Priyank's Portfolio

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

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

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.

3 Likes

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

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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.

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.

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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

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.

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
6 Likes

SEPTEMBER EOM UPDATE

SUMMARY

  • Added Shyam Metalliks while exiting Sparc/Vindya/RACL/FDC/Kovai
  • No of holdings now stand at 22 (including MF)
  • Avg MarketCap to Sales (for direct equity): 2.8
  • Net uptick: 25.81%
  • During the month some equities/bonds were getting sold at very low prices so I took entries with a short-term POV. However, have exited them now with some profit (ex: GS2052, AllCargo etc)

ALLOCATION

MCap/Sales Names Invested % Net Returns FPD > 1
PPFAS🔒 20.33% 20.60% Yes
0.98 Godrej Agrovet🔒 8.68% 6.36%
1.51 Triveni Engg 6.95% 38.06%
0.70 BCL Industries 5.76% 11.29%
1.46 Exide Industries 5.25% 1.23%
2.25 Sansera Engineering🔒 5.02% 22.65%
7.23 Ami Organics 4.78% 8.18%
2.15 Gokaldas (GOKEK) 4.57% 103.58%
2.72 Greenpanel🔒 4.49% 4.30% Yes
3.12 Max India Ltd🔒 4.34% 18.41%
3.00 Lupin 3.80% 33.80%
12.20 M.K.Ventures🔒 3.51% 5.82%
0.72 TATA Motors - DVR 3.46% 7.00%
5.19 Borosil Renewables 3.38% -11.75%
2.18 L&T 3.25% 148.56% Yes
2.89 Shyam Metallics 2.77% 0.08%
2.31 TIIL🔒 2.75% 59.94%
3.69 Ion Exchange 2.56% 73.04% Yes
0.63 Cosmo First🔒 1.80% 2.83%
1.14 MMP Industries 1.18% 78.79%
5.36 Niyogin Fintech 1.01% -11.38%
2.07 Banka Bioloo 0.37% 4.43%
  • FPD>1: First purchase date was 365 days ago. May have added more / sold some at a later time

  • SHYAM METALICS: Needs a detailed post - will write later. (over the weekend hopefully)

  • RACL Geartech
    Exited somewhere between 60% to 80% uptick (it was insignificant so didn’t care to remember). Bet size was getting insignificant with time (not comfortable adding at this valuation). Secondly, at 4 times Market Cap to Sales, chances of valuation re-rating were low (for comparison, Sansera is 2.2 times).

  • FDC (< 1year)
    Exited at around 15% percent uptick. The re-rating could have limited upside from here onwards.

  • Vindhya Telelinks / Sparc Electrex
    Bought them to study since they looked interesting - but - too many unknowns and unable to put the needed time.

  • Kovai Medical
    Very consistently growing business but if I had to pay these valuations, why not target faster-growing companies? I still like this so maybe I’ll review at lower valuations.

Looking interesting: Private Banks, Natural Gas, Textiles, Water


Disclaimer: Views are personal and nothing I say is a recommendation. I often go wrong and may even change my views without informing anyone.

2 Likes

Hi @ChotuKatappa Thanks for sharing your portfolio and the rationale behind the stocks. Did you get a chance to write about Shyam Metalics? I know its a recently listed company and i went through screener to check some of the basic things.

Found that profits and OPM% has got huge variations in last 3 years. What made you interested in the company?

Regards,
Suhag

Hello

I dont intend to criticize but this approach seems to be more academic and more suited to a storied Uniiversity Professor who wants to convince his students he has theory with all postulates and assumptions adding up…

I prefer a little more free flowing with focus on understanding the business and understandin g management better( they have bigger stake in the Business after all) and som etimes try to understand if there is a big trigger ( positive or negative ) which will impact the business. Believe me , this can be very cerebral and does not align itself to rules or framework.
About large caps it is a misconception that large caps dont give good returns , their returns are linked to risk in the business and cyclicality in business, These companies do benefit from the big economic trends affecting the country and these companies dont face existential challenge when economy slows down. So you take your pick …

Thanks for listening

Malolan R

Hi @suhagpatel

The business is quite cyclical and the margins are unlikely to be consistent. My understanding is that this cyclicality should reduce over the next few years. I haven’t been able to find time to document the thesis - broadly it revolves around the following points:

Expectations

  1. Capex: The company has been investing in massive capex / backward integration. I like how most of this comes through the cash generated/non-debt. Here’s what happened in FY22

Here’s what happened in FY23:

This ppt would give a better idea of where’s this capex is going. Is the management skilled enough to use this capacity? If things turn out as per my expectations, it could drive higher profitability.

I also find it interesting how the company has been trying to diversify different segments such as aluminum foils (~EV battery) - I believe they have a collaboration with Achenbach - but that’s a different story. [Source]

  1. Debt: High debt is something that always has made me avoid steel companies. However, Shyam doesn’t have much debt at present. Management doesn’t look like they’ll go crazy over here which makes me interested.

Valuation

I would have preferred to enter at a lower price. At these valuations, I’m okay (okay not excited):

  • a) Ideally one may want to look at EV/EBITDA. However, for me, MCap to Sales has worked much better so I do prefer it.
  • b) Company recently had a successful OFS at 411
    (2 years since IPO - I did ask why would the company be valued at approx listing price?).

Management

Looking at the team, one might feel good about corporate governance. I have mixed opinions. However, the management broadly has been consistent with their words so I got intrigued. Here's what the management claims/expects:

There are things I do not like about this investment:

  • Investing in companies where timing is crucial, isn’t something that I prefer. I do not think i’ll hold this stock for the long term. Management commentary proved my understanding here. Let’s see how the plan goes.

  • I still haven’t completely analyzed through their pre-IPO journey which is a serious risk on this investment.

  • A lot of unanticipated things can go wrong in such business

This is all I could write due to time constraints. In my opinion, before analyzing this business, one may want to look at GPIL.

I hope I was able to give you a direction.


Disclaimer: Invested and biased. Not a buy/sell recommendation. I am often wrong and change my views. Further, I may buy/sell stocks without informing anyone.

1 Like

Hi @Malolan_R, I am quite open to criticism so feel free to add.

Can you please elaborate on your understanding of my approach?

“good” here is relative so I will not comment on it. But, I do not think I have ever said that large caps do not give returns. I try to avoid stocks that are being chased/covered by every analyst as the chances of valuation re-rating are often low. This is higher for large caps as compared to small/mid caps.

Secondly, large caps are all about providing stability to the portfolio by protecting the downside.
My thought has always been - “If I have to protect the downside, I would rather hold it through a fund that doesn’t have large drawdowns while beating the large-cap index”

Once in a while, a large cap may offer good risk-to-reward, at which time, I do evaluate the opportunity.
Ex: Invested in TATA motors / L&T

What happen to your VA Wabag holding? You sais, you added it, as it was a better option for you, considering the risk vs rewards.
Then suddenly it was gone from your portfolio w/o mentioning anything about the exist. What made you to exist this stock? I think its still a good opportunity and it is one of my highest allocation.
Would like to know your view if you don’t mind.
Thanks much.

@satyajitpatra2005 -

Why I liked Wabag

Valuation seemed quite favorable. Further, the probability of a significant downside was on the lower side (not zero though).

Why I don't like Wabag

I do not see it as a long-term stock and wouldn't like to hold it during a down cycle. Here's why:

There are usually 2 reasons for undervaluation when a stock is undervalued (there can be other reasons too but for the sake of this discussion I’ll focus on the following):

  1. Concerns at an industry/sector level: everyone performs poor
  2. Concerns about a particular stock: a specific company performs poorly while peers are doing okay

If it’s the first one, often management can’t be singled out.
If it’s the second reason then I like to be cautious. In the case of Wabag, I have concerns about the management’s decision-making and vision during the last down cycle. I think the comparison below expresses what I mean:

I was getting into Wabag with a rationale to exit in 2-3 years. Midway, I realized that I’ll not be able to exit in time due to personal commitments. So, I decided to stick with Ion Ex.

My complete set of actions was: Bought Wabag → Sold Wabag → Add Ion Ex. (Last addition on 09/08/23) .


Disclaimer: I am not a SEBI registered advisor or analyst. This is my personal view and not a recommendation. I am often wrong and do change my views without being able to inform anyone.

2 Likes

I like your way of seing companies. Could you elaborate what concerns you had about management decisions like which decisions etc and also which lack of vision?

Thanks

Yes … I am ex L & T so I may be biased . Its only after 10 plus years market is realizing the worth of L & T …

About large caps many large caps benefit from the growing economy … we need to compare with equivalent listed companies in same industry in developed markets …

Malolan

Malolan…

Hello

Whats the thesis behind 5% in Greenpanel. MDF usage is struggling in India . and companies need to deal with lower priced imports from Middle East or East or SE Asia ??
Even current valuation dosent reflect this downside

Malolan

Difficult to answer since there is no direct statement that I can quote but let me try.

Before covid, they had a goal of 1 billion euro. From being the top player in water purification to changing its EPC business model, management has set multiple targets in the past. I do not see them achieving most of them. When I go back to the 2016 - 2020 period and compare peers, I see much better ambitions/actions. For example: Thermax diversified their business during the period while Wabag was sleeping.

Money is made for an investor when either the company becomes the leader in one industry OR, the company expands in different industries until it becomes a leader in one. I do not see Wabag doing any of this in the near future (mid-term).

In other words, having a big dream, working on it, and finally achieving it are three different things. I do not see Wabag doing enough for the first two itself.

1 Like