My portfolio - need Advice and Opinions

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Hello everyone,

I’m Abhishek, a recent graduate about to start employment. My introduction to finance came in 2013 while I accidentally stumbled upon the book Too Big To Fail (I was preparing for my medical entrance test back then!). That seems to be the turning point in my life as I felt it was finance that was what I was most interested in.
Hence gave up the medicine career for the world of Investments. I have read Buffett, Lynch, Graham, and those must-read books on investing to develop a long-term investing mindset. I won’t say I am a newbie to this field and I approach it with a 10-15 year horizon.

My investing process: While picking companies, I looked for Promoter quality, large headroom for growth, good ratios and growth rates in that order. I’m based towards tried-and-tested businesses with predictability. I completely avoid infra, real-estate, sugar and steel stocks which I believe is the general consensus here on VP . I am biased towards stocks that are consumer-focussed ones with strong brands that any common man who knows nothing of stock-markets knows of - Kotak, Yes, Britannia, Piramal, Bajaj Finance. I’m heavily tilted towards the finance sector as I believe this sector shows steady growth and a degree of predictability ( reasonably confident that Yes, Kotak, Capital First etc will continue to post 20%+ YOY earnings) and my belief that the new-age private banks will continue to gain market share from public sector ones.

Avoided IT altogether as I haven’t can’t differentiate one from the other (what makes Infy’s margins 22% while Wipro has 15%) and also these have grown too big to be able to grow 10x from their current levels. Couldn’t find small caps in this space with high conviction.

Same with Auto stocks, the existing ones are the leaders and are too big to be able to grow their sales by 10x from here. Had a stint once with Eicher (bought by looking around the many new Enfields in my college parking lot - the true Lynch style!) but sold out early :frowning:

I stumbled upon this excellent forum a few months ago and can’t thank the people enough for their invaluable insights.

I request experts to please give me their advice and opinion of a portfolio I have built over the years and continue to deploy my salary proportionately(started in 2013)

my portfolio.png1085×252 26.6 KB

Thank you so much.

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Dear @abhishkjain2626, First of all, it’s good that you have started early and have taken good time in reading/learning about investments. As you may have seen with many other portfolio posts previously, it is advisable that apart from stock names, you should provide your investment thesis too for others to be able to comment on it. Cheers!

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Rationale:

Manappuram: Gold loan play. The question was: Muthoot vs Manappuram
Couple of things I noticed at Muthoot were: Promoters taking very high salary, four heads (all brothers) taking Rs. 8.8 crores each (AR-17) and the board seems to be almost comprised of promoters and related people. Manappuram was much smaller in terms of Market Cap back then. Recently as it has also diversified into home loans and SME, leveraging their brand I believe it has potential to grow.

Satin Creditcare: Bought it very recently as it felt the stock was a value. Ignoring DEMON’s affects, Satin makes sales of approx 1000 crores, and considering Net profit margin ~12% brings 120cr. With market cap around 1200 crore and having institutional buying at much higher levels, I felt comfortable buying it here.

DHFL: Increasing brand visibility, seemed really cheap at ~1.3 PB and having consistent sales and profit growth. Missed CanFIn and Gruh (didn’t know of VP back then). However, reading VP posts have increased my conviction in DHFL further. I would hope those Corp. Governance issues get resolved.

Capital First: A consumer-durables focussed NBFC which I hope treads the same path as BajajFinance. Mr. Vaidyanathan is an accomplished man and I’m wiling to stay put. Their ROE seems low currently due to write-offs, so will increase holdings upon improvements.

Britannia, Bajaj Finance, Kotak, Yes: The dominant share of my portfolio. the Tried and the tested steady compounders. Strong brand equity and consumer-facing companies. Was also holding Axis Bank, but exited last year when NPAs surged.

IDFC Bank and Ujjivan: These two seem yet play out, will look to steadily build allocation upon improving businesses.

Gujarat Automotive Gears: Good ratios and a strong balance sheet. Not sure of steady profit growth but the stock has given decent returns so far. D/E ratio has increased (purchased land) and I will look for management commentary on that. Maruti, Hero, BajajAuto seemed too big to grow multifold from here.

Piramal: Because of less impact of FDA as they have many OTC product contribution and their NBFC business is gaining strong momentum. And yes, promoters like Ajay Piramal give a sense of comfort.

I tend to avoid the current market fads as they undoubtedly would be very expensive already. Currently it seems those are defence, infra and chemical. I avoided cement and industrial goods in 2014 (not sure if that has been a good thing) due to their very expensive nature based on Modi Govt’s focus on infra spending. Though the earnings and sales don’t seem to have improved dramatically, stocks have run up a lot to question my investing logic.

I have done a few value buys (strong FCF, low earning multiples) but haven’t got any meaningful returns in such stocks, they seem to be stuck in a range. May be I would have had to wait longer, its just been 4 years!

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Capital First: This is a good NBFC business, and has benefited in past 3 years. Though ROE is low, it is improving steadily and it on its road towards becoming another Bajaj Finance. I have stayed away due to high valuations when I read first about it in early 2015.

Kotak Bank also looks good at this stage.Their thought process is quite clear. They do not want to run after some initiatives just for the sake of tick mark. They have good “Change the Bank” initiative in place, which is right direction to grab digital business. Recent success of their 811 initiative and other such initiatives will keep growth in tact. We may need to keep a watch on their NPA though.

IDFC Bank : I also believe that, currently Mr. Market has punished the stock due to some NPA issues which surfaced during last 2 quarters. Here as well, we need to watch there digital banking initiatives and NPA both. It would be tough to grow at fast pace as competition in this sector is stringent. It will take long time to prove its capability and show ROE improvements. (I am holding this).

Glenmark : (I have been holding this for a year). It is going through tough times as far as sentiments for Pharma are concerned, though sales growth is intact compared to SUN and LUPIN. It has its own strengths and weaknesses and those should be discussed in separate thread.

I have not talked here about detail analysis but thought of sharing some high level thesis.

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Great picks!

Why Omkar and Lasa?

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@chets hi sir, I bought Omkar earlier this year reading that their capex had completed and will become operational along with good ratios. Had 10-20% paper gain, but came to know about the demerger and decided to keep it. Not sure if I should continue to hold… ?

I agree that high-leverage companies like Nandan, Pincon and Omkar seem substandard, and hence wanted views from experts whether the risk-reward ratio seems favourable to hold and be patient.

Pincon: I didn’t do much background check on this. As you might recall, Peter Lynch in his book ‘One up…’ describes about a low-cost hotel chain which after succeeding in one state, replicates the same strategies in other states and continues to grow. I felt Pincon could do the same with its low-priced alcohol (it is yet to become Pan-India). But after the recent SEBI crackdown, I am a bit concerned if the risk is worth taking.

Thank you

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@abhishkjain2626

Gujarat Automotive Gears was acquired by HIM Teknoforge Limited and since then it has been used as another source of income for HIM. If you read the annual reports of last 3-4 years of Gujarat Automotive Gears, you will find the entire profits + debt (taken despite good profits) has been transferred to HIM. HIM made Gujarat Automotive Gears as a money lending company for its own benefits. Read past annual reports and take your decision.

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Thank you for sharing your rationale. I just wanted to check whether you are aware of risks associated with businesses that have promoter pledging and high debt.
To hold on or not is purely your decision, but if you are a novice (like me), better to start with safe long term bets.