Priyank's Portfolio

[ChotuKatappa]

PART 1: ASSET ALLOCATION

20% Debt
80% Equity
0% Gold / silver / commodities
0% Real esate.

Part 2: Debt Allocation

• Given the prices at which I bought, I would be generating ~7.8% (pre-tax) yearly interest.
• I do have concerns over liquidity in debt instruments. The trading volumes are very low and my current strategy of buying NCDs directly is sustainable. Actively looking for suggestions here.

Part 3: Equity Allocation

My equity allocation is based upon the following points:

1. Following a framework of 1 - 25 - 5. This means that if a business is:
   MicroCap → 1% Allocation of equity portfolio
   SmallCap → 2.5% Allocation
   MidCap/LargeCap → 5% Allocation
   This removes personal biases and limits the number of companies I can choose from.

2. My classification of Micro v/s Small v/s Mid vs Large Caps
   
   The reason I have put an upper range on LCaps is that I tend to avoid companies beyond a certain Market Cap. It’s better to just buy an index rather than buying a stock that is getting tracked by every analyst 24 x 7.

3. Life is a mess and I have very limited time. Can keep a track of limited companies only (~20 to ~25)

4. Everyone is smart in hindsight. I’m going to make mistakes today only to realize tomorrow - what if I have no capital to come back into the markets?

5. No matter how many concalls / forums I track, I will likely be very late to learn about anything. ex: know some analysts who keep track of import/export data at a weekly level - can’t compete with them by just tracking quarterly concalls.
   Also, makes me question myself if analyst actually can significantly higher return than me as a retail investor?

6. Past mistakes taught me that I was unintentionally bringing biases while investing. Now, I have been following a strict rule of not going beyond 10% in every theme/sector.

Theme	% of Equity Portfolio	Rationale / Notes
Mutual Fund	25%	Point 4
Experienced analyst	10%	Point 5
Infra / Water / Power	10%	-
Manufacturing	10%	-
Technolgy	10%	-
Agriculture	10%	-
Pharma	10%	-
Miscellaneous	10%	-
Cash	5%	-
Total	100%	-

8. Targets for this year:

• To move more and more towards passive investing / GTT based investing
• Reduce companies under 25 by year end. Do not have more than 4 companies in a theme.
• Increase allocation in IT and reduce allocation in API/CDMO.
  Every investor and every company is doing capex in CDMO… There can be only one thing in future - enormous supply leading to possible pricing pressure

[Malolan_R]

Some feedback .Priyank …why dont you sebi amfi guideline for mcap limits its quite sensible…
And whats GTT type investing ??
And passive investing will only get you somewhere there… it is only a moderate wealth creator…
Larger companies and as long they maintain leadership position…they will provide long term wealth creation…it wont be linear… mortality rate in small companies as we all know…
Thanks and all the best…
MalolanR

[ChotuKatappa]

Thank you @Malolan_R

1. Why dont you sebi amfi guidelines for mcap limits
Are you referring to why I am classifying investment in PPFAS as LCap?
The way their AUM has been growing, down the line I can’t see them making significant investments in Small Caps. They will continue finding opportunities in Large and some Mid Caps but the ratio is hard to predict. To keep things simpler, I classify it as LCap

2. GTT type investing: My bad, I should have better rephrased this better.
Consider two approaches.

Approach 1: I am monitoring sectors/companies at a daily level. The VP forums, google alerts, the news, the stock prices, everything I could consume.
Approach 2: Do not track businesses at a daily level. Rather, after studying if you like a business you decide on an entry value and schedule a GTT order. It gets executed automatically whenever the price condition is met.

For example, I like a business and was waiting for it to fall by say 10%. Over the next few days, the stock falls by 9% and now starting to go back upside.
In approach 1, I was monitoring the business daily, so I would be I would add a small quantity.
In approach 2, the GTT never gets triggered and I am not able to add more stocks to my position.

Approach 2 may sound bad at this point, but I like this approach more and it also helps keep my feet on some rules/framework.

3. Larger companies …will provide long-term wealth creation
The statement is generic and I am not sure if agree here. Multiple scenarios where this isn’t the right way to look at investing.
Example 1: If a sector doesn’t grow over a period or worse, it de-grows, and no matter if the leader remains the leader, as an investor one will likely lose.

[ChotuKatappa]

Update:

Exited some older/tracking positions (haven’t mentioned them here because I was going to exit them anyway):

1. MK Ventures
2. Hikal
3. Kopran
4. Power Mech
5. SKF India

Still need to exit from older positions at Coromandel, Maithan Alloys, Axis Bank and Tata Motor.

[ChotuKatappa]

Latest Holding

PPFAS	23.02%
Greenpanel	5.77%
Gokek	5.74%
Godrej Agrovet	5.03%
Triveni Engg	5.02%
Alicon Castalloy	5.01%
Sansera Engineering	4.99%
L&T	4.07%
IEX	2.23%
Max India Ltd	2.54%
TIIL	2.53%
Ion Exchange	2.15%
FDC	1.85%
Laurus Labs	1.01%
Faze Three Ltd	1.01%
Cosmo First	1.43%
Artemis Medicare	1.00%
Renaissance Global	1.02%
Shree Pushkar	1.00%
MMP Industries	1.00%
Ami Organics	0.88%

Disclaimers:

• This isn’t the complete list for equities. Have tracking positions in a few other businesses.
• Have been reducing the weightage for debt during the fall at the end of last month/early this month.
• Exited Maithan Alloys and Axis Bank.
• Could enter Lupin / Pix. Still researching - no positions here yet.
• Not SEBI registered. Nothing I say/write is a BUY/SELL recommendation. Please do your own research.

[Rahul_Singh]

Very much interested to know ur thesis on Renaissance global .i have been holding and very much like what the promoters are doing the the branded business in usa especially d2c business.

[rahil_sayta]

Good to see on allocation front.
On the debt side NCD are good bet with return of 7-9 %. Liquidity may not be a challenge for good papers.

If taxation of individual falls into 30 % returns would be in 5-6 % range.

Better option would be to look at multi asset / BAF fund .

Though both have their pros and cons.

I personally prefer Debt only for short term income need .

BAF may help to balance debt and equity beautifully. SWP can help post 3-5 years to manage liquidity too

[ChotuKatappa]

• Good business but will it scale big? The probability of a significant downside seems low so even if it doesn’t, significant capital erosion shouldn’t be there.

My concerns on scalability are because of the following reasons:

1. Licensed brands: Unique but then, I have multiple concerns about scalability and sustainability of growth here. Management doesn’t disclose much about these licenses so further difficult to visualize.
   
   

2. Homegrown brands: Company has two brands: Four Mine and IRASVA.

a. FM is a made-to-order business. It’s often difficult to scale made-to-order business beyond a point.

b. IRASVA: Good potential. Need to see how management executes over the next few years.

Disclaimer: Although I am invested now, I may exit - if I see better opportunities (or) need cash.

[ChotuKatappa]

Thanks for the suggestion, Rahil. I prefer to keep equity and debt separate - BAFs confuse my process here.

• 5 or 6% on the debt should be enough to compensate for the inflation. That is all I expect from fixed-return investments

[ChotuKatappa]

Company	Current %
PPFAS	23.49%
Greenpanel	5.46%
Gokaldas (GOKEK)	5.43%
Sansera Engineering	5.28%
Federal Bank	5.28%
BCL Industries	5.25%
Godrej Agrovet	4.99%
Triveni Engg	4.75%
L&T	3.86%
Ami Organics	2.75%
Lupin	2.65%
Max India Ltd	2.63%
VA Tech Wabag	2.63%
Cosmo First	2.62%
TIIL	2.60%
Rolex Rings	2.36%
Ion Exchange	2.21%
FDC	1.78%
Faze Three Ltd	1.06%
DCM Shriram	1.06%
RACL Geartech	1.04%
Tracxn Technologies	0.97%
Shree Pushkar	0.95%
Artemis Medicare	0.95%
MMP Industries	0.95%

• Exited IEX - explained here
• Ion v/s VA Wabag: I would have preferred to buy more of Ion Ex than Wabag. However, the Wabag is offering better risk v/s reward.
• Godrej Agro - notes

[ChotuKatappa]

Name	Invested %	Thesis Documentation
PPFAS	22.70%	Link
Godrej Agrovet	9.95%	Link < WIP >
Triveni Engg	7.24%
BCL Industries	6.40%
Greenpanel	5.01%
Gokaldas (GOKEK)	4.98%
Sansera Engineering	4.84%	Link
Ami Organics	4.83%
Lupin	4.24%
L&T	3.63%
TIIL	2.91%
Tata Motors- DVR	2.61%
Max India Ltd	2.41%
VA Tech Wabag	2.41%
FDC	2.29%
Rolex Rings	2.16%
Ion Exchange	2.02%
Cosmo First	2.01%

• Have some tracking positions in a few stocks that form less than 10% of the equity portfolio

---

I had the following targets for this year and here’s how they have been going

1. To move more and more towards passive investing / GTT-based investing -
   Broadly able to implement.

2. Reduce companies under 25 by year-end. Do not have more than 4 companies in a theme -
   I realized that this is an impractical approach and doesn’t suit me. I have dumped this goal. If there’s value, I’ll go. I do have to reduce no.of stocks though

3. Increase allocation in IT and reduce allocation in API/CDMO
   Haven’t increased IT. Need to re-evaluate approach about API/CDMO

[ChotuKatappa]

Names	Invested %	Thesis Documentation
PPFAS	21.51%	Link
Godrej Agrovet	9.18%	Link
Triveni Engg	7.35%
BCL Industries	6.06%
Gokaldas (GOKEK)	4.83%
Greenpanel	4.75%
Max India Ltd	4.60%
Sansera Engineering	4.59%	Link
Ami Organics	4.58%
Exide Industries	4.24%
Lupin	4.02%
TATA Motors - DVR	3.66%	Link
Borosil Renewables	3.58%
L&T	3.44%
TIIL	2.76%
Ion Exchange	2.70%
SKF India	2.19%
FDC	2.17%
Cosmo First	1.90%
MMP Industries	1.24%
Kovai Medical	1.15%	Studying
Sakar Healthcare	1.12%	Studying
DCM Shriram	0.92%
RACL Geartech	0.91%

Notes & What’s on the mind

• L&T: No major additions since last 365 days. Mind says EXIT v/s heart says HOLD
• FDC: Almost time for Review (~Q3/Q4FY24)
• Greenpanel: Review by Q3/Q4 FY24
• Debt Allocation < 5%: Below ideal range

[Investor_No_1]

@ChotuKatappa

|Max India Ltd|4.60%

you have relatively very high allocation to this small cap which was around 250 cr mcap couple months back.

Can you explain your rationale, time frame and vision for this company. Till when you think to hold it and where do you see it probably in 3-5 years if you have that long holding thought…thanks

[ChotuKatappa]

Can you explain your rationale, time frame, and vision for this company? Till when you think to hold it and where do you see it probably in 3-5 years if you have that long holding thought…thanks

Short Answer: For me, there was nothing to lose

Long Answer: I’ll divide the answer into 3 parts:

1. What I seek in a microcap (MCap ~1000 OR PAT< 50)?

• In microcaps, I look for companies that may not have the best numbers but the direction is right. At times there are other things I look at, but broadly these are broadly the 4 parameters that shape my mind:
  a) Business (what does it do and how big can it grow)
  b) Management Integrity (how much can I trust the management)
  c) Management skill/experience
  d) Valuation
  e) Everything else

Parameters (a) and (b) are non-negotiable.
Parameter (c) is negotiable because at times there are young entrepreneurs & you can’t really expect to always have a good experience. Sometimes, people learn as the journey goes on. When I was in my early career, I used to work at a very early startup where we would do all kinds of technology projects to survive. It took a few years, to finally start scaling up in something.
Parameter (d) - If I really like the business and as long valuation is not crazy, I’ll pay a bit more.
Parameter (e) - These are very company specific - so I’ll skip generalizing this one. For eg: I recently came across BCC Fuba via VP itself and I didn’t invest in it because of violations on multiple params including (e)

If a company makes it past my checklist, my ideal allocation is between 1% to 2%.
Yet, I have invested beyond that in Max India. I have done this in the past as well and each of the cases had its own reasons.

2. So why did I invest beyond 2.5%?
Due to my average buying price being low, I do not see significant chances of capital erosion (can’t comment on short to medium term). There can be capital stagnancy/illiquidity but that’s a risk I am okay with.

You are right about the significant price rise in the last few months. My initial buying was somewhere between March - Aprill before the market’s surged up. I added some at a later stage and some more after the post-results correction.

Further, after the recent concall, I feel more confident about the probability of not losing much here. But who knows the future !

3. Rationale / Outlook / Holding Period / Other Things
Let me answer all these ones by one.

Rationale: I think this is covered. I’ll write detailed notes on Max India once I get time. I’ll tag you. VP guys have already a good job though.

Outlook: I usually do not try to put targets. I don’t even expect management to give correct guidance (especially on a microcap).

But I can tell you that for < 500 Cr I have bought a business which:

• Is in a sector that is necessary AND should grow with time (multiple triggers)
• Promoter is trying to scale this business AND has a proven track record
• Has a very small base

Having said that, there are some challenges that the promoters will have to find a way through. Care homes / Mental health solutions etc have their own problems and risks. I do not expect numbers to start showing up in the short to mid-term. I would not be surprised if the topline growth is slow/stagnant in the initial years. As long as the direction is right and I continue liking the management, I plan to hold this stock for some time. Let’s give some time to the management and see how they perform.

How long can I hold?
Very difficult to say. For example: If I find something, which offers a much better risk-to-reward ratio, I might just exit/reduce (OR) if in the future, I see some risks or I’m unhappy with the way things have been growing, I might take action.

But, I’ll show tell you something else that should help understand my expectations. Every business that I buy, I categorize if “I can hold this for a decade”.

“CAN Hold” doesn’t mean I WILL hold. Rather, it’s more of a parameter that I use to foresee if the business/sector could continue growing till 2030. Whether I will actually hold or not, depends upon various factors such as management attractiveness, valuation, sector performance, unexpected events, personal biases/interests/needs etc.

I hope I have answered your questions. If there’s anything that is not, do let me know.

---

I think you are already a seasoned investor but I do not know who might just read my post and end up taking a decision, so I’ll just give the disclaimer.

Disclaimer: These are my opinions and NOT a BUY/SELL recommendation. My views may change anytime and I may take decisions anytime without informing anyone.

[Investor_No_1]

@ChotuKatappa

I hope I have answered your questions. If there’s anything that is not, do let me know.

Thanks, you have explained everything beautifully. Appreciate your time.

[ChotuKatappa]

What's working well

• Added small quantities of TIIL and Exide recently

• Institutions seem to be back in 4 out of the top 5 holdings [Source: StockEdge]

What's not working well

• Haven’t been able to add Sansera / AMI / TaMo. The fact that Sansera isn’t in the top 5 (even Max India has a higher allocation) is starting to bother me.

• Haven’t been able to raise cash up to the desired level. Have to figure out something

• DCM Shriram - another year where management hasn’t clarified the timeline expectations.

[ChotuKatappa]

August EoM Update:

PF After Today's Transactions

Names	Invested %	Net Uptick
PPFAS	21.25%	18%
Godrej Agrovet	9.07%	7%
Triveni Engg	7.26%	13%
BCL Industries	5.99%	-1%
Ami Organics	5.00%	14%
Gokaldas (GOKEK)	4.77%	114%
Exide Industries	4.75%	4%
Greenpanel	4.69%	4%
Max India Ltd	4.54%	27%
Sansera Engineering	4.53%	29%
Lupin	3.97%	26%
TATA Motors - DVR	3.61%	0%
Borosil Renewables	3.53%	-10%
L&T	3.40%	121%
TIIL	2.87%	67%
Ion Exchange	2.67%	88%
FDC	2.14%	19%
Cosmo First	1.88%	12%
Vindhya Telelink	1.66%	-5%
MMP Industries	1.23%	52%
Kovai Medical	1.13%	2%
Sakar Healthcare	1.11%	17%
Niyogin Fintech	1.06%	3%
RACL Geartech	< 1%	84%
Banka Bioloo	< 1%	-2%
Sparc Electrex	< 1%	2%

Long Term Holdings: PPFAS, Greenpanel, L&T, Ion Exchange, RACL Geartech
(These stocks are the ones where my first buying has been over 365 days old. Depending upon the stock, I may or may not have added thereafter)

Rationale for the changes

Short notes on additions

1. Vindhya Telelinks: Can this be a beneficiary of fiberisation capex (or) am I late to the party?

2. Banka Bioloo: Railway capex | Promoter seems okay | Worth researching

3. Niyogin Fintech: The management looks very interesting

4. Sparc Electrex: Yet to have a view

5. Tata Motors: I needed cash so I sold TATA motors and before I could re-enter, the demerger started causing a rally. Nevertheless, I re-entered within a few days. I think I forgot to mention this in the last update

Short Notes on Exits

1. SKF India: Nothing wrong with business but wanted the cash. The valuation didn’t made me worry much before selling.

2. DCM Shriram: I was divided initially - ultimately, I chose to stick to the basics and exited
** Why I wanted to hold: The commentatory (via A.R) is very +ve. I do feel that they can receive orders - there is enough data for me to think in this direction. Secondly, if the sugar cycle kicks in, the business could be re-rated. Lastly, at my buying price there wasn’t much probability to lose big.
** Why I was unsure to hold: Commentary in the A.R. has always been positive for the last few years but where’s the execution/output?!! As an investor, I am unsure of the stage of ongoing defense projects. Defense projects are time-taking, but it’s not like there are no businesses with more transparent management and better execution.

DCM didn’t offer me enough data to increase allocation - not even the clarity of when I could have some clarity. The allocation was going to be insignificant soon. At this point, I had been asking questions to myself - Should I be patient? Do I have conviction in the management? etc.

Ultimately, I realized that a ~1% holding wasn’t worth the trouble - especially since there were enough opportunities and thus, I exited. I was sitting on 60ish% kind of returns with < 1 year of investment - so still happy.

Going forward

Will need to work on the following areas:

1. Backtracking inconsistencies: My lower end of the portfolio has been very inconsistent. I think I have picked up this behavior post Covid but not very sure. In any case, I will be testing out a few strategies to figure out a solution here. Example: Sold SKF → re-entered → Sold again within few months

2. Time constraints: Leisure time continues to be less than before and will be even less over the next few quarters.

---

Disclaimer: I may be or may not be invested in some of the stock names that I have mentioned here. The information shared here is my personal view and I may be biased/wrong and change my views without informing anyone. This is not a Buy/Sell recommendation. Please do your own research or consult your financial advisor.

[ChotuKatappa]

Notes on chemical sector:

• Fluoroploymers industry will likely see consolidation over next few years.
• There are only 5 naturally occurring compounds that contain C-F bond. Hence, the body does not know how to handle them, making C-F carrying drugs easier to kill cancer cells, viruses, bacteria etc.
• Navin Fluorine International does CDMO in pharma - no other Indian listed entity is into this space.
• Tesla sources batteries from Panasonic and brands them as Tesla

Source: Prabhudas Lilladher

[ChotuKatappa]

M.K.Ventures - Excerpts from AR FY23 - Link is HERE

• Company is looking at FY24 to be the year of consolidation and base building for future growth. → is in the process of further raising growth capital

• Looking to scale up its business in both lending and non lending segments → evaluating lot of alternate businesses other than lending and is committed and confident towards finalizing a detailed business plan for the same in coming year.

• Focus is to strengthen board of directors as well as senior management team.

[ChotuKatappa]

Notes from 100 Baggers by Christopher W. Mayer

• Stock Screening:
  ** Present ROE > ROE 5 yr avg
  ** Independent Directors owning a % of shareholding

• Bet Size: Kelly Criterion (% = edge / odds)
  Another rule: (P% * 5) = 50 where 5 is the no of stocks & P is the percent in one stock (< = 12.5%)

• Quality company: Post one bad quarter, the stock doesn’t fall 35%. It falls 3% and then the ROE kicks in, and they are back to normal in no time.

• Exit Strategies: If the ROE doesn’t fall below 20% (OR) the valuation gets stupid.
  When people are easily willing to invest in a theme, its probably time to sell.

• Gross margin: They “are surprisingly resilient and do not contribute meaningfully to fade rates.” High gross margins are the most important single factor of long-run performance. If gross margins are sticky and persistent, then a good turnaround candidate would be one with a high gross profit margin and a low operating margin. The latter is easier to fix than the former.

• Moats: Moats aren’t permanent. Some forms of moats are strong brand, switching costs, network effects, lowest cost, biggest in domain. There should be a clear sign of a moat — if it’s not clear, you probably are talking yourself into it— you may also want to find evidence of that moat in a firm’s financial statements. Specifically, the higher the gross margin relative to the competition, the better

• Good v/s Bad industries: Airline, Paper, Forestry, Gold mining are bad. However, the industry isn’t destiny and money can still be made in airline industry in may ways.
  Suggested approach: Make an industry map with all the allied sectors - take the end product → go forward and backward. Now, look for the area where the profit pool is

• Frauds prevention tips? Where there are no antelope, there are no lions.
  It’s better to deal with people who have had past successes, stay away from things that you don’t understand, avoid hot sectors (ex: biotech, social media etc)

• Avoid asset heavy: The ideal business during an inflationary time is one that can (a) raise prices easily and (b) doesn’t require investment in a lot of assets.

Some Quick Tips

• Great CEOs are nothing but great capital allocators or great investors
• Value per share is what counts, not overall size or growth
• Sometimes the best opportunity is holding your own stock.
• Market often seems bored with just about anything that isn’t tech, biotech, social media or Tesla.
• Investor going overseas was often simply swapping risks he could see for risks he couldn’t see.
• People tend to forecast a future that closely approximated the present. Reality is volatile.
• History Lesson: General markets tend to come back strongly in periods subsequent to price crashes! That was the case in 1932, 1937, 1962, 1974–75, 1980–82, 1987 and 2001–2002.
• The price of a stock varies inversely with the thickness of its research file.
• Not all holding companies are slow compounders. ex: Berkshire
• Extreme predictions are rarely right, but they’re the ones that make you the big money.
• You have to look for them instead of being satisfied with 5/10/20 baggers → then sit tight
  One YoY performance isn’t enough to judge and the 100 bagger journey will take 20–25 years.

Further reading

• Security Analysis by Benjamin Graham & Dodd → for security analysis / financial accounting.
• The Outsiders by William N. Thorndike → for in general investing
• The Little Book That Builds Wealth by Pat Dorsey
• A Zebra in Lion Country, published in 1997
• Contrarian Investment Strategies by David Dreman
• Building a Profession by Benjamin Graham
• The ego and his own