[quote="prashanthmsp, post:1, topic:899535307"]
Astral Poly Tec
[/quote]
Have re-structured my portfolio over last year and happy to
have done an overall CAGR of 45%.
Focus has been on adding performers and reducing non-performers.
Like for many others in the forum, Ajanta has been a great
investment and still continues to be.It remains my top holding even after aiding the purchase of
Shilpa Medicare.
Polymedicure and MCX are recent entries, while others have
been in the portfolio for close to an year.
Hoping for a 20% CAGR this year J
|
Stock |
Holding % |
|
Ajanta Pharma (3) |
17 |
14 |
|
Kaveri Seed (2) |
13 |
|
Shilpa |
11 |
|
PI Industries (2) |
11 |
|
Poly Medicure (2) |
9 |
|
Kajaria Ceramic |
8 |
|
Mayur Uniquoter |
7 |
|
MCX India |
6 |
|
ITC |
5 |
Excellent portfolio Prasanth.I donāt like ITC at CMP,though its ok to have one such ādefensiveā stock in oneās pf.Since you seem to be making decent returns off your investments,maybe you can take some risk & look at buying some shares of a cyclical/energy kind of company in the ongoing correction.To me,many pvt. sector banks look attractive,as markets keep punishing the banking stocks for the smallest reasons.
Hi Sagar,
Thank you so much for your feedback.
On ITC: I have a different view on ITC. After years of building the non-cigarette FMCG and agri brands, it is poised for good growth. It has not moved anywhere for more than a year. Whether it is a buy at CMP, I have no idea but I believe itĆ¢s definitely worth having ITC in ones portfolio.
On timing the cyclicals: I believe this requires higher level of understanding the sector as a whole and predicting demand. I would prefer to stay away with the limited knowledge and resources at my disposal.
I am looking to re-enter Canfin after their good set of numbers. Demand for housing is something which will never go down.
Prashanth,if a stock has done nothing over the past year,it doesnāt necessarily mean that it may go up anytime.Similarly,a stock thatās been performing well,may continue to perform.The reason ITC was trading at multiples in excess of 30 was because there was no other option! But with IT(US recovery) & Pharma(due to currency) making a comeback,the multiples have receded.Consider this: A few months ago,HULās(trading at 40x) nos. were due & markets expected a 9-10% PAT growth.However,they posted 12-13% growth & the stock rose 3-4% the next day on that! On the other hand,more recently,IndusInd posted estimate beating nos. on bottomline & even I think,NIMs.The stock has already been de-rated from 23-24X to around 17-18X,but when the NPAs showed an uptick,the already de-rated stock corrected even more!! So,you see banks are the favourite whipping boys & quality managements are available at good prices.ICICI Bk has been able to sustain growth,so has Axis & so has HDFC/IndusInd Bk.So,its pretty unfair that stocks must go down even though the companies continue to deliver good growth.Also,markets wonāt wait for the cycle to turn.Just a āsignā & prices may shoot up in excess of 30%.The multiples for IT,etc. too may go down then,since attention would shift to cyclicals.You can stay away from Infra,construction,etc. but many banks,NBFCs look good at CMP & of course,at lower prices.
Disc.: Not trying to scare you,just expressing my opinion 
Sagar -
We have to understand why market assigns āhighā P/E to certain industries. FMCG businesses tend to have higher ROCE, ROIC, low debt and less capex intensive. Since it is less capex may be required, investors tend to think their capital is less prone to risk. The industry is not cyclical (you need to take bath irrespective of the GDP growth) and the customers are potentially everyone living in the planet.
In India, they may trade at a premium compared to other FMCG businesses traded in other parts of the world but FMCG businesses always trade at a premium to the indices average.Iām yet to see any good quality FMCG businesses trading less than 25 P/E. Even during the 2008 sell-off, ITC was trading at 20 times earnings.
Iām not saying is you should buy FMCG stocks or whether ITC is a good business to own (or at what price to own); all Iām trying to say is FMCG stocks are going to have premium valuations. Sometime you need to cough up to own good business.
āIt is better to buy wonderful business at fair price rather than fair business at wonderful price.ā - Warren Buffett.
Disc: Views may be biased. I own ITC.
Ashwin,as you would agree,these points are well known and well appreciated by the markets.Its no secret that cos. like Jubilant,Nestle,Colgate,etc. enjoy exemplary return ratios & will trade at premium valuations.But isnāt there a ceiling to this premium?
As an investor,one is looking for deltaā¦and the more we know about the company,the lower our āriskā.E.g.: The awesome groundwork on Kaveri meant we,at ValuePickr,had an edge over most investors.So to me,the merits of ITC seem priced in.At CMP,I donāt see an upside of more than 10-15%.Until and unless one foresees a crisis like situation,then for sure ITC,etc. could do more than that.The question is about putting incremental money.Would you do that at CMP? My sense is,stocks like ITC provide excellent downside protection & one may keep it in that place in his/her portfolio.ITC wonāt give returns like Ajanta,PII,Astralā¦thatās my point.
Sagar -
Of course there is ceiling to the premium. That is there for every stock, right? You buy low and sit tight. While Iām not qualified to valuate businesses and the price you couldāve bought, but in recent times you couldāve bought ITC at 29-30 times earnings.
IMO, ITC has the best pricing power in India. Every year GOI slap taxes and yet we donāt see margins shrinking. My holding period is forever. ITC will not give the kind of return of Astral or Ajanta but holding the best business something for 30 years with 20 CAGR (assumption, of course) works like a charm.
In a way youāre right. While Iām not qualified to talk about capital allocation, what I do is own solid businesses like ITC, TCS & HDFC bank and then add some 25% capital in stocks like Ajanta, Amara Raja etc. Yes, I donāt get the kind of return your portfolio gives butā¦
Disc: Own all the businesses mentioned.
ITC:
For the last 17 years (1996 to 2013), Total Shareholder returns have grown at a CAGR of 26.4 %
This fact alone should justify the (high?) valuations for ITC
Talking of long term sustainability, here is the ITC sustainability Report 2013 :
http://www.itcportal.com/sustainability/sustainability-report-2013/sustainability-report-2013.pdf
Really impressed with the mega vision of the company!
Disc: ITC was the first stock I brought and still invested and hence views may be biased!
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