Rohan's Portfolio inspired from coffee can investing

Q&A: Questions & Answers Portfolio Q&A
1

Hi Everybody

Firstly I would like to thank @Donald Sir for Valuepickr and enabling new investors like me in getting accurate analysis and in building the correct though the process from the very start.

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I am sharing my portfolio and selection process below. Would love to know the opinions of more experienced investors in this community. I am sure that I would have missed some facts, so it’ll be great if you could add something to the collective knowledge. Thank you :slight_smile:

Assume equal allocation in the portfolio for each stock.

Step 1 - Separate the wheat from the chaff

I used screener.in (Thank you @pratyushmittal Sir and @ayushmit Sir for the tool :slight_smile: ) and ran the following query.

Market Capitalization > 20000 AND
Average return on capital employed 10Years > 15 AND
Sales growth 10Years > 10

This query gave me large-cap stocks that already have sales growth of 10% per annum and ROCE of more than 15%. I used a separate analysis for financial sector stocks.

Step 2 - Choose the market leaders with a strong vision and proven business models.

I researched quite a few companies from the above list. Checked their management quality, trends of institutional ownership (smart money from FII and DII) and future prospects of the industry as a whole.

Step 3 - My final portfolio (Total 11 stocks)

  1. Ipca Labs - Strong brand presence in the north. Strong sales. The highest growth among all pharma manufacturing companies.
  2. Divi’s Laboratories - Strong placement in the API business. Anti-China sentiment might be positive here. Consistently increasing sales.
  3. HDFC Bank - Strong loan growth. Lowest NPA’s. Lowest moratoriums. Very strong management. Largest credit card player (so skipping investing in SBICard here)
  4. Reliance Industries - Strategic fundraising. Tailwinds for the Aramco deal. Strong brand penetration. Strong potential for retail business. Gradual exit from oil and gas.
  5. Muthoot Finance - healthy LTV ratios. Rising trust in gold. A trusted brand in gold loan segment. Rising loan book.
  6. Infosys - Weakening rupee. Decent dividend. Strong revenue pipeline.digital transformation led growth and new deals. Vanguard Deal.
  7. Bajaj Finserv - wanted best of both worlds. Indirect investment in Baj Finance and Allianz and did not want exposure to the Auto sector so skipped Baj Holdings.
  8. PI Industries - longshot AgriTech boom. Rising adoption for Agri chem. Largest distributor network among peers. Affordable product pricing and brand trust. Patent and decent export.
  9. Berger Paints - Building material sector is promising. Better pricing. Market share strong in T-2 and T-3 cities.
  10. Britannia Industries - Promised Capex in the medium term indicating confidence. Strong management. No1 brand for biscuits and cake resonating with strong sales. Decent dividend
  11. Indraprastha Gas - new expansion plans. Regulatory push with exclusive rights to operate. Maybe can charge for pipeline network access in future. Increasing sales and shift to pipeline-based gas.
5 Likes
3

Hi Rohan,
thanks for sharing your coffee can inspired portfolio. This is very useful. I had a few different questions for you:

  1. Do you invest equal amounts in all companies or do you practice some sort of position sizing according to some strategy?
  2. Can you also please share the purpose of your portfolio, in the sense that what goals do you want to achieve with the portfolio that you are constructing?
  3. Is there a criteria under which you sell a portfolio stock?

All the best with the portfolio!

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Hi Rohan,

Assuming that your portfolio is aimed at long term investment (5-10 years), a few questions to get your thought on following points:

  • Any reason for picking Berger paints over Asian Paints?
  • Is it better to have Alkem as part of your pharma companies compared to Ipca labs? better ROE and lower PE
  • How did ITC and HUL fare in your analysis for Consumption/ FMCG companies compared to Britannia?

Cheers,
Yash

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Hi @sahil_vi

Answering your queries in the order -

  1. Each stock has the same weightage in the portfolio. Every month I set aside 30k-35k and I equally divide this amount among all of them. Yes owing to different market price there is an approximation and this I why I have a 30K-35K range.

  2. Long term wealth creation - Can call it retirement/goal-based or whatever but I’ll hold this long term with the hope of wealth creation.

  3. Yes. Reasons would be stock specific like NPA for banks or maybe management issues but on a general sense consistent underperformance is can be one reason so I actively track the companies. Other reason can be government regulations that hinder the long term growth, so in such events, I analyse the market again and see what’s the best way forward. There’s is no point in becoming blind for 10 years for the sake of long term investing. Also, I don’t prefer churn and paying STCG/LTCG unless there is a very strong reason therefore I shall stick to the portfolio.

Regards
Rohan

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Hi @ch.yash

Yes, the assumption is correct. This a long term portfolio. Answering your queries in the order.

  1. I think that Berger will be less impacted from Covid due to smaller presence in T1 cities (which are affected the most) compared to Asian Paints. Berger has a strong footing in the T2 and T3 cities so revival would be better. Also Berger is foraying into the personal hygiene business of masks and sanitizers. Berger has a stronger sales growth rate than asian paints.

  2. Alkem does not qualify the Sales and ROCE filters as per Coffee Can approach in the very first place. Ipca has better margins and pricing than Alkem. IMO Ipca can be a consistent compounder and I am not very confident about Alkem on the same. ROE and PE are favourable figures but I again would like to go with IPCA due the consistent fundamental strength and continuous outperformance.

  3. What I think is that not all FMCG companies are the same. Every FMCG company has its own story. Think Nestle has Maggi, Reckitt Bannister has Dettol, Britannia has Gooday, ITC has tobacco. We can’t really compare them since they operate in different segments. I am invested in Britannia’s story.

Regards
Rohan

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Hello @Rohan2433 ,

Could you please provide an update on your portfolio- Have you added any other stocks apart from the mentioned 11?

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Kudos for this clarity. many investors get this bit late or never get it and keep avoiding quality FMCG on pretext of valuations, margins etc. Beauty of FMCG in India is you get value or dividend or growth stocks in different companies and most run by decent managements…you can pick your own ones as per comfort levels and evolution as an investor…