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@alexander

I think you seem to have complicated the stock selection process. First of all the list of holdings and wish list is pretty long. If I had to select 10-15 businesses atleast for next 3-5 years, irrespective of near term concerns like Corona, the top 5-7 businesses would be Asian paints, hdfc twins, pidilite, bata, page inds, 3m, and maybe a couple of other strong businesses.

If I wanted to play relative strength for next 12-18 months, it could be from pharma and speciality chem.

And if I want to play adventurous and want to hit for the galleries, it would have to be high quality small-midcaps with clear visibility for next 3-5 years.

Concepts like dividend yield etc need to be tested for sustainability of dividend and preferably in growth in future dividends.

Value plays also need to be differentiated from value traps. Cyclicals like auto, cement, sugar etc maybe a better choice but will need a lot of patience and pain bearing capacity.

Contra bets in current markets like aviation, infra, , multiplex etc at appropriate valuations and at right time will be rewarding but still seems some time away.

Above are reflective of my thought process based on current market and economic outlook.

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Thank you for your reply Hitesh Sir. I have been following your thread and learning quite bit since I started.

I agree I have complicated the stock picking framework, but I thought putting it this way makes it clear on what is my expectation from each stock and will help me later when I have to take a sell decision. Will discard it in some time if it doesn’t make sense.

On the quality businesses, HDFC twins are at an acceptable valuation for me and hence buying them. But other names are simply too costly to feel safe for me.
Asian Paints, Pidilite, Bata, page and 3M - PE of 55,55, 43, 50 and 70 and historical sales growth is around 10% (Except page which is at 20% but slowing a lot recently). I guess the expectation from the market is significant future growth for a long period (> 30 yrs) Will read up on these but I feel uncomfortable with such high future valuations.

I am preferring to find single digit PE stocks and good earnings visibility for next 3-5 yrs and cash rich and no debt (Like SJVN… till sutlej flows it will be making money and market gives it a PE of 5!!)

Hi Harsh,

  • I look at cyclicals and undervaluation differently. Cyclicals go through a cycle with the market while current undervaluation could be because of n number of things (Eg: Some big MF offloaded lots of shares tanking the stock). By having different buckets, it helps me think about the reasons differently.
  • SJVN is not a cyclical. I mean sure in the rainy season water flows more but not a commodity types.
  • Agree that auto is not a deep cyclical. But I want to start thinking about auto in this way after listening to Peter Lynch
  • See, all businesses are cyclicals to an extent. There is a boom-bust business cycle always going on in every market (some are more pronounced than the others) and on top of that there is a market cycle as well
  • Thank you. I accept this is a logical way to look at things. But risk is difficult to assess… Are edelweiss and PNB housing really going bankrupt? If they survive, I think they can easily go up 3x in few years… So difficult to take the decision.

Apart from SJVN and some media stocks like Zee, not having conviction that my other picks will increase by 3x in the next 5 yrs. They might increase by 2x. Hence not switched still.

Also I think GARP stocks have not done well recently. The high PE (high quality) and moderate growth ones have done well, like the ones Hitesh mentioned.

I do not like to overpay unless I am convinced about the company’s future. I can make some judgement abt 3-5 yrs and maybe 10 yrs. Looking farther is difficult in most cases. Hence very high PE buys are difficult for me.

When you plan a strategy for dividend stocks , you should always look historical high dividend paying stocks, if they ever stopped paying dividend and why?
Can same thing happen to the watchlist made by you?

I have checked for what I am holding and feel confident… Which one do you think is at risk?

Fair enough, I didn’t look at it closely enough.

I guess if there is a good enough answer to that, we can make a lot of money. Thats the problem with leveraged financials, its so hard to know from outside.

I used to own Zee but sold it out when promoters gave 200 cr of intercorporate deposits and later wrote it off. Its such a nice business, I hope the promoters don’t siphon money from other shareholders.

I look forward to reading more about your stocks, good luck!

Ofcourse it’s not guaranteed but rough idea is PSU stocks which had been paying dividend in past (for e.g. PSU banks ONGC BHEL etc) are now considered troubled PSUs and stopped paying dividend

You have to just take care , the one chosen by you has less risk on that front

Just posting here to report that I am +10% positive now after the recent run up. Invested during the run-up gave me good results.

Below are my holdings now:
2x - Cupid, Persistent, IDFC,
1.5x - Natco, Cochin Shipyard, CDSL, GoldBees
1.3x - NOCIL, HDFC Bank, MahScooter,
1.1x - Zee, TV Today, Hexaware, DB Corp, JBChepharm, KEI
Flat - Nalco, Jagran, Powergrid, Edelweiss, Sonata, SJVN, Bajaj Holdings, Manappuram, Ashok Leyland, ACE, Vedanta
0.9x - ITC, HDFC
0.7x - Delta Corp, Coal India, ONGC
0.5x - PNB Housing

As you can see exited Glenmark, matrimony, apollo sindhoori, M&M

Now am trying to invest more in chemical and pharma and exit some companies…

Companies to exit - PNB Housing, Manappuram

To add - Alembic, Laurus, Ajanta, Granules, Aarti … etc…
Want to increase pharma + chemicals to 10% gradually. But I don’t have sufficient knowledge in the domain. So still studying and planning to take a portfolio approach.

Thanks for all the suggestions. Keep them coming.

Only problem am facing now is that I am having over 30 stocks and ideally want to reduce … but that needs more thinking

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Why do you want to exit mannapuram? Is it because of gold being at ath, LTV & npa scene not being clear yet?

Want to reduce all exposure to lending. Idfc is the only one I’ll keep. Even hdfc I am considering exiting

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