Have been traversing through the Valuepickr and it has been very informative and useful in building my portfolio which I have been constructing over the past 5 months. Invested in lumpsum in situations I thought were favourable and I thought I was getting some value. Otherwise have invested in SIP mode every month.
Still have some cash to deploy set aside which I don’t think would use very soon. Given the disconnect between the economic situation on the ground and the market recovery. Still am continuing with the SIP on a monthly basis.
Please let me know your thoughts if any on my portfolio or is there any way I can better allocate the finances.
Chosen for the wide range of products manufactured and a good track record. Growth has been lacking so far but company has come up with new verticals of revenue which can add to future growth.
ITC, Avg buy price 165, CMP 192, 14.19% of portfolio
Saw a pocket of value in ITC at 160 levels. With a good dividend yield, betting on the betterment of margins from the non tobacco business and possible re rating.
Company has gained market share in the cookware business. With a pristine balance sheet , good dividend yield and no debt company looked a decent bet. COVID 19 impact has dampened the outlook a bit, but expect the company to weather the storm and come out stronger.
Indian Energy Exchange: Avg Buy price: 164, CMP 164, 8.49% of portfolio.
Recent lumpsum investment at current levels. Betting on the shift from long term to short term power contracts and the company’s recent gas exchange venture to fuel further growth. Company is debt free and has a good dividend yield.
Niche company in the animal vaccine segment. Key monitorables are the Africa venture and management of debt from here on in. Looking to add in SIP a i believe there is some runway for growth for the next five years.
Cash : 33.31%
Companies i try to pick, i try to find some value, but not at the cost of quality. Would be great to get fellow boarders opinions and suggestions for some other companies i can foray into. (I know the portfolio is too concentrated) or suggestions for rebalancing as well.
You mentioned you have been constructing the portfolio for past 5 months. A bit surprised, having cash in hand, how did you miss out some big leaders and blue chip stocks during March Crash? Sad that you only ended up with only those 5 stocks during big market crash (unless you were averaging them during the crash). Anyways, except ITC, nothing really excites me. To my mind, next decade belongs to high quality stocks within Pharma, Consumption and Speciality chemicals pack. All the best.
I am bit surprised with lack of largecaps available at cheap valuations. Barring ITC, I am seeing smallcap portfolio which lacks growth as well as cheap valuations to gain meaningful returns. Even for safety purpose, you can go for better companies. I don’t mind companies that you have picked, but allocating 22% to pharma company without proven growth is a bit questionable. You’re buying smallcap companies during pandemic at 25+ P/E which doesn’t leave lot of growth runway.
Notes : Had booked some profit in Polymedicure and reinvested in VST at 3000 levels to reduce the concentration of the portfolio on Polymedicure. (Though Yesterdays price action on Polymed gave a little pang of regret.
Results view : Though Hawkins had a poor last quarter, I still believe in the quality of the management and more importantly their products and Brand recall.
Portfolio has done well so far mainly on account of the performance of Polymedicure. TIme will tell whether it will be sustained.
Forgot to mention in the opening post that I had a ELSS MF running which had opened for Tax saving purpose. However not currently adding and redeeming from the fund as and when money is unlocked to build up cash position.
Notes: Have continued with the same set of companies with a monthly sip. Cash reserves are roughly the same in absolute terms as the last post (percentage decrease due to increased portfolio size)
Returns have been decent mainly due to the run up in Polymedicure which has been a 3 bagger since the initial investment around 220 levels.
Other investments have given decent returns around 25-30% with IEX being the next best performer.
ITC and VST have been laggards but the regular dividend income keeps me happy. And the fact that I can continue to add at these low valuations gives comfort.
Lessons learned: Averaging up can be a good strategy. The biggest mistake in getting to this point was selling a chunk of Polymedicure stock at 337 levels because I thought it was having too high a weight in the portfolio. As per the previous posts I invested in VST at lower levels and returns have been ok but the price action in Polymed since then shows it always pays to ride your winners.
I plan to remain invested as long as the investment thesis remains intact. Which I hope is a long time. Preferably more than 10 years.
I believe there is some runway for growth in all the above companies. ITC and VST may not grow as much but hopefully attractive dividends will continue.
Banking : I’m a banker myself and I deathly afraid of levered institutions. Except for HDFC Bank I hesitate to invest in other private sector banks knowing how quickly things can go bad. HDFC Bank is in my watchlist. However I do feel it’s a tad expensive.
Pharma: Triggers are there for sustained growth across the sector . But frankly I don’t understand it that well. I’d rather play the healthcare theme through Polymed given that it’s a relatively simpler business to understand.
IT : I have a couple in the watchlist but by and large if I were to invest I’d invest for stable dividends in some of the service based companies. Some of newer digital plays I’m afraid I don’t have the skill set to analyze so I stay away.
I believe there are opportunities in the sectors mentioned but it’s just my inherent investment biases that keep me away.
I like your way of sticking to what you understand and comfortable at. What is your take on Hawkins now? Also, why did you chose Hawkins in consumer durables and not a full fledged player like Whirlpool, Havells or Voltas?
If you want to be in Kitchen wares then where do you place a Prestige vs Hawkins?
The consumer facing names mentioned are no doubt quality players but they are astronomically expensive and have been since I can remember. I’d like to own them but at more reasonable valuations. But it seems the market won’t let them trade there.
Prestige Vs Hawkins: to me it feels like prestige is trying it’s hand at too many things (purifiers, electricals) whereas Hawkins seems to stick to what it does best. Apart from the fact that Hawkins has better return ratios, better dividend payout and operating margins, My wife also swears by Hawkins products. So I stuck with them. I identify with Hawkins’ philosophy more so have no issues sticking with them.
Great philosophy. This helps to stick to our picks. I agree with you that Prestige or any other similar range cookware is no match to Hawkins.
Only issue with hawkins vs prestige is growth…where do you see significant growth coming for hawkins if it does not expand its range significantly? They must lag in growth with prestige if I am not wrong. However, I agree that growth without proper ratios and long term sustainability is an issue…
Now coming to likes of Whirlpool, Voltas, Havells - These were, are and shall remain expensive. If i am not wrong, Voltas was not that expensive earlier but as things changed with it, so did valuation.
Havells - I underestimated Llyod takeover and the perspective it can bring.
Point is - If they always remain expensive, should we ignore them? Or look for best possible prices to enter…The choice is personal.
If I may ask you, leave aside the valuation aspect - The way you identify with hawkins, out of these which ones do you identify with, which ones not and why - Whirlpool, Voltas, Havels, Hitachi Johnson Air Conditioner.
Thanks
Investors are chasing high PE stocks due to growth visibility , cash flow and next-to-nil governance issues.Till these things are intact they will command premium
Eg. Infoedge, Abbot, Pidilite, berger, Asian paints,Havells, Relaxo, Astral , Bajaj finance , PI , Whirpool, bata etc
From whatever i read .In las 5-7 years Growth investment is in flavour And value investing has taken a back seat in India
In a study on BSE100 stocks, Marcellus Investment Managers found that there is no significant correlation between starting period valuations and subsequent long-term returns.
Instead, in each of the historical phases, there has been a strong correlation between earnings growth rates and share price returns, the study concluded
I thinks Hawkins has a good runway for growth. As more and more households move from kerosene to lpg under the ujjwala scheme. I feel there will be demand. I feel in the end quality prevails. Hawkins products last longer so there may less repeat demand, but discerning customers will look to switch to better quality products as incomes rise. Further if the WFH trend takes some sort of permanent shape especially in the private sector then a lot more people will be cooking at home leading to demand.
Coming to choosing between Voltas , havells whirlpool. I had identified with Voltas best. They had stuck with cooling solutions for the longest time. Now entered into other appliances via beko. ACs are a good theme with summers getting hotter and even now a lot of middle class families are not having ACs installed (myself included) . Looking to purchase one this summer and would probably go with Voltas.
As far as valuations are concerned, there are varied opinions. Each with merits and demerits. But I feel that buying companies with astronomical valuations leaves you open to the risk that the company won’t perform for a year or two. The same market which valued the company so highly will not give that much rope if growth is not fast and consistent. It’s a risk I personally am not willing to take.
Portfolio update : Returns have chugged along again mainly due to the performance of Polymed, IEX, and Hester Biosciences.
Have initiated a tracking position in Marico. With a salary increase and expenses remaining stable, found that i could sip into another company. also deployed a miniscule % of the cash on hand to initiate the position.
Rationale behind Marico: Apart from the usual return ratios, dividend yield, good margins and FMCG nature. the picks i was already sipping into have become expensive at around 60 pe. Mentally could justify investing in Marico at 45 pe. Plan to continue sipping into all the above companies. Marico also seems to be like a company that doesnt sit back and rest on its laurels. They want to innovate and explore new avenues within their area of expertise. Its good to see in a company this size. Further with a company this size, have endeavored to reduce the small cap ness of the portfolio.
As always keeping cash handy for a correction. While the markets did correct ever so slightly. the portfolio showed good strength and continued to perform for now. so couldn’t deploy as much cash as i would have wanted to.
Sold off approximately 25 % of my position in Polymedicure at 1130 levels. Could turn out to be a massive mistake like I had done earlier. But decided it was prudent to take some money off the table tax free. ( Maxed out the ltcg threshold for tax exemption) . Valuations have reached extremely frothy levels. While I still believe in the growth runway in the company. Felt it best to turn some of the paper profit into actual cash.
Portfolio valuation apart from ITC and VST has reached froth levels and most likely will continue to add to my cash position instead of sipping monthly. Will hold the rest of the portfolio.
