Over the past few days I’ve added 2 companies that I’ve been tracking for more than 2 years now…
Dynemic products and valiant organics
I had a chemical company shaped hole in my PF after selling Deepak nitrite and now I’ve filled it(also my Everest tranches are on hold until there’s clarity regards USA subsidiary) Kept some headroom so i can add some more of each later if needed but in total both of them combined are now about 14 percent of my PF(with dynemic having a slightly higher stake vs valiant since i really like the management a bit more)
Both companies are trading at valuations i didn’t think id see again and so I’ve taken the plunge. Both companies are/(were) available at just over 1x sales and considering their potential it was just too good to pass up. There will be volatility here in the short term but this is a minimum 3 to 5 year investment for me and I’m expecting this to be a very fruitful period owning these companies at these valuations
With these 3 microcaps about 1/3rd of my embassy money is/will be invested. For the remaining 2/3rds I’ll try leaving this chemical/Pharma comfort zone
Yes. Bought around low 100s and haven’t sold a share. That being said I would only buy again at 10 percent or so under book value since the risks in ugro are inherently high.
Hey @Malkd - Hope you doing good. Been long we interacted.
I see you mentioned above that last 6 months - 1 year you were away from equity and more into debt or related instruments like REITs etc. and feel that it may not be right thing to do in hindsight …but I feel it was not that bad also considering how markets have behaved broadly. A diversified portfolio of patient investor (who generally follow buy and hold for at least medium term) have probably gone nowhere - including mine.
Overall my portfolio is down around 9% from the peak it did back in Oct/Nov 21.
There maybe some stocks which have done reasonably well but in sum, the peaks are far away…
So debt and related instruments over last 1 year sounds good in hindsight to me…
Regarding REIT - no one would have guessed new rules coming in…plus I was always wary of the sponsors in India, unlike probably US, where you may be able to trust the sponsors…In India sponsors are real estate builders and that did not click the first box itself for me…Still these REITs are down probably because of change in rules - which is kind of an external event for them which no one can be prepared for…so one may not put the onus of that judgement to oneself is what I feel…
Also, I remember we talked about ITC a lot and I admired your conviction. Incidentally, over last 2-3 years it had been my biggest allocation in terms of buying cost and currently second largest holding in terms of Market value…
Would like to know how your thinking has evolved around ITC with time, with some re-rating it has seen, stock run up with broader market doing nothing and a probable stake sale by government, possibility of increase in taxes subsequently as still India is much below the WHO recommended taxation of 75% (India is probably somewhere between 55-60%) etc.
Also, what weightage it holds in your overall family portfolio with current run up?
Wish you best for your new picks and good to see you writing again.
Hey @Investor_No_1 … glad to chat with you again. Back in 2020 i loaded up on ITC in my wife’s and family PF. Post run-up it’s more than 60 percent in each of them. It’s reached the point where it’s just in cruise control now ie already more than doubled and giving out dividends for free and it’s one of those own till we pass it onto our kids type of companies(this may sound counterintuitive since the weightage is so huge… but everything is on track and it’s the only blue chip i own and i need to spend my time on the non blue chips). so i just have glances at its result every quarter now and ignore it. Probably the best investment decision I’ve made and ever will make. I wish there was an ITC type blue chip opportunity in the market now so I could just throw all my money into it…but alas… those were the days
Weirdly enough my so called high delta PF has been struggling vs theirs. sold deepak nitrite as a 4x but apart from that it’s been chaos due to my huge holding in laurus which has effectively halved from all time highs. The likes of idfc and ingrevia have still done ok but overall it’s been a tepid past 12 months. Im not too bothered though. Most of my investments have atleast another 5 years left in them so what will be will be and all losses are on paper only(apart from my sale in embassy… still left it as is in my wife’s and family pfs though).
Debt made sense but ive realised that now since my business is back on track post covid and i have clear cash flow visibility for the next few years i might as well take a few risks and enjoy investing again. It’s been difficult finding value with potential growth bets in this current market but I’m hoping the likes of Everest, dynemo and valiant deliver(I have huge doubts regards Everest though since it’s only company i own where I dislike the management). May scale my investments in all of them further too based on the next few quarters. At the end of the day i enjoy the quarterly results and the fact that I’m seeing a miniscule company grow into a large one year by year much more than leaving it in debt like instruments and getting killed by tax
It’s been 13 days since I sold embassy… Deployed most of the money I had in it since then into a couple companies in what I consider my micro/small cap PF where time lines range around 3 years for triggers to play out. Typing in order of weight age from high to low
Dynemic products : average of around 240 since I added more when it fell to 230 or so. All bad quarters seem behind it now and the Capex they’ve struggled with will finally bear fruit from now on.
HBL power : The thread already explains this perfectly. Technically it had a huge support around rs 90 to 95. Added around that range
Everest kanto: Only had 1 tranche in it. However, management came out of hiding and yesterday’s concall started at 3 pm and ended at 3.25 pm. During the concall I added 2 more tranches at rs. 67 yesterday. Risks are high here so won’t be adding more tranches and will let this run for the next few years
Valiant organics: Good promoters, cheaper than it should be… Playing a return to normalisation game here. This may take a few quarters to play out
Krsnaa diagnostjcs: Was invested earlier as documented. Sold out at above 500 post the It raid. At sub rs. 400 it was just too good to ignore so I’ve hopped back on
Wpil and orbit exports: Have small amounts in these(ie around 3 in Wpil and 2 percent in orbit). Still need to scale them the more I understand them though il probably leave the total invested as is.
Overall, all of the above equals my entire stake in laurus. So my PF is now split between above - 35 percent, Laurus (35 percent) and my core combo of Intellect + Idfc + Ingrevia +Ugro (30 percent)
Made my final buy for the time being with my embassy office cash today… A year ago I wrote that the most expensive company I owned was Vaibhav global and that I would never make the mistake of buying an expensive high PE company again. Well, I broke that rule today. I’ve always wanted to own a paints company… But they’ve always been too rich for my taste (though the likes of Asian paints and berger have been ever presents in my family’s PF since the early 2000s). 2 years ago the indigo paints ipo was announced. I studied the company and was all aboard until I actually saw the valuations. For context they made 47 crores in FY20 and the IPO was priced at nearly rs. 1500 ie 7000 crore mcap giving a PE of over 100. It then rose to past rs. 3000 and I just totally forgot about it and never looked back. So why have I started investing in it today (with a first tranche of a planned 5 over the next few years).
Since the IPO their profits have doubled… They hit 26 crores last quarter and will hit nearly 30 crores in Q4(usually their best quarter). Q1 and q2 are usually mute meaning around 20 crores in each. So without considering any growth they’ll be at double FY20 profit over 12 months. That means the company is available at 1/3rd less the price at IPO (at current sub rs. 1030) and has doubled it’s profit too so it’s even cheaper And we are closer to the Capex coming in which was announced during the ipo with ipo proceeds. Even with a disruption in the paints business via AB and with the dependance on crude prices I’d still say this is one of those sectors that can grow for years to come with a high terminal value. So I’ve ignored my rules and worries and paid a premium here.
That being said… While I do tend to be a bit cavalier… I also am very conservative. There seems to be no respite with the overall markets, beating of paint company valuations and beating of the Indigo stock price…
So I’ve split my investment into much longer time periods Vs the ones I usually follow
I’ve put in one tranche now fully expecting a further drop. The next tranche will only come in if the company is available at 3x sales(I can’t see this happening unless the whole sector gets a derating since it’s already at 4x sales which is a rare sight for a profit making growing paints company ) OR if the company continues to grow well and it’s still available at similar valuations further down the line. Further tranches will come in when there’s more data when grasim enters the market.
This has the potential to be one of my core long term bets so the tranches aren’t that small either… For eg my first tranche is Just enough where I won’t miss it if it goes to zero or stays flat for a few years… And just enough to enjoy a nice profit if the market goes crazy and gives the company sky high valuations again and I never get to put my second to fifth tranches. Realistically, the worst I’m expecting the price to stay within this range(*/- 20 percent) for 3 to 4 years until valuations catch up (fully expecting them to double their revenue and profits by then giving a big Mos even if the sector gets a derating to 20s type PE) which would give me enough time to invest and then sit back and enjoy a 18 to 22 percent CAGR company for a decade+. Using this failsafe is probably the only way il ever get to enjoy quality premium companies and premium valuations instead of just chasing cheap companies all the time and will improve my learning too since skin in the game with the markets is the best tutor
Disc: Not a sebi advisor.
Edit: Added my second tranche yesterday at rs. 992. Too early to say but it already looks like adding more near 3x sales wont happen but one can only hope. Will hold off on further tranches for a while. Since its a long term holding i dont mind if the amount isnt the full 5 tranches since it will have the benefit of time to compound.
How are you looking at your investments in Manappuram finance, if any ?Are you expecting reduction in competitive intensity and thereby growth returning ?
My family has investments in manapurram from years ago ie near rs. 30 or so. I was considering investing when it crashed to rs. 80 last year but stupidly waited for a price of 70 to 75 that never came. In a business like this one needs as high as an MOS as possible to stomach what could be a tricky few years and with a lot of leaps of faith and guess work. At cmp im not really interested in making an investment here so ive not spent too much time tracking it off late.
Its been a long while since ive posted on here. Thats because ive just been riding the wave since february and its been a weirdly bullish two months. The last move i made was selling a huge stake in embassy office at a loss and putting it into(in order of weightage high to low) back in February
Its been quite a ride since then with WPIL doubling, Everest at 60 percent up, HbL at 50, Indigo/Krsnaa/Dynemic/Valiant up 40 plus percent and Orbit being my lowest performer at 15 percent while embassy has gone even further below my selling price. Im now in a quandary as to when to sell since all of them still seem relatively cheap.
Selling is one lesson ive never learnt. Having ridden laurus all the way down to 280 im glad to see it recovering but i need to learn to let go at X returns.
Overall its been a fantastic 3 months since I last posted with ugro exploding and intellect recovering too.
After a terrible 2022 , 2023 has gotten off to a good start for me. Now i just need to figure out a strategy to book profits
Will start being more active on here from next month
I was curious to understand - If you are tracking the turn around for Stride. Remember, you mentioning about it about an 12-18 months ago and you were betting heavily on its turnaround. As expected it had a tough time in last 5-6 quarter and some green shoots emerging since last quarter.
Would be interesting to know your assessment if at all you are tracking.
I dont track it anymore tbh @manoopatil … Got a small profit and ran. Seeing laurus labs struggle and being a huge part of my PF was enough pharma for me. Was between selling my entire stake in strides or a few shares in laurus and decided the former. Investing in pharma is basically for individuals who love suffering… and owning 2 pharma companies(especially one that was a turnaround play) was too much for me lol. There are easier ways to make money than pharma…that being said it was a very low downside bet at the time
Side unrelated note: Started a tracking position in dlink and city union bank and rkec yesterday. Studying 3 different sectors(rkec and dlink are a bit out of my usual areas of interest while cub looks the safest bet at current valuations since im comfortable with banks) and will scale up in one or all 3 as i get more comfortable over the next few weeks
I think this was about 2 years ago @Mayank14 . I didnt understand IT and while studying the sector i made a basket of Intellect design arena, expleo, saksoft and xelpmoc all with equal weightage. As time went by i moved my money from 4 to 1 ie intellect design arena (theres a comment i made on this thread regards this nearly 2 years ago i think) and till date its the the only IT company im comfortable with since its in a sector i understand ie bfsi. Just had a look at xelpmoc and i think i escaped a falling knife situation. I still have no idea what the business does and they currently seem to be loss making and at less than half the price it was then lol.
A follow up on this. Added City union bank and dlink yesterday. For city union bank i actually broke a couple FDs and added into it since im pretty much convinced i wont lose money here. Its a 5 year play for me. Expecting no/minimal book growth in the next year until the npa issues get sorted and for it to go back to its near constant and extraordinary 13 to 14 percent book growth rate of the last 10 years from from FY25. Over 5/6 years i can see a book value of 150 and a median P/B of 2.4 would see me get a 3x in 5 years instead of leaving cash stuck in fds even at admittedly high rates. There are a lot of risks here but after ugro and idfc im excited to take a new bank journey. I may scale my investment up even further over the next few quarters depending on how things look. Honestly, sometimes an opportunity looks so good that i cant stop thinking about it and i do all i can to invest in it … its happened 6 times over the past few years for me… ITC sub 200, Laurus in low 100s, (pre split) Ugro at 105, Deepak nitrite at under 500 and ingrevia at listing near 240, idfc in its 20s/30s. Thats what i feel with CUB right now considering its also an excellent company and not just any cheap bank… and im doing all i can to take part in this opportunity since these occassions dont pop up too often. Im hoping it stays in this range for a quarter or two so i can build it to 10 percent levels of my pf(currently around 4 percent)
Dlink i added more to my tracking position but wasnt that comfortable adding more than a percent of my PF. Ran up today and i may just leave that percent in and not scale it up since I honestly still dont know much of this space and it falls under the learning experience category
Rkec im buying cautiously and have barely dipped my toes in and the stake here isnt really relevant and more as a learning experience… even more so than dlink. Still basically a tracking position and i wont be increasing here since i Absolutely hate the construction space but it looks too cheap to ignore. Will scale it up over the next few quarters. That being said embassy office at current prices tempts me more as a real estate play… though based on its price action i foresee problems upcoming including a possible dpu cut which would explain the 52 week low. Very cautious with this after i burnt my fingers earlier.
Currently its at 1.3ish Book value due to the npa divergence as seen by rbi and the next 2 quarters being no growth as per management. As i see it is… the divergence is basically due to 13 clients. Management says some of these clients will pay back and also due to restructuring atleast 40 to 50 percent should clear. So about 130 crores will disappear. Also, the management team would know these clients better than anyone… and if they can help a couple of them through this tough period they ll get a couple of good high loan clients out of this in the long term. This should get settled over 2 quarters and considering other provisioning too i can see their profits falling to near 150 range next 2 quarters. This isnt an issue since their book value wont get hurt and growth should kick in by 2nd half fy 24 since they are at low leverage at the moment. The major issue is will this continue to be repeated in the future. Personally i feel this would be a tipping point for management to go even further into digitization and reporting npas and it may turn out to be a good thing long term. When 13 to 14 percent book growth kicks in(and maybe even more when leverage hits 13 to 14x) then this would be forgotten.
Its still a small bank and has a long way to go so don’t see growth being an issue for years to come… atleast for the 5 year period i have planned for it(betting on book value being above cmp in 3 years and hopefully above median or above median PB of 2.4 to 3 over 5 years…). Theyve proved they can handle down cycles well too and at current valuations even if things go wrong over the next 5 years i doubt il lose anything here vs an fd.
With that being said ive closed another few fds and hiked my stake here to 7 percent of my PF. Im so desperate to add cash that i even took out my “learning experience” tracking position in rkec and added it here even though it barely moved the numbers.
Currently have 15 stocks in my PF… in order of weightage at present values they are
Laurus labs
Idfc + Idfc first
Hbl power
Intellect design arena
Dynemic products
City union bank
Jubilant ingrevia
Ugro capital
(Above accounting for 77 percent)
And a total of 5 percent all combined(ie less than 2 percent in each) in:
Valiant Organics
Orbit exports
DLink
Pretty happy with the above and ive reached breaking point regards tracking the above so in the future il only add companies if i sell one of the above or increase stakes in the above 15
Thanks for you insights, I got onto ITC and LaurusLab mainly based on your conviction and writeup. I’m generally cautious on bank and financial companies in India due to ‘fraud’ and ‘manipulation’, your write up on Citi Union Bank is interesting, don’t banks typically trade at ‘book value’, even the best of the best like JP Morgan only trades at PB 1.5x and there is loads across US and UK trading at discount, e.g Citi at PB 0.6x , is there any reason to pay more than book value, is it due to growth in loan book ? All this considering the ‘book value’ itself could be wrong
