My top 5 picks for long term

I am currently working on:

Indiabulls Ventures( Undervaluation, Moderate Conviction, Invested @ Rs.12)

  • It is quoting at around 7 TTM P/E.
  • High dividend yield of 10.5%.
  • Acquisition of India Land and Property’s IT park in Chennai with a leasable area of 2 mn square feet can give them a consistent rental income.
  • Markets perception towards Indiabulls group promoters is changing lately.
    -The traditional brokerage model is getting challenged by online discount brokers such as Zerodha and RKSV, the brokerage business is cyclical in nature and disruption is already happening in this space.

KSE( Moderate Undervaluation, Moderate Conviction, Invested @ Rs.680)

  • Available at P/E of 8 times TTM earnings.
  • Company is engaged in cattle feed producing and marketing.
  • Raw materials(Rice Bran and Copra) prices have been stable for some time.
  • Dairy farming is becoming a lucrative business for rural households as the demand for milk and its derivates such as cheese, curd, butter and paneer is rising.
  • Milk and its derivates are considered discretionary spends and with rural incomes rising, their demand will further rise.
  • Limited pricing power, can’t pass much price increase in Raw Materials cost to customers.

Edelweiss Financial Services(High Conviction, Fair Valuations, Invested @ Rs.50)

  • The size of its AUM is increasing at a good pace over the last 3 years.
  • It has positioned itself as a credit lending NBFC, catering to both retail and institutional clients.
  • The company has nearly grown it’s profit 50% over the last year.
  • Rakesh Jhunjhunwala holds this stock(Purchase Price: Rs.55), cloning strategy.
  • It’s promoter Rashesh Shah is very efficient and has weathered the dot com and 2008 crash.
  • Their Asset Reconstruction business can add to the bottom line if they are able to scale it up.
  • Their insurance JV with Tokio Marine Life Insurance is still in loss.
  • Insurance companies are selling promises, and when insurance premium is same, people tend to trust bigger names such as HDFC, SBI, LIC, Icici Pru.

Vaibhav Global(Undervaluation, High conviction, Invested @ Rs.803)

  • Discount jewellery retailer with high growth opportunities.
  • Exceptional inventory management, As Warren Buffett says, Inventory management can make or break a retail business.
  • Good Management quality, promoters have learned lessons from the past.
  • Sales through its web channels are growing.
  • Zero debt company.
  • Sales growth have been flat.

Kesar terminals and Infrastructure Limited
Have to start working on this, Will add the details soon

I am invested in all these stocks so my views may be biased, this write up is not a recommendation to buy or sell any of these stocks.

1 Like

Hello Sarthak,

I would like to ask you a question before commenting further.

Why would you invest in a company for long, where you do not have high conviction? Shouldn’t you take a initial (tracking) position or treat it as an opportunistic bet until you develop strong conviction, instead?

Hi Nikhil,

As an investor I am still learning to develop conviction, I have been investing for nearly 2 years now with moderate success(may be due to markets rising and luck). The positions in these stocks are not big, allocation is nearly 0.5-1% of my total portfolio in each stock.

Would love to know from fellow valuepickrs on how to develop conviction in stocks, because I do not have much market experience.

Hi Sarthak,

I am also a novice in the stock market. I started investing a year ago. But in my pf I have only 10 stocks with allocation ranging from 5-20%. I try to gain conviction by these methods:

  1. I look for management interviews and try to see what could be the earnings growth for next 2-3years.
  2. I check the past record. Here I look for the important parameters like PEx, sales n profit growth, RoE,RoCE, debt/equity, dividend payout, Marketcap/sales, margin improvement over years etc. to get a feel of numbers. Then I compare them with peers.
  3. I look for research reports from brokerages to get more confidence. I cross-check the numbers if there more than 1.
  4. I look for analysis/information here and if any blogger has covered.

After all these I get a general feeling of what can be expected. Based on this I take position. I dont want to have too many in my pf. Tracking becomes easy. I allocate initially 5% and with each quarter passing I keep adding more. So far this approach has been working good.