Manas Portfolio

[Kumar_manas]

@pratapmouli

Dynemic products - not a very liquid stock, how did you factor in the liquidity issue.

It is not that illiquid that you can’t buy 3-4k shares in 30 minutes. It is not liquid like Yes Bank, Unitech though.

@pratapmouli

our opinion regarding Triveni Engineering. Looks like it ticks most of the boxes just like Godawari.

Not sure, how it ticks the same boxes? It is not cheap (PE of 15 vs PE of 2.6 for GPIL), it is not debt free either.

[Kumar_manas]

@Kumar_manas

My portfolio size is at 40x my annual expenses.

Currently, I have only 4 stocks in my portfolio-

Portfolio nearing 50x annual expense now.

Surge in last 1 week because all 4 stocks have gone up- dynemic products, GPIL, meghmani twins (including today’s surge)
Also had been adding GPIL 1 week ago from the dividend I had got.

Continue to hold all 4 stocks and plan to add more if there is any dip.

Overall asset allocation- 80% Equity, 20% cash, zero real estate, zero gold, zero crypto.

@pratapmouli

Dynemic products - not a very liquid stock

Also, Dynemic looks more liquid than GPIL to me. Even though GPIL has much higher mkt cap, it seems free-float of GPIL has been cornered by a few big PMS or big investors, or it may be due to ASM. Not sure, but the bid-ask spread is sometimes pretty high in GPIL.

[parkhi_nazar]

Manas bhai, if you don’t mind sharing: What % of your net worth is invested in equity?

If your portfolio is 50x of annual expenses, I reckon that you could simply put all (or at least a very large %) of this in a FD and simply look to match inflation. So your floor is set, for the rest of your life. Anything you earn above this (by doing what you enjoy doing only) will serve to top up your wealth.

If you still have a large chunk of your net worth in equity, what is your objective behind continuing to take more risk? Building generational wealth? Improving your lifestyle (i.e. 50x of current expenses is not enough if you want to dial up your lifestyle and that expenses number)?

[parkhi_nazar]

Also when you say portfolio, I assumed you mean equity portfolio. Is that correct?

[parkhi_nazar]

Thank you for sharing. It’s a different thought process from mine (“go into protection mode, and leave maybe 20% in equity/ risk capital”). So I was curious to understand your thought process. It’s fascinating to see the diversity of thinking. I guess this diversity is one of the things that gives our world beauty and resilience.

All the best to you, and wish you Godspeed in your quest.

[Kumar_manas]

@parkhi_nazar

All the best to you, and wish you Godspeed in your quest.

Thank you.
Also, I see risk in everything.
If I buy a big apartment, there can be an earthquake in that area, leading to big fall in property value.
If I buy a lot of Gold, there is big risk of it not going anywhere for next few yrs, while the prices of everything else increase by 30-40%.
If I put money in FD, I will get post tax return of 3.5%, which is negative 5% real return (based on actual inflation), and I will lose 5% of my capital every year.
I can’t afford to lose 5% capital every year (if majority is in FD), then my portfolio will fall by 50% (in real value) in 8 years for sure, and I will have to reduce my expenses by half.

[parkhi_nazar]

Yes, there is risk in everything. But there are degrees. Ultimately, you can never remove all risk, and have to reach a state of “acceptance”. I had already penned my thoughts on this here.

Towards a Capital Allocation Framework!

That’s a good takeaway (perhaps I say that because it aligns with my belief as well…?) Start with a risk taking attitude when you don’t have much to lose, and many years of earning ahead of you. Grow increasingly paranoid and diversify as your future earning capability decreases, or if you’ve “made it” (to your point on “huge corpus”). The point is, as in much else, about balance. To search within and seek out where your balance point lies. What are you balancing? True paranoia and diversific…

[Investor_No_1]

@Kumar_manas

Also, I see risk in everything.

Agree! One thing which you can do is shift within equity to compounders gradually where you can handsomely beat inflation over long term, get decent growing dividends yoy and have decent downside protection as well.

50X expenses is a dream, which must be protected before achieving and also when once achieved. Its no wonder that risk management is so crucial in every business.

I am sure you must have done your risk analysis & management as well. When you say no real estate and 80% in almost smallcaps…does that mean your entire family’s (spouse, parents etc.) 80% portfolio is in smallcaps in a bull market? (Age & Job profile is another factor for risk analysis) If yes, then that is an amazing risk taking ability but you must think of ways to protect what you have achieved as well…

Would be interesting to know your thoughts

[Kumar_manas]

@Investor_No_1

oes that mean your entire family’s (spouse, parents etc.) 80% portfolio is in smallcaps in a bull market?

Yes, that’s right. 80% of our entire corpus is in small caps.
Small caps are more volatile than large caps and Nifty obviously.
But, this does not mean that they have more risk.
Risk arises when you don’t know where your money is invested in- for example, people who bought flats from Unitech and JP associates, or even readymade flats from Supertech (very poor quality). They lost their life savings in physical real estate.
Then there are people who lost money in PMC Bank fixed deposits or DHFL Fixed deposits.
Risk is not dependent on asset class, but where you invest in that asset class. In large caps, Yes Bank and DHFL stock led to 99% erosion of value for a lot of investors.

I do detailed research on my stocks and invest only when I am confident. Both valuations and future growth are important. Only undervalued stock with no big growth trigger is not a good investment for me.

For me , my investments not going up is a risk. Coincidentally, 2 of my stocks- Dynemic and Meghmani Fine (42% of portfolio together now) are locked in upper circuit today. And I have gained around 3x of my annual expenses in one day.

[Kumar_manas]

@Kumar_manas

20% allocation to Dynemic products
Again same theme-their new plant is ready now, and it can potentially triple profits. The stock is at lower valuations compared to its peers though not exactly cheap like GPIL or meghmani. Still, the mega capex theme is pretty similar to my investing style.

I am surprised by the 20% circuit on Dynemic products post the information shared in AGM.
With such a big plant, it was already known that profits should be 2x soon, and can be upto 3x depending on price increases etc. Why did investors need an AGM to repeat what was already known?

The stock was still trading at very cheap PEG ratio despite the fact that plant is totally ready now.
Markets are not always efficient, they need an AGM to tell simple facts to investors.
All my stocks are based on the same theme.

[kalpesh4430]

@Kumar_manas nice to see your portfolio thread, we are very like minded

I believe you will do good ahead based on your in depth research and investing only in few companies where you have strong conviction.

best of luck for future journey!!!

[Kumar_manas]

@kalpesh4430

best of luck for future journey!!!

Thank you for the wishes.

Posting my portfolio on Valuepickr 2 weeks ago has proved very lucky for me.
It has moved from 40x annual expense to 53x annual expense in less than 2 weeks.

Thanks to surge in Dynemic products and Meghmani finechem.
Though not unexpected, as the thesis of my investing in them is playing out.
All 4 of my stocks have same common thesis of big capex and low valuations.

[Kumar_manas]

@kartiks

In case you filtered company by screening.

It can’t be filtered on a screener for a simple reason that GPIL has announced the capex and not implemented the capex yet.
Announcements can’t come in screeners I guess.

[Madhu_BD]

I think we should have/start a thread to track all companies where capex is planned.

[Kumar_manas]

@Kumar_manas

1. Tata steel long- you have to view this co as a combined entity with tata metaliks. Since merger ratio is already fixed, you can’t view this as a standalone entity.
Another thing is they don’t own iron ore mine. A lot of recent profitability gains may be due to cheaper raw material inventory and not because of permanent increase in margins.

Poor result declared by Tata steel long, because they don’t own iron ore mine.
60% fall in QoQ profits.

[dinesh111a]

What about high coal prices. I think that also contributed a lot in lower profit…

[Kumar_manas]

@dinesh111a

What about high coal prices. I think that also contributed a lot in lower profit…

90% of coal in India is supplied by Coal India at rock bottom prices. We are not China which is dependent on International coal.

[parkhi_nazar]

Manas bhai, you may want to relook at this assumption.

[Sat]

@Kumar_manas Since I have been on this thread, I was thinking on what is a good capex vs a bad capex. It’s easy to mistake your core idea and reduce it to a formula i.e. low/decent valuation + mega capex = multibagger. I am sure that is not always the case and I wanted to find some counter examples of a company that got destroyed due to a bad mega capex. Did you come across companies like that ? Would you be able to share some examples. And, reasons why you rejected a mega capex company will help us understand your thought process better.

[Kumar_manas]

@Sat

Did you come across companies like that ? Would you be able to share some examples.

I have already shared NMDC as an example of that-

1. PSUs - details on this post- Commodity and Cyclical Plays - #1400 by Kumar_manas NMDC which built huge steel plant. Inefficient employees and management of PSUs usually mismanage capex and cash, even if they have lots of it. This is typical characteristic of PSUs.

2. Capex funded by debt that gives low ROE for years/decades- textiles, paper industries are like a treadmill. ROE is very low, and leads to erosion of shareholder value.
   GPIL would have gone in this path and would have been a bankrupt company, if it did not have its own iron ore mine. Many steel cos went bankrupt that did not have iron ore mine of their own.

3. Capex/acquisition at peak of euphoria- Tata steel acquiring corus, and tata motors investing lot of money in tata nano plant. Tata steel survived all this mis-management because it had low cost iron ore mines. Tata steel survived because the JLR acquisition turned out well at least.