I made a list of the stock I’m interested in and I track them with a google sheet
Profit/Ebidta/Sales/Book value in Target year
Exp Market Cap
So bassed on this kind of list I see where I can get most return in CAGR terms and invest accordingly. So, wherever I allocate more where the odds are in my favor. In addition to this I follow a few more things
Reduce the weightage where drawdowns could be bigger
Keep allocation to each sector less than 20% (Chemical and Agrochem is still less than 20%)
Exit gradually where the risk reward is diminished or keep stoploss. (exited Angelone and MCX partially because of this reason)
Follow what my mind says in addition to the numbers in the sheet
IT and ER&D:
I pay lot of attention to valuations and PEG. So, I didn’t find many good bets in IT cos here. All the big IT cos are trading at >25x PE for grwoth of 10-20% and same for ER&D. So, didn’t invest much in IT cos
Cigniti tech is an IT co which is still available at 17x P/E and I’ve invested here a few months ago
Mold Tech Technologies is in Engineering services work and supports customers mostly in NA. So, you can say I have some weightage to this ER&D co
From both these cos I expect >20% CAGR revenue and profit growth and found the valuations attractive at my buying price and even at current price
Mayur Uniquoters is the only Auto Anc in my PF
As I’ve mentioned already I pay attention to the price I pay. IMO chemical cos are at good valuation and the drawdown would be very small from here. In fact after very bad results in recent quarterls the stock prices didn’t fall much. I expect the cycle to return to normal atleast in next 3 years and with the earning improvement and valuation rerating I expect to double the money in next 2-3 years. Shortly better Risk reward
Total no, of stocks held: 107
This is the total no. of stocks I see when I look at the Combined (Realized and unrealized P&L for the year). This includes all the stocks that I held atleast for one day including the stock carried forward from CY2022 and stocks that I’m carrying forward to CY24. This number is looking high and I should control the no. of stocks I trade in and out of so as to reduce churn and charges. I’ve subscried a smallcase and also participated in multiple buybacks/OFS which may have added ~30 to this number. Else this number could’ve been around 70, which is not too good either. I would consider it a win if I could keep this no. below 70 for CY2024
Total sum of Win/Total Sum of Loss: 7. This is a result of the whole year being good for the smallcap index. The Profit and Loss includes the unrealized Profit and loss existing at the end of last FY. So, all the profit can’t be attributed to the current year and same goes for the loss.
Biggest Losers and Assessment in abs terms:
Averaged down during fall from peak in 2022
Though it’s cheap after listing post demerger. Kept averaging and didn’t hold it through recovery
Sold when the CEO resigned.
10-15% loss. Still holding. See good prospects
Bought for buyback. Mistake in judgement.
Uncertainity on profitability and lack of conviction
10-15% loss in % wise. Eventhough the plan was to hold till the cycle turns upward. But couldn’t hold as I got swayed away by better opportunities
Small loss in % terms. Still holding for recovery in Chem cycle
Lack of conviction and inability to understand the pharma cycle
sold with stoploss. Could’ve given + ve returns if held. No regret
Biggest Winners in abs terms
Bought during lows of Mar23 at criminal undervaluation
Value creation with demerger. Still holding
Bought at lows of the cycle in Mar 23
Bought at lows of the cycle in Mar 23. Holding for TCAS orders
Bought during lows of Mar23. Cycle played out
Bought at lows of the cycle in Mar 23. Plan to hold till Fy27-28 for Capex to come live
Bought at lows of cycle
Held though CY22 and added in FY23. Holding as I expect earnings to improve
Low Risk and High uncertianity regd the New trading platform
Bought 3 months ago. Strong business model and management
Bought when Pref issue was done at ~600 rs. Not holding
One of the cheapest IT cos with good growth guidance. But Prom selling
Most of the ideas came from twitter and some from VP. Thanks to Sahil sharma, SOIC Finance, Chinmay (chins) and VP community. I have made my own study in limited capability to invest in these cos
BIggest winners came where starting valuations are cheap along with improvement in earnings (Angelone, Ujjivan, Equitas, Pitti, Krsnaa)
Biggest learnings came where I didn’t respect the valuation like Nazara tech, Symphony. Some other reasons are cyclicality of earnign and my inability to hold the stocks through. So I should either limit my allocation where the it’s difficult to predict (Chemicals, Pharma, cyclicals) or should have the discipline/gut to hold the stocks through the recovey in earnings/stock price. After all I believe the best returns could be made in cyclicals
Evaluate more cos to improve returns. Take more ideas from twitter, VP and do own research to make better returns.
Areas to improve:
Allocate higher where I could predict the earnings (difficult to do so in Chem, Pharma etc.). Undervaluation to start and growth in earnings are the key for good returns
If allocated to cyclicals buy during bottom of cycle or at the start of upcycle and hold till the cycle recovers
Evaluate more opportunities to find better opportunities and make better returns. Currently most of these ideas are coming from twitter and VP. Could use some technical screener to find opportunities to start with
There’s no substitute for hard work. Work hard and smartly. Spend time where it matters
Readings for CY2023:
Read Buffet Partnership Letters
Spent significant time on VP reading. Started writing as well. Long way to go
Joined a Whatsapp group with like minded people (based out of pune). Have people to discuss ideas
Targets for next years (CY2024):
Read Berkshire Hathaway Letter to shareholders (ongoing)
Read Bulls Bear and other Beasts
Read Masterclass with Super investors
Read Secrets from profiteering from bull and bear markets
Look at the charts posted by Chartist and VVV on twitter. Learn and improve the understanding of technicals
Start sharing thoughts and learnings on twitter. Helps to network with people and work better
Targets for Tracking Universe and Portfolio:
Reduce the no. of holdings in the PF to close to or below 20
Alreadyb have a list of cos I track and have estimates on earnings and fair P/E or P/B multiple for most of the tracking universe. Cross check the estimates against the actual results when after the target time frame (Fy25, Fy26 etc.)
Evaluate and participate in short term opportuniteis llike OFS, Buyback etc… (started in early 2023 had fair success)
Maintain better returns over Nifty smallcap 250 index
Create a Paper trading momentum portfolio as a combination of technical and fundamentals or either of them (Create one technical based recently. Need to keep working and improving)
Learn and implement technical based exit system for portfolio stocks. Could have helped with Angelone, MCX etc
Writing this post helped me make some observations on my PF and investment process. I believe this would help me understand the areas where I need to improve, Make plan for improvement with set targets and hold myself accountable for future progress
I recommend fellow VPers to consider writing a similar post, Learn and grow
Thanks for reading
Disc: Have/had positions in almost all the cos mentioned. No reco to buy or sell
Currently I’m writing the updates on my PF as and when I can without any specific frequency. But now onwards I’ll try to update this topic on 1st day of each month. This is would help me later to go look at my PF at a particular time and assess how it could’ve played out if I didn’t change weightage of any co.
It’s possible that not many people appreciate the presence of high churn in the PF and so the update on PF would be unnecessary. But in my case as I’m still learning I may have high churn. Also, I mostly add and exit stocks in a gradual way, so making the weights in the PF to have consistent small change instead of sudden big changes. The top 5-7 constituents always remains the same as I take view of few years (2-3 years)
Coming to the point now, this is how my current portfolio look as of today
Few actions that I plan to take soon:
Partially or Fully exit MTAR tech. In past few weeks, the promoters of the co have been selling heavily in the open market making me nervous and I feel that the upcoming quarter results and the guidance for FY25 would be not so good. So, I plan to exit this co and allocate somewhere else
Participate in Buybacks: I see decent opportunities in ongoing buybacks with a possibility to make 5-10% profit (buyback profits are not taxed to the investor, the co pays) in 2.5 to 3 months which is decent considering the market valuation
Raise allocation to DCM Shriram Ind: I see opportunity to make good returns here with ongoing demerger which may take 1.5 to 2 years to conclude. I would be comfortable increasing my allocation from current ~4% to bit higher and upto 8% if I see good correction or any positive developments in the business ( If I find any)
The column marked in green is my estimates and already available data for current buyback. Other 3 columns contain the data for previous buybacks
For last 3 years the co bought back ~4% equity shares and the buyback premium varied between 4% to 50% (price as of record date)
For current year the co is buying back upto 8% and the buyback premium from CMP is ~10% which is not too attractive.
So, I expect to get 80 to 100% expectance in this buyback and that would mean 6-10% returns in 2.5 to 3 months, which is pretty decent. Also, here I’m assuming that I sell the unaccepted shares in open market at 590 Rs (10% below CMP)
Hope this example helps.
Disc: Please don’t take any action based solely on this data. This is just for illustration and learning purpose. I plan to take position and participate in this buyback
The data mentioined may have inaccuricies and I also made some assumptions to arrive at my thesis
Added Mufti (Credo Brands): Trading at 20x P/E and seemed like a good opportunity in Fashion and apparel space. Industry growth is in double digits and the management expects to double the sales in 4-5 years. There is chance for operating leverage. Anti thesis: Need to see if the margins could sustain above 30%
Added NHPC: Bought via OFS as the allotment was below then CMP. Stock price has good momentum and so holding half the quantity of the allocation and sold the other half. No strong fundamental view expect that the power sector sees tailwinds in near future . Holding as there’s good momentum
Sold ANGELONE after the results (~3400 rs) as I see the margin pressure could continue in near future. May turn out to be a bad decision for me, but won’t regret
Added small qty of Kaveri Seed Co. Ltd (KSCL) to participate in buyback as I see opportunity to make 6-8% in 2-3 months for small shareholders (investment < 2 lakhs)
Added small qty of DCMSRIND as I see value unlocking coming out of demerger… Expected timeline of 2 years (may take more time depending on NCLT hearings and postponements)
Please feel free to share your views or ask questions on my PF or any of the cos mentioned
Great to see you adding this. I am also tracking this company since its IPO. The low valuation and a very decent looking Management attracts me here. But why would someone value their company at a good discount to listed players in such a roaring bull run? This has been stopping me from entering this company. I could not find much to read about the company either. Any theses you have to add?
I think it’s valued same as peers like cantabil retail, TCNS clothing killer and other brands (excluding retailers like pantaloons, etc). For whatever reason, the stock didn’t do well at listing.
I’ve looked at this as an opportunity instead of worrying about why it’s not priced higher at IPO and didn’t list with good premium.
Anti thesis :
Margin improvement from 10% to 33%. Margins may or may not be sustainable
Wage hikes for lbaour could hit gross margin and so ebidta and profit margins
These are the only major risk I could see
Other risks could be not growing in 14-15% but as the industry is growing in this rate. This growth rates are within reach
Not a asset heavy business, as the manufacturing is outsourced
Operating leverage will play out as Same store sales growth continues
Valuation rerating upwards is a major part of investment thesis for me (in addition to 14-16% growth and operating leverage)
Moldtech is into Infra Eng services business. Most of their clientele is from USA and Eu. Currently due to high interest rates, the business is going through headwinds. However I consider this a good opportunity to buy. Few things that may work in favor of the business
Reduction of interest rates in US in near future
Acquistion is expected sooner than later. The acquisition will help the co. move up the value chain and enter into the high margin business of design
Inherent low cost humanforce advantage of the co, as it serves clientele in developed countried from India
Corporate governance is good (same management as Moldtech packaging)
Mechanical Engineering Services is expected to contribute to the growth whereas historically most of the revenues came from Civil Eng Services
These are the few qualitative thesis points, I have in mind. For management guidance on growth of Revenue and Profit, you can refer to the recent concalls
Thanks Praveen for an elaborate answer. Those pointers matches with my thesis as well. I started learning about engg services sector recently but couldn’t find listed competitors. If you have it please do share. A P2P analysis would also give a perspective of sector trend
I don’t think there are any comparable listed competitors.
The management gave KPIT as one of the peers. But, it’d be futile to take it as a fair comparison.
Valuation wise we may value them on par smallcap IT cos. But, the growth rate has been good with operating leverage playing and would do so in future. So, may be 20-30x P/ E depending on general market conditions.
@praveen_potnuru KPIT majorly focusses on Automotive software and it’s definitely not a peer to Mold tech.
TAAL deals with Engg design services and one vertical of Axiscades also focussess on mechanical design. Don’t you think these are comparable peers to Mold tech?
Not sure about TAAL.
Coming to axiscades: Axiscades is well diversified and does more value added work. What Moldtek Tech does is plain Vanilla work in Just stuructural Eng (CIvil and Construction). The Mechanical Eng Division of Moldtek is relatively better (IMO) but still a long way to go. So, overall I don’t think Moldtek is as good as Axiscades but the growth rates have been good in recent past and the management indication that they are closing in on an acquisition (mentioned in Q2 concall) is a step in right direction. In addition to this, seasoned management (proven track record in Moldtech pack) and good addressable (global) market with Cost advantage (working out of India) forms my thesis.
As per Q3 concall managment commentary, they were asked by clients to serve them in Press tool
The co is moving into Press Tool, Dies, Wiring Harnesses etc. So, they have onboarded some employees to increase the capabilities. This would be the thing to watch out for in near future
I’ll check TAAL and keep an eye on axiscades as well.