I have been holding Godrej Consumer, Page, Britannia, Yes Bank , Engineers India, Dabur, ITC, Zydus, Bajaj Electricals, IPCA etc for almost 7 years, and have been investing with sum total of 1 lacs kind of money. I have been able to make my money 9 times through last 7 years, following a certain way . Over last 2 years have increased exposure to the markets, shuffling my portfolio significantly, picking a set of winners / potential winners (may or may not be market leaders) and trying to follow the spirit with which I grew my initial seed money.
Here are the latest stocks with allocations::
Bajaj Finance 37.65%
Jubilant FoodWorks 24.21%
Page Industries 5.88%
Avenue Supermarts 9.67%
Britannia Ind. 5.14%
Godrej Consumer 3.34%
L&T Technology Serv. 4.06%
Bandhan Bank 3.84%
RBL Bank 3.39%
AU Small Fin. Bank 2.83%
General theme: The company shouldn’t be a one trick pony and should have multiple products as a consumer company , operate in multiple segments as a lender etc… Hold these for the next 5-7-10 years , as long as they look like innovating and winning market share.
Rationale for Banks/ NBFCs: Buy Banks / NBFCs growing at 25-30% plus growth rate , managing NPAs well over last 5 years, having considerable retail exposure. Buy mid-cap banks as a basket, so that one can get an average 18-20% CAGR return over a period of time from that basket. AU / Bandhan operate in the so called “Bharat” which is supposed to be a huge expanding market. Bajaj Finance allocation is high based on intuition that there is a organized retail boom coming and this company gets windfall gains being in consumer durable loans. Bajaj finance has other tailwinds too, like housing and rural. Their housing finance is growing fast as well.
Rationale for consumer names: Avenue Supermarts / Jubilant Foodworks are the only new consumer stocks I have added , based on the fact that they seem to be winners. For example DMart can gush out way more cash than Reliance Retail when it reaches the levels of revenue. Jubilant Foodworks doesn’t seem to have any competitors at all. All of the consumer companies in the portfolio to see windfall gains from the organized retail boom in the next 5 years. The other tailwind being growth in rural spending.
Rationale for continuing to hold Page, Britannia, Godrej Consumer : Don’t fix it if it ain’t broken. Just because PE multiples have gone through the roof, I don’t want to see these gone from my portfolio. They continue to be hungry to grow profits. Their penetration will increase with the organized retail, be it online or offline. In fact the organized retail will offer these companies a playing field unprecedented at no cost of their own , and they should be able to create/experiment with entire new categories of products. I must admit that I have cut exposure to these during portfolio reshuffle, as reflected in the low percentage numbers, but together they form 14% of portfolio.
Rationale for LTTS : It seems to be a winner in the IOT field and I wanted to participate in IOT / AI growth because of my own background.
Regarding Valuations : I don’t know an iota of reading balance sheets. I do understand few things like PE, PEG, ROE, ROCE etc. The thesis is that well placed companies should be able to take advantage of tail winds for next 10-15 years and the PEG ratio is expected to remain rangebound between 1-3. So no permanent crash is coming in these stocks is what I feel. Given 20% of humans will be in india by 2025, and we would have taken 85% out of poverty, and would have put 40% on median per capita income due to more inclusive growth. The affluent+upper-middle+middle-middle will grow from current 25-28 crores to 56-60 crores . The target market becomes 2 times for consumer companies in just the next 7 years. Sales of these companies grow by 2-3 times in the next 7 years , the profits will grow by 3-5 times due to margin expansion. As I do not expect any further PE expansion , so the expected return on these investments : 3-5 times in next 7 years.I do not see major PE contraction either as the sales in these companies is expected to grow again significantly between 2025 and 2030. The core valuation theme is longevity of secular growth.
Would like to know opinion of forum members on the above investments.