Have made a portfolio of 15-20 stocks along with a watchlist of 15-20 stocks. Basic underlying theme of the folio is market share gains by the companies that I own in the Pf . Have given a weight age of 5% to each stock, only 2 stocks have a weight age of 6%.In some where conviction isn’t that strong, have allocated between 1-2.5%, Pf is as follows:
HDFC bank 6%- goes without saying that it is a Casa franchise with excellent underwriting skills. An article by finception further clarified my doubts about the growth sustainability.
Bajaj Finance 3%- unluckily couldn’t scale the position appropriately as prices ran way ahead of the fundamentals within a day or two. Really like what Sanjiv bajaj has built. But one has to be wary about the current high growth, as in lending biz it pays to be more prudent. Sustaining 30%+ kind of growth is a tall ask considering the overall slowdown in the economy. Underwriting quality might get compromised. No reason for that happening right now, just a possibility to be kept in mind.
Kotak bank 5%- in BFSI main bet is on the management and their ability to sustain the quality of growth. Same thesis as HDFC bank.
P I industries 5%- after the painful consolidation in the last 3 years, growth has come back in the company. Their csm is firing on all fronts. One of the best performing stocks of the last decade or so.
Alkyl amines 5%- like the single minded focus of the Kothari family on Amines chemistry. He even says in the concall that we won’t diversify into other chemistry chains due to their hands being full with Amines chain in the next 3-4 years.
Meets all the filter- Stable margins+skin in the game+less competiton+long runway for growth.
Aarti industries 5%- multiple chemical chains plus long term contracts making them indespensable for its customers. Solid co with a proven trackrecord of execution.
Divis lab 5%- one of the leading Api manufacturers supplying to the regulated markets. Capex underway and more capex to be likely undertaken in the future. Just look at the OPM’s in the last decade.
Apl Apollo 5%- leading steel tube manufacturer in the country. Gaining market share as the competition around it is collapsing. Even the recent Q2FY20, volume growth was around 20% in such a subdued environment.
Gujarat Ambuja Exports Limited 6%- short term pain for long term gain. 10% capacity of the entire industry has collapsed due to the disproportionate increase in the prices of the maize. They are dominant (25% market share) in the industry that they operate in. With the derivative manufacturing starting in October and when the maize prices stabilize, difficult to see the co not getting re-rated by the market. Its a classic- low risk high uncertainity bet.
CanFin homes 4%- main bet is on the competition from other Nbfcs receeding. This is one of the well run Hfc’s. Major catalyst can be the stake sale by Canara bank. Have to keep in mind the rising proportion of non salaried segment in the book along with growth coming from Tier 3 and beyond cities.
Knr construction 2.5%- just like in banking where the most prudent guy wins. In sectors dependent upon the government, guys with lowest debt and prudence in terms of handling their balance sheet and bidding for orders win in the long run. Others like Dilip buildcon were busy taking up their order book and adding debt ok their B/s. Only when the tide goes out we get to know who is the strongest player. Still wary due to the mounting debt at Nhai. Still, India needs a lot of roads to be constructed. (Risk-Nhai, if business model changes due to change in nature of projects being offered)
Psp construction 2.5%- asset light player with best in class ratios when compared to the competitors. Would wait and watch how the company scales the order book and in what segment they scale the order book. Won’t shy away in averaging up if the thesis works out.
DCB bank 5%- anyone wanting to understand the conservative nature of the management should go and read the Q2FY20 concall. Main bet is on Npas remaining under control and Roes improving above 15%. Can see a Cub like outcome if the above mentioned happens.
Cera 4%- third largest player in it’s segment. Main bet is on the cyclical recovery that can take place with real estate cycle reviving.
CCL products 5%- they have a world market share in coffee processing of nearly 10%. With new plant commissioned, main triggers can be improving margins and 10-15% volume growth. However, thesis might go for a toss if incremental voolumes don’t come. The other risk is that a major agglomeration customer of theirs opened his own plant. The entire narrative might go for a toss about CCL’s competitive advantage of the above mentioned risks materialize.
Cholamandalam 5%- again the same theme. In an environment where the competitors are struggling to survive. This co reported a growth of 20%+ in Q1FY20. The quality of promoters and Cholas diversified auto loan book makes it a good candidate for the folio.
Aia Engineering 5%- with capacity expansion in place and with the introduction of mill liner, which can help Aia to increase the customer stickiness. As it will become the one stop shop for all the solutions
Orient Ref 5%- major beneficiary of the EAF boom. Earnings growth coupled with ROCE’S of more than 25% will likely deliver high teens kind of returns in the next 4-5 years.
Edelweiss 5%- getting EGIA almost at 10 times its earnings of FY21 at the current valuations.
Market is assigning bankruptcy kind of valuation to the Nbfc business. I believe the cycle might have turned with the interest rates bottoming out. Though have to track the book very closely. If Egia is demerged in the next 2-3 years, just think about the valuations this business which generated 650cr(normalized) of Pat will get. Do think about the valuations ascribed to IIFL Wealth by the market.
Trading/pseudo investing postions-
1.5%- Sanghvi Movers: main bet is on wind energy revival. Getting at 20% value of its gross block.
1%- Managalam organics: near term triggers their in the company with the camphor prices holding firm.
1%- Hsil demereger: lets see the what is the outcome of the experiment. My first demerger bet. Will bring a lot of learnings.
- Kei Industries
- Bkt Tyres
- Deepak Nitrite
- Abbott India
- Ngl Finechem
- City Union Bank
- Hester Biosciences
- Ratnami metal and Tubes
- Minda industries
- Solar Industries
- Bharat Rasayan
- Dharamsi Morarji
- Maithan Alloys
- Apollo Tricoat
- Sundram Fasterners
Remaining portion is Cash.