My Portfolio - Help me trim this Please

Q&A: Questions & Answers Portfolio Q&A
1

Dear All,

I started investing since the March 2017. The below is the portfolio of 25 stocks. please help me get rid of stocks which do not deserve to be in short/mid/long term.

|Stocks|Allocation %|
|Britannia|9%|
|Cipla|8%|
|Finolex Cables|8%|
|Cochin Shipyard|7%|
|Good Year|6%|
|Atul Auto|6%|
|NLC India|6%|
|Dabur|5%|
|CUPID|5%|
|Hatsun|4%|
|SJVN|4%|
|IDFC Bank|4%|
|HCL Tech|4%|
|DHP India|4%|
|ION Exchange|3%|
|CERA|3%|
|COX and KINGS|3%|
|Ashok Leyland|2%|
|NMDC|2%|
|HGS|2%|
|SUZLON|2%|
|Mirza International|1%|
|Federal Bank|1%|
|BHEL|1%|

Best Regards
Muthukumar D

1 Like
3

it is more of removing the junk rather than identifying the gold. there are certain stocks which are 70% down like the suzlon, i really still dont have a clue whether to hold them or bury them. your valuable advice to clear the junk ones please.

5

Hi Muthu,

The general practice is to provide your reason / conviction for investing in each of these stocks. Then from there, suggestions can be made regarding weeding out the junk.

1 Like
6

Please go ahead and sell off BHEL … Based on my experience , its a white elephant,

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7

I can tell you to sell bhel and add more federal bank kind of things, but i think the right way to do this is to arrange these stocks in the acending order of your conviction and stay with the top conviction ideas …

8

As many pointed out, exiting BHEL would be a wise decision and Federal Bank will go through one or two bad quarters and then hoping for a good run up. Reason Kerala Floods.
Disc:Evaluating Federal Bank entry, never had BHEL.

10

keep accumulating the ashok leyalnd

11

Hi Dinesh,

The ones with a question mark after ‘plan to hold for long’ are the ones i have a feeling needs to be cleared from the portfolio. i have updated with my limited knowledge. please advice.

Britannia, Dabur - plan to hold for long
Pros - Benefit from GST, rural consumption and excellent ROE
Cons - Expensive to accumulate more
Plan - accumulate on dips if only this happens :slight_smile:

Hatsun - plan to hold for long
Pros - plans for huge expansion and majority is direct procurement without intermediaries
Cons - debt is rising, very high P/E
Plan - No plans to accumulate till the debt settles

Cipla - Plan to hold for long ?
Pros -
Cons - very high PEG, ROE less than 15.
Plan - no plans to accumulate more

Finolex cable - Plan to hold for long
Pros - it is a part of the franklin smaller companies fund which has generated more profits for me in past.
Cons - the growth is less. The stock lost 30+ rs after the quarter result
Plan - Plan to accumulate on dips

Cochin Shipyard - Plan to hold for long?
Pros - Less debt and good ROE for last 5 yrs
Cons - poor cash flow ? i do not know the reason for it
Plan - plan to buy more if the poor cash flow is justified

Good Year - Plan to hold for long
Pros - Less debt, good ROE, good PEG
Cons -
Plan - to accumulate on dips

Atul Auto, Ashok Leyland - Plan to hold for long
Pros - Less debt, good ROE, good PEG
Cons -
Plan - to accumulate on dips

NLC India, SJVN, NMDC, BHEL - Plan to hold for long ?
Pros - plans for expansion, less debt, good dividend yield
Cons - high gestation time for future projects which would increase the debt and government being the biggest promotor
Plan - no plans to accumulate

Cupid - Plan to hold for long
Pros -
Cons - recently the stock dropped huge and could not figure out a reason
Plan - no plans to accumulate till the cons part is clear

IDFC Bank - Plan to hold for long ?
Pros -
Cons - poor ROE, huge debt
Plan - no plans to accumulate

HCL Tech - Plan to hold for long
Pros - i expect INR to depreciate which would boost the stock
Cons -
Plan - no plans to accumulate

DHP India, HGS, Ion Exchange, mirza international, CERA
The above were cloned from other portfolio :slight_smile:
Pros - i see no debts and reasonable growth in them.
Cons -
Plan - Plans to accumulate on dips

Federal Bank - Plan to hold for long
Pros - aggressive bank with increasing exposure in rural areas
Cons - Gulf situation no good, Kerala floods
Plan - no plans to accumulate

Suzlon, Cox and Kings - when to sell ?
Pros -
Cons - the stock is dropping in value ever since i bought it
Plan - no plans to accumulate

Best Regards
Muthukumar D

12

My two cents w.r.t. Cupid India. The companies that have lower sales like less than 100 Crores can’t give a good margin of safety. Also, people prefer Durex/Apollo/Moods condom and have never seen or heard Cupid being the brand of choice. Female condoms not yet a trend in India but company has to depend on orders from SA or other backward countries to run business.

Any business to create a shareholder value the opportunity size should be sizeable & company should plan as to whether it wants to be contract manufacture for big companies that have big cash or go for B2C, take on biggies which needs a strong balance sheet to support, unique edge be it technical or low-cost etc… Depending on the gov orders is a big risk.

Note. Had invested at 110 Rs/Share and exited at 300/Share. Not holding any units & no plans as well. In this beaten down market, one can explore for opportunities.

1 Like
13

Thank you praveen. all the finance ratios are good, that is where i began with. I could not forecast the industry as such.Do you know why the share price dropped by 18 % recently ?

14

3 reasons that might have potentially caused the fall,

  1. It was suspended from trading in BSE due to some compliance issue an year and half back. That caused it to fall from 500ish to 300 odd levels.
  2. Uncertainty on the future revenue due to lack of winning big orders, making contracts for manufacturing or creating brand values. That caused it to stay in 270 to 330 odd levels.
  3. Midcap-small cap carnage caused further fall as investors night have rejigged their portfolio by selling those with less conviction to buy beaten down quality midcaps.

If you are an amateurs investor less than 3 years in market, I would suggest you to go for better economy proxy beaten down midcaps. Male condom business is very competitive where margin is squeezed & MNCs are already doing good brand advertising. Female condoms, if there was a sizable opportunity, MNCs would have made a foray into.

Sensible thing for Cupid to do is - to start contract manufacturing for MNCs.

Few more reasons,

  1. They are unable to find a CEO for long.
  2. Promoter sold a few % of equity to buy land in US, if I remember correctly, it was disclosed in conf-call or so.
  3. Establishing itself as a brand of choice, Cupid has to shell out cash for running add campaigns, setting up supply chain and attend customers grivience. I think it’s difficult with the balance sheet they have. They have to probably start with one state or zone.

Please take my opinion with pinch of salt. I may have biased view as I have sold.

1 Like
15

Thank you praveen. The long term vision seem to be missing from the above points.Bonus issue of shares is approved . let me keep a watch for few more weeks. You did mention about opportunities in other beaten mid cap, do you find any midcap gem in my portfolio which i can keep accumulating ?

16

I will only respond wrt to a few companies / sectors which I have tracked before.

First off, I’m flattered that you’ve cloned my portfolio to a large extent. But make sure you do your own research about these companies in order to steel your conviction. Borrowed conviction hardly lasts. You can, of course, find comments about my portfolio (Both positive and negative) in my PF thread:

Otherwise:

I’d ask you to read this wonderful analysis of the milk products industry in India:

I personally wouldn’t touch any company with a D/E > 1, unless they’re borrowing temporarily for an expansion or so. A D/E > 3 is simply too risky in my opinion. What’s more concerning is the management’s explanation of their rising D/E Ratio:

image

In the real world, a load of Debt actually reduces a company’s capacity to try innovative stuff and also decreases the ability to borrow further funds. My take away from this is that the management isn’t shy to rising more Debt, which makes an investment in Hatsun way more risker (To me).

I did an extensive research on Cochin Shipyard. I’m even convinced that the company has a wide moat. However, the nature of its business makes it so that it has a very high fixed expense, whereas revenues are spread across several years. I’d still maintain that it’s a great company. However, I’d personally require it to drop several notches before I consider it a good investment.

The VP thread for Cupid has a trove of research on the company. I suggest you read through it completely:

However, as already mentioned, the company is at the crossroads of several things:

  1. The old CEO is about to resign and has hinted that he might be reducing his 44% stake in the company
  2. The new CEO will be identified soon (Within this year, according to the last concall)
  3. Foary into India’s B2C segment
  4. Testing waters for FC in Europe and USA

So, you should track all these things before making any buy or sell decisions. Personally, I find the company to be pretty responsive to adverse situations.

For instance, recently the SA government had indicated that they’d prefer giving more business to a local player. While FHC (The biggest competitor to Cupid) didn’t specifically respond to this, Cupid responded by planning a JV with a local manufacturer. There are other small gestures like this, which make me believe that the management is not all words and no action.

Disc: Cupid forms about 10% of my PF. Views may be biased.

17

Hi Dinesh,

I follow your portfolio and the regular updates :slight_smile: The kovai hospital is the only one i did not invest, its a fluctuating a lot and for some reason i don’t feel comfortable with the stock, a instinct you can say.

Hatsun is more of a emotional value for me hold. The reason being my father had shares when i was young, i do not know how but we get yearly coupons of 5K to buy icecreams. I have read the struggles Mr.Chandramogan went through in the initial stages. I have seen his interview where he created a lot of entrepreneurs where as TCS/Infosys just created jobs. His son is no where to be seen. Kwality is falling, Arun icecreams has plans for expansion in middle east. It is a good dividend paying company. The only thing which bothers me now is the high P/E and high debt. I shall wait for the right time to accumulate more.

As you have analyzed cochin shipyard, do you know the reason behind the negative cash flow?

Regarding the Cupid fall, Naveen have given a detail explanation but in the last 2 week, it dropped hugely. is there anything wrong with the fundamentals for the fall or its the big players correcting it ?

18

You should refer to the company’s past few Cash Flow Statements. The nature of the shipbuilding business demands that the operation goes on continuously, but the payments received only in iterations of 1-2 years. The company has also lent out some 500 Cr of Loans, on which it receives interest. This is on a fairly regular basis, so you could consider this as a proxy Operating activity.

In fact, since the company already had a healthy Cash holding of ~1900 Cr, why the government chose to go for a further ~1500 Cr IPO is beyond me. It could be that the government was simply looking to spread the risk.

Either way, Cochin Shipyard has to either begin re-deploying its massive Cash balance (Almost ~60% of the current Market Cap, which is crazy levels of bad capital allocation) or drop a few notches to, say, below Rs. 320, for it to make sense as an investment to me personally.

If you had enough cash, you could actually buy a majority stake in Cochin Shipyard and force it to pay out massive dividends. Just kidding. I can’t help but think how someone like Warren Buffet could make use of this float, which is otherwise earning anywhere between 5-10% only.

It makes no sense to assign reasons to a stock’s short term movements. Get the business right and you will not worry about whether the stock prices goes south or north.

19

Hello All,

i learnt some lessons in the past few months. booked losses on some shares, i felt the below portfolio is getting better. Let me start with what i am not going to do,

Finolex cables, Cochin Ship yard, britannia, cera, kovai medical center will lie till i see a rally to exit. the reason being they don’t pay dividends and it is costly to continue holding them without a return.

The other shares i am accumulating in lesser volume. i prefer auto sector now. Please suggest which ones are better to continue with accumulation ?

|Manappuram Finance|15%|
|Ambika cotton mills|13%|
|Finolex Cables|9%|
|Ashok Leyland|7%|
|DHP India|6%|
|Good Year|6%|
|Cochin Shipyard|5%|
|HGS|5%|
|Britannia|5%|
|CERA|4%|
|Dabur|4%|
|Atul Auto|4%|
|HCL TECH|3%|
|KMC|3%|
|ION Exchange|3%|
|L&T Finance|3%|
|CUPID|2%|
|Hatsun|2%|
|Fiem Indistries|2%|
|Yes Bank|1%|

Best regards
Muthukumar D

23

For the love of god, please read the forum rules before posting personal messages.

Post or transmit any content that is disruptive, uncivil, abusive, vulgar, profane, obscene, hateful, fraudulent, threatening, harassing, defamatory, or which discloses private or personal matters concerning any person.

If you really have to take it out with someone, do it in the DMs.

24

Hi Dinesh,

Eager to get your views on my position. how do you see Auto sector for investment now for the next 6 months to 1 year ? I am adding up some in small volumes in Atul Auto, Fiem Industries, Ashok Leyland, Good year india.

Best regards
Muthukumar D