge amount in ITC too tbh. It’s one of those companies that will pay you a salary in 10 years and hence make you financially independant with almost a certain guarantee. You have time on your side. You don’t need quick multibaggers(though you have time to correct mistakes too). When you look back at age 30 you’ll wonder how and why ITC traded at sub 200 rs :). An opportunity like this with a blue chip large cap won’t last too long and if you can hold for 10 years you’ll be smiling in a decade. You have the luxury of doing that too. I haven’t studied deepak fertilizers funnily enough and I never looked too deeply at insurance companies either so can’t comment on the rest :slight_smile:

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Thanks for the very detailed reply! If I understand correctly then you intend to invest your monthly investment surplus into either itc or one of the other low risk alternatives like ppf that you have outlined earlier. Is that correct?

Yup. So I liquidated my entire portfolio in March since I honestly felt the world was going to end. This wasn’t a 2008 recession in my eyes. So I liquidated all my hdfcs etc that I’d held and had been SIPing in since 2010 and switched over the sectors with tailwinds. I didn’t understand these sectors and companies though so it took me nearly 3 months to study. So I was invested again around june only after I was convinced my capital would be safe. In the future as I get cash my first stop will be PPF, then ITC if it’s at a yearly low(it always is post dividend/after tax news etc) and the remaining will go into 2/3 companies that I’ve not even found yet. I have a list which contains idfc first bank, vip etc but il inly look at them next year after I’ve done my first 2 allotments. Finding a worthy low PE company is hard work and will be even harder next year when the economy is in full bloom lol.

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@Malkd sir I would like to know that as economy will reach to 5 trillion dollars of india about 5 to 6 yrs later but how to determine such right P/E opportunity to invest in it

I honestly dunno how to answer that. All I know is we are still at just the start of the journey and we have a long runway of growth ahead of us in India and due to this there’ll be opportunities to invest in for a long time and no matter which country I was born in I’d still invest in india only. We are lucky to be born here and are able to scuttlebutt our economy first hand so we will always be abreast of trends etc just via daily life. However, there will always be overvalued companies and overvalued sectors due to business cycles. Just make sure you don’t end up buying at the top of a cycle since you may have to wait a few years until the cycle goes back down and catches up again… and for good companies it will always catch up. It’s just a matter of time and opportunity cost while waiting. At the end of the day it’s upto individual companies to perform and for the right nimble management who understand business cycles, can make secular profits to cover cycle lows, finds growth drivers via innovations and new products/services to make use of this huge growth boom ahead of us. Our job is simple… buy good companies that aren’t overvalued and hope that the companies we pick today are trading at nosebleed P/Es 5 to 6 years from now. And then rinse and repeat. Btw I’m just 14 years older than you @Dhanesh_Chauhan . No need to call me sir :slight_smile:

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Thanks @Malkd Truly satisfied with your reply
As I see ITC(FMCG) as a introduction stage and somewhat reaching growth stage but maturity and decline stage are much more ahead of us
I am really thankful to this VP forum that you really spend your valuable time in replying me
Once again Thanks :smiley:
And happy as India has many opportunities in upcoming times to invest and we all are headed to a new and financially independent India
As Time is the only thing which we pay to these companies for growth
Will not call you sir again :sweat_smile:

Just penning a few thoughts about conviction
I honestly don’t understand why people panic on days that the sensex and their companies fall. If it’s due to a specific reason ie promoter scandal/no growth plans/really, really poor result its understandable. On non business related days like today it’s just so random. Right now I’m sitting with a -15 percent loss in Kaveri and all I’m hoping for is that it stays low/falls further over the next few months so I can buy more in a few months when I get more cash to invest since I’m fully invested now. If you are sure about the fundamentals of a company and nothing changes then drops like this are just buying opportunities where suckers who panic and aren’t looking at the next 5 years worth of the company are selling to you. Days like this make me confident that I will get opportunities to add more to my 9 companies in the future since they just prove how irrational the stock market can be. My fear was that the stocks I own would run up too high(about half of them have) By next year… I’m now excited by the fact some of them may not rise/may even fall and I may be able to add more in a few months. The stock market really is a way of transferring money from the impatient to the patient. Btw I watched this talk by Peter Lynch today morning btw… one of the best videos I’ve seen regards the stock market of late(even though it’s from 1994):

Also found a channel called the Swedish investor on youtube which summarises almost every book related to the stock markets. I’ve read most of them but he provides a quick way to prevent re reading them and a great way to learn from these greats for people who don’t like reading. Id recommend binging them on days like today since they keep you calm and help strengthen the long term mindset
Note: I am a bit annoyed with myself for buying Kaveri early. But I honestly felt it was value at 606 and it’s just been given an even more irrational discount now at 510

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Been debating opportunity cost with myself of late. 2 of my current stocks are currently being offered at fantastic prices by mr market

  1. Kaveri seeds: was under pressure due to Prabhai selling. Can be bought near its 200 DMA. It won’t last at this level for long
  2. Alembic pharma: promoter selling due to non nefarious reasons has led to it being available at almost it’s pre Q1 price of around 900

I have full conviction in both of these. And considering the current opportunities being presented and the tailwinds in their sectors I am tempted to add more. The problem is I have all my cash invested. My only option is to let go of my favourite company ITC which has closed below it’s 200 DMA and has a potential government SuUTI sale in the future to give me a buying opportunity. I have full conviction in ITC too but I will be buying it every year for the next few years too anyway. So I’m now considering selling about 1/3rd to half of my ITC holding and spread the cash across alembic, kaveri who will not be available at their current prices for too much longer. Will be buying ITC every year for the next decade anyway and as long as the cigarette contribution is so high I can’t see the price going anywhere for a few years(though I’m fully convinced it will be a FMCG giant with a re rating a decade from now).
Just a quick note on what I expect between kaveri, alembic and itc for the next 5 years.
Kaveri can increase their profits at 20 to 25 percent per year for 5 years easily as per management. They also have spare cash for dividends and buybacks and will almost surely go back to a 20%+ dividend policy. If they do pull off what the management says a re rating is on the cards too and it’s currently in single PE. Alembic has enough in the pipeline to offer a re rating from sub 20 PE to 30+ and huge PAT growth over the next 5 years. Both these stocks offer a margin of safety since their latest results haven’t even been priced in yet since the selling pressure began straight after and negated the rises post fantastic results. The new sebi ruling could see these undervalued companies rise fast quickly too offering a huge margin of safety in a short time.
ITC offers safety and a huge dividend yield currently. However, over the next 5 years I can’t see it even doubling though there will be a huge re rating at some point in the future. Makes me even more convinced to buy the others now and invest heavily in ITC slowly over the next few years instead of aggressively right now at the loss of opportunity cost of other stocks
Safety vs risk(though I can’t see the risk anymore in kaveri and alembic once I’ve understood them). Tough decision this

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@Malkd While going through all the quick reads and some what analysis using screener I completely understand the value of both Granules India and Kaveri seeds.
I know that this Is like personal consultancy from you :sweat_smile:
But do you think that I should sell my all Shares of ITC and United spirits with a loss of around 1500 rupees and buy Both the companies as mentioned above
Because somewhere in the mind I think staying invested in united spirits for becoming debt free and unleashing the true spirit of united spirits will take some time of 1 year
And ITC 5 to 6 years as you mentioned
So what’s you take on this topic
Thanks

I don’t track United spirits. Sorry. ITC is an sip candidate for the next few years. Switching to a fast mover for a few years and then jumping back to ITC which is expected to be a slow mover for a few years should work in theory. However, trying to time the market could leave you disappointed. You could buy kaveri and granules and they may stay stagnant for a year and ITC may show amazing improvements in FMCG other margins etc in any quarter… they may even do it this year. They may suddenly announce acquisitions/buybacks with all their excess cash too and before you know it, it may be out of reach(look at reliance for eg). So this can go very wrong too and you need to know the risks. Personally, I fled to ITC a few months back for capital protection. As I’ve studied the likes of Kaveri I’ve slowly realised I can trust them too based purely on logic(sound fundamentals, increasing earnings, future buybacks and increasing dividends). I’ve decided il be selling around 1/3rd my allocation of ITC and switch that over to Kaveri and Alembic. The market rarely throws such opportunities at you. When it does you have to grab with both hands. I am confident il be able to grab ITC at good prices for the next few years(SuUTI sale, ex dividend date, tax increases, poor quarters) so il just need to commit to buying ITC at its lows next few years if I sell now which I know I’m disciplined enough to do. I am confident I won’t see alembic and Kaveri sub 1000 and 600 again so hence why I know I need to act now.
Note: not a sebi advisor

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In my opinion, Kaveri may stay range bound without triggers. The best quarter for Kaveri is over. It may be rangebound till q4. Post that it might see some movement basis next year’s expectation.

Thoughts ?

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The previous trigger ie Q1 hasn’t had a chance to materialize yet due to the Prabhai selling. The number of MFs buying has been steadily increasing in august. I suspect that without the previous selling pressure this Q1 trigger can now materialize properly. Being in the agri field is another trigger due to it being covid proof. The next 3 quarters being more profitable YoY are more triggers too since it will prove Kaveri is no longer fully dependant on Q1. All it takes is for more people to understand how under priced it is. Retailers may need triggers. However all the triggers that are needed are currently present at PE of under 10. They just need to be discovered now by the big institutions. It’s just a matter of time. Kaveri is probably the only stock that I’ve seen that I can easily just sit back and calculate the next 5 years of returns though. As a disclosure, I owned Kaveri from 2011 to 2015 during its amazing run so I know what it’s capable of. The government ruling against cotton and the SEBI probe made me sell. They are now over those hurdles and back with a bang imo and I can see a 2011 to 2015 run starting again now only more secular since there’s less 1 product dependance. It’s just a matter of the market catching up. You may be right regards triggers but I still feel the Q1 trigger will happen over the next few months. My only concern is… Prabhai is known for his patience. I thought he was just booking a few profits but he has ended up selling nearly half his stake now and I cant quite figure out why he would sell 4 percent+ of his 9 percent at this inflection point.

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@Dhanesh_Chauhan
I’ve gone down the rabbit hole regards ITC. There had to have been a reason for the ceiling in its price and for its subsequent fall below 200 DMA and I’m pretty sure I’ve understood why.
BAT has been trying to gain a controlling interest in ITC for ages. As of now they hold around 30 percent and the management at ITC have done all they could to prevent this controlling stake by preventing buybacks. Now here comes the problem. The government owns approx 28 percent in ITC. 7 percent via SUUTI and 21 percent via LIC etc. The government stated their interest in selling the 7 percent SUUTI stake back in May and considering all the income issues the government is facing they’ve already begun selling HAL, Bharat, Irctc… I think the market believes ITCs turn will come soon too. Then you have the LIC IPO… they hold 16.3 percent of ITC currently and LIC have to bring it down to 15 percent and below before the IPO. So they have to sell 1 percent. So as of now there is a threat on around 8.5 percent of ITC shares! Imagine the selling pressure over the next year if these very real threats materialise. And imagine BAT lapping up these shares and increasing influence in ITC which could be both good and bad(uncertainty). Already on trendlyne you can see that there’s been a firesale by Mutual funds last few months so there is definitely something they know that we don’t. Usually I wouldn’t even bother speculating in the short term but the stock price has behaved abnormally and along these lines for ages too even… closing below it’s 200 DMA of 190(which is a sell signal as it is). All of this leads me to believe that we will soon be getting ITC at a very unreasonable price/we will have atleast until next years dividend announcement date for a meaningful rise. I think that’s what the market is expecting too. Why buy now when they can possible get it cheaper in a few months? Nothing wrong with the company long term but this whole SUUTI/LIC/BAT overhang needs to get out of the way for me first. There are 2 things we can do:

  1. start saving cash expecting to buy more ITC at a cheaper price soon.
  2. Sell ITC and buy back later at a cheaper price and use the cash in agro/pharma for now.
    I’ve not decided which of the two il be doing.
    This isn’t my forte ie trying to time the market. I’m good at buying and holding. So if I do try something rash I may end up getting burnt haha
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