Ronak's Portfolio - building it slowly

[ChalakPadiku]

A bit of back ground to start with :

Starting in Stock market (year 2015-2018)

I have bought my first share ICICI bank on 23Mar2015 followed by Infosys. At that time both the stocks moving very slow and when you have entered the market your expectations were quite unrealistic as well. So, then I had bought the stocks based on tips from my uncle, friends, CNBC. As during this period midcap and small cap were doing well, I usually buy the stock and sell it once I have profit around 30%. I did not care to look into balance sheet, management or anything else. I wasn’t aware about the market cap of the stock at that time.

Stocks traded during this time : Motherson sumi, Sona koyo, Texmaco rail, Sical logistic, Upper ganges, Aksh optifibre, Bhansali enginnering, VIP Industries, Minda corp, Rico Auto, Capacite, Jamna Auto, Meghmani etc

Midcap correction period (Year 2018-2020)

Initially I have booked profit in the stock from above list but then after Jan 2018 , there were few stocks left in the portfolio and I kept averaging down in the hope that these were the prices to good to ignore. Stocks in the portfolio : Meghmani, Tata motors DVR, Capacite, Hikal, HUDCO, Motherson Sumi, Srikalahasthi pipes, Gabriel etc. Most of these stocks were down more than 50%

Covid time (2020-Present)

From around 2019, I have started reading books One up wall street, common stocks uncommon profits, The little book of behavioural investing, Fooled by randomness, Dhandho, Value investing – Parag Parikh. Though I did not have an immediate impact of reading these books but somehow, it helped me to get the direction in investing. “5 rules of successful investing”(Thanks to @hitesh2710 sir) , “The most important thing” have the most impact on me.

Though midcaps have returned back in favor after 2020, but I had decided to sell them even in loss and enter in stocks where I have the maximum conviction. Because during this journey I did have some good stocks as well but I sold them with 20-30% movement because I did not have the conviction in them.

My Investing style:

Over years, I have realized what suits me. The market works in cycle, before 2018 small/midcap were firing then we had a period where quality stocks took over and in last 2 years again small/mid cap rallies. So, it is important that you stick to your style of investing. Investing is all about probability, it is very difficult for me to spot the winners early, identify the turn around story.
I would like to focus on my career and family at the moment after marriage, so it will be difficult for me now to go through every concall, Annual reports of all the companies. So I would like to keep investing simple where I will keep investing in Index funds and in well known companies when they are out of favor. My expectation is to earn ~15% but with minimum volatility.
TCS/Reliance has market cap of more than 10 lakh crore and many will join them in the list going forward, so I would like to buy established companies in the industry where it can keep growing. My preference is mostly companies in B2C segment, so I can judge the company as a customer as well. Few things I look while buying business :

• Decent growth in sales/profit
• Low debt
• Consistent ROCE/ROE>=15
• Consistent high Margin
• Positive Cash flow

Current Portfolio :

Apart from above I have significant stake in CSK through unlisted market, I have bought it during Covid times where it was available at around 2.5K crore market cap and I feel IPL can be really big similarly what we see in UK/US sports league.

Note : I know still the portfolio is not balanced, but I have started to build it from last year and I am not finding enough opportunity to add at the moment and that’s why as can be seen in above table, still 73% of the money is either in cash or Debt mutual fund. Equity mutual fund is my monthly SIP in Nifty 50 Index fund, Nifty next 50 index fund, Parag Parikh fund.

I would like this forum to keep building my portfolio over time.

And lastly thanks Valuepickr forum, @hitesh2710 sir, @pratyushmittal sir for Screener (the best ever tool), @ranvir (really like your thought process), @Worldlywiseinvestors (for all your content) , @basumallick, @zygo23554

[ram1984]

Just a thought. Big bets are in safe nifty stocks, so why not index Or any good mf? Your PF will in any case move in tandem with index

[akash_das]

@ChalakPadiku

CSK through unlisted market

Can you tell the process of buying in unlisted markets?
Please share your analysis of CSK and IPL industry. I am invested in LSG through RPSG Ventures.

[Mudit.Kushalvardhan]

When you hold nifty stocks in individual capacity, you can hold them longer and sizing can be as per your wish and conviction. But in Nifty Index fund, index management committee , keep on adding new stocks and removing old stocks on the basis of momentum of that stocks, trading quantity etc. and weightage also can be depending on such trading criteria. Recently , I think they added PayTm, zomato and Nyka…which given a chance , I will never buy, as I consider these stocks inferior companies. hence I think, long term performance of Index Fund and Index stocks held in individual DMAT account can be very different. This is just my personal opinion…I have not studied any past data to support my personal opinion and hence I can be 100% wrong.
Disc… I hold Index funds as well as index stocks in private Dmat account

[ChalakPadiku]

My overall strategy is divided in 2 parts.

1. keep investing in Index as big companies will get bigger with time and I invest through SIP route so that unlike direct investing, I will not wait for the correction and I keep on investing
2. Direct investing as I described above

Now at the moment there is an overlap between 2 because I have recently started building the portfolio and at the moment there are better opportunities in large cap compared to Mid/Small cap, but that doesn’t mean that I won’t invest in them.

To get the sense at very high level, I used to look at the below table and as we can see Nifty50 under performed in FY2020 & 2021, hence I am focusing at the large cap.
Using this similar strategy I have invested in small cap mutual funds until mid of 2020 and booked all the profit by end of 2021 as that bet was for medium term.

[ChalakPadiku]

Actually, I wasn’t actively looking to invest in unlisted space. My friend knew some broker and offered me to invest in CSK.
It was very simple decision for me at that time when available at 2.5K crore market cap, I have not done any in depth analysis on IPL but rational from me to keep invested in CSK :

• I have seen the kind of fan following for FC in UK and in India it is just the beginning, with time their brand will become stronger
• RPG bought Lucknow at 7K crore and expect it to reach around 10K in 3-4 years time
• Recently CSK partners with ICICI bank for the credit card and in future they will leverage their brand through different routes

[Mudit.Kushalvardhan]

Out of 17 years, Nifty 50 and Nifty Next 50 are ranked first 11 times…That is 65 %…so we can stay invested in these 2 indexes and still be 1st winner in 65% times…No need to take risk in small or midcap also

[ChalakPadiku]

Hi,
I like following Saurabh Mukherjea but one thing that always bugs me is the valuation of the companies in his portfolio.
At one end we all have example of Infosys and Wipro after dot com bubble where due to high starting point in valuation the return for next decade was almost null, and at the other end we know companies like Asian paint and Visa which keep on growing and getting expensive over time.
We have an argument that starting valuation matters and the counter argument is that we rarely get good companies cheaper and valuation gap will always be there between high/low quality companies.
Honestly right now I want to focus more on my career and family and I have a long way to go so I can afford to be wrong on valuation side rather than quality side, I am more comfortable with firms grows slowly but consistently over time rather than fast movers on both side. Building position slowly helps my style of investing.
Coming back to valuation side, I believe that over long time price and pat growth percentage will be in sync. So by keeping that in mind and let’s say I want 15% return over next 5-7 years, can’t we just focus on expected EPS vs PE
Few examples on how I think

1. LTTS : To get 15% over 5 year means stock roughly has to double in price.
   Current price : 3,122, Current EPS : 90.71
   Expected return 15% over 5 years
   FV : Future value(price) of stock should be more than: 6,279
   The boxes in green represents the scenarios which will give me this return.
   For example: Company needs to grow ~30% and PE should be more than 20 after 5 years or if company manage to grow at 15% then PE should be more than 35

Then I look at their historical performance to get the idea of growth

2. Finolex Industries :

As I stated earlier it is very difficult for me to invest in cyclicals or to find turn around stories. I would like to invest in proven companies which are currently ignored in the market but at the same time just because of cheap valuation don’t want to get trapped by holding past winners. I don’t want to complicate things too much.
I usually look company using 3 parameters : Quality, Growth and Valuation
From valuation point of view , is this approach too simplistic do I need to consider few more things?
Would really like to know thoughts @hitesh2710 sir, @basumallick sir, @zygo23554

Note : Not invested in above companies and investment period of 5 years is for illustrative purpose, like to hold companies till I have conviction in it.

[ishu]

This analysis is impressive but I am having a hard time understanding the whole table of PE growth. Can you please elaborate? It would be really helpful.

[ChalakPadiku]

Hi,

if we assume that only 2 parameters drive the price ‘PE’ and ‘earning’.

So in column we have a range of PE starting from 10 upto 100 and in row earning growth from 5% upto 30%.

In the 2nd table, at the top we have assumed the expected returns of 15% for 5 years, so the price should be 280 rs.

The table highlights all the scenarios where you can achieve this return. So in case of Finolex table you won’t achieve 15% in 5 years if PE is <10 and growth for 5 years <10, in all other scenarios you have probability to achieve this return, but in case of LTTS you have to have higher growth or higher PE to achieve this.

Again the table just has to be used as an indicator as to what are the odds to achieve the expected returns.

[ChalakPadiku]

Update on Portfolio:

Based on above tables, last year I have focused on large caps as small and Mid caps were outperforming in CY 2020-2021.

Portfolio weightage:

Stock	18%
Equity MF	11%
Debt MF	23%
FD	5%
Gold	8%
Cash	22%
Other	13%

Still lower proportion in equity (~29%), I need some money in next 2 years hence parked large amount in debt fund and in cash as I am still not finding many opportunities in the market where I feel comfortable. But since I have achieved my target, I can move more incremental money into equity now. So I have increased my monthly SIP as I don’t need this money in short term.

MF Portfolio:

Still focusing on index fund in MF portfolio but added basket of small cap funds.

The distribution is large cap 60%, Mid cap 20% & Small cap 20%.

Equity portfolio:

No major changes since last time, still portfolio dominated by ITC,TCS, Insurance and banking stocks. ITC, Rites and Cochin outperformed while other stocks have minimum movement so no significant movement in either direction in portfolio.

New position added:

Sundaram finance, Muthoot Finance in addition to the Kotak, HDFC as these are trading lower than their historic valuation and I like the management based on their track records.

Added PSUs like Gail, GSPL and REC as I need to park some money where MOS is higher and at the same time div yield is attractive as well.

Sr No	Ticker	Inv Price	Allocation
1	NSE:ITC	206	20%
2	NSE:HDFCLIFE	566	9%
3	NSE:ICICIGI	1,292	9%
4	NSE:HDFC	2,278	7%
5	NSE:TCS	3,903	5%
6	NSE:HDFCAMC	2,242	5%
7	NSE:COCHINSHIP	451	4%
8	NSE:LALPATHLAB	2,688	4%
9	NSE:GAIL	88	4%
10	NSE:RECLTD	100	4%
11	NSE:IOC	77	4%
12	NSE:RITES	250	3%
13	NSE:ICICIBANK	724	3%
14	NSE:GSPL	239	3%
15	NSE:MUTHOOTFIN	1,040	3%
16	NSE:SYNGENE	562	2%
17	NSE:AJANTPHARM	1,198	2%
18	NSE:KOTAKBANK	1,755	2%
19	NSE:SUNDARMFIN	2,048	1%
20	Other		5%

Below image summarize the portfolio:

Few names missing in the above allocation table as it is very small part of the portfolio.

I like to build position slowly so the one in light yellow, I keep on adding and meanwhile there might be many position where I keep on booking profits time to time.

[Investor_No_1]

@ChalakPadiku

Based on above tables, last year I have focused on large caps

Liked your focussed yet simple strategy and way you are following it.

@ChalakPadiku

I need some money in next 2 years hence parked large amount in debt fund and in cash as I am still not finding many opportunities in the market where I feel comfortable. But since I have achieved my target,

Shows tremendous financial discipline. The fact you achieved your cash target two years in advance and are still conservative about it speaks of your temperament and style.

@ChalakPadiku

|Stock|18%|

|Equity MF|11%|
|Debt MF|23%|
|FD|5%|
|Gold|8%|
|Cash|22%|
|Other|13%|

How do you invest in gold? ETF or any other means?

Other is significant 13%. What is part of other?

[ChalakPadiku]

Thanks @Investor_No_1 , been following you on Valuepickr since long and loved your views.
Gold is largely through ‘sovereign gold bond’.
Actually you can ignore that 13%, I like to see investment as whole and hence for now combined them under ‘Other’. These are investment in PPF and NPS for retirement purpose and to save taxes.

[ChalakPadiku]

Update on Portfolio:

Midcap is outperforming the market and doing well since last 4 years.

Through Mutual fund I am heavily invested in large caps and my portfolio is heavily tilted towards Large cap as well. So I am planning to shift my portfolio towards Mid and Small cap, though individual stocks seen correction but still not comfortable to add those in portfolio.

Portfolio Weightage:

Increased weightage in equity through direct investment and increasing SIPs in mutual fund as I have parked my short term required money into Debt MF for now.

Going forward I’ll add all the incremental money into equity and will add more in case of any correction.

MF Portfolio:

No change in MF portfolio and the distribution is large cap 60%, Mid cap 20% & Small cap 20%.

Equity Portfolio:

No major change in core portfolio.

The idea is to hold ~15 stocks from finance, Insurance, AMC, QSR, IT and FMCG space as I am more comfortable holding B2C businesses and these stocks have a long runaway which gives me enough time to accumulate on monthly basis.

And then hold 7-8 stocks from Mid-Small cap which are steady in nature and preferable have Mcap from 7k-25K.

New position Added:

CDSL – ~10k Mcap company, duopoly, performance is linked to market but over long term market will go higher, can be steady performance if we add the market performance and potential dividend over years.
In terms of risk, regulatory risk is there

TTKPrestige - ~10k Mcap company, strong promotor with high % of holdings, consistent in terms of margin and ROCE over years. Leader in the segment and constantly come up with new products. Growth is a bit on lower side and competition is tough but can be safe bet in terms of generating steady return over long term

NAM-India – Betting on finance theme and this is an addition with my HDFC AMC holdings. It’s more of a bucket approach here. ~12k Mcap at the time of entry, very high margin business, long runaway, Nippon as promotor with high holding so float will be very low (~181K retail holders only). And very high dividend paying, so again on same theme some increase in earning and dividend, expecting steady decent return over long term. In terms of risk, competition is very high and regulatory changes in terms of TER.

Jyothy Lab - ~8k Mcap firm, liked the way they have build their brands. Lot of D2C brands coming in but they are facing issues in terms of scale. Jyothy has built it slowly and growth in all categories except HI is very good. Strong balance sheet, consistent in terms of margin and ROCE. Removed pledge shares. Available at reasonable valuations.
Risk: white label brands from large retailers, operating in categories where people usually buy cheap options. Penetration of these products are high. Involvement of many family members in the business which can be problematic in long term.

RBA - ~5k Mcap, betting on QSR theme, good brand recall and available at <$1Bn Mcap, though still a loss making but it is part of bucket approach for QSR theme along with Devyani

Apcotex - ~2.5k Mcap , very good promotor, steady growth and consistent on various parameters. Going through problem from business prospective so accumulating slowly during this time

Bajaj Finserv – Part of Finance theme. Getting NBFC, Insurance, AMC (in future), strong management, although it’s a holding company so discount will be there all the time and not expecting super returns from this. Added few when price went below 1300

Exited:

Cochin Shipyard,Gail,IOC,Rites,GSPL,Ajanta Pharma – booked profit in all these counters and some others in between. Reason is I don’t have strong understanding about these businesses and added all those based on valuation and dividend capabilities earlier. Some of these looked strong on charts but as part of restructuring I want to get out of the opportunity bets and want to increase stake of my core portfolio

ICICI Bank – I have enough finance related stocks, so just concentrating on existing one and booked profit in ICICI.

In watchlist:

Want to add few more stocks from IT and FMCG such as LTIM, Tata consumer but not comfortable with valuation at the moment.

In Mid/Small cap : Shaily engineering, Carysil, HIL, Apollo Pipes, Indigo paint, Latentview, Aavas, V-Guard

Sr No	Ticker	Inv Price	Allocation
1	NSE:ITC	206	20%
2	NSE:HDFCLIFE	545	13%
3	NSE:ICICIGI	1,218	13%
4	NSE:HDFCAMC	2,018	8%
5	NSE:KOTAKBANK	1,785	6%
6	NSE:HDFC	2,278	6%
7	NSE:RECLTD	100	4%
8	NSE:LALPATHLAB	2,638	4%
9	NSE:MUTHOOTFIN	1,017	4%
10	NSE:TCS	3,903	4%
11	NSE:CDSL	1,026	3%
12	NSE:BAJAJFINSV	1,321	3%
13	NSE:SYNGENE	562	2%
14	NSE:NAM-INDIA	224	2%
15	NSE:SUNDARMFIN	2,129	2%
16	NSE:TTKPRESTIG	735	2%
17	NSE:JYOTHYLAB	206	2%
18	NSE:APCOTEXIND	520	1%
19	NSE:RBA	108	1%
20	NSE:MCDOWELL-N	517	1%
21	NSE:CARTRADE	1,618	1%
22	NSE:UBL	918	0%
23	NSE:LTTS	3,034	0%
24	NSE:DEVYANI	153	0%

Still the allocation is not where I want to but as I stated earlier, building it slowly over long term. I will keep adding in above names whenever there will be any opportunity or in the counters where valuations are getting lower than their historical averages. And will sell Cartrade, REC and few other names to concentrate more into few stocks.

[Mudit.Kushalvardhan]

Nice portfolio.
What is your take on…
Investing Large cap and Midcap stocks in direct stocks holding and small cap through mutual funds?

[ChalakPadiku]

Honestly, I am in process of finding that out for me.
I am not convinced investing in Small cap MF as they usually hold more than 80 stocks, size of AUM matter and understanding of mutual fund manager. That’s the reason that I hold index funds or PPFAS (for their clear strategy)
But at the same time I do realize that my time horizon is very long so I need to increase exposure to mid/small cap.
Identified DSP/Kotak/HDFC small cap as basket approach to invest in small cap and in the process of adding more stocks in PF. But not convinced with the valuation (some very good points raised by Pankaj Tibrewal in the beginning on the small cap space Market All-Time High, What's Next | Pankaj Tibrewal | Sr. Fund Manager, Kotak Mutual Fund - YouTube)
I am doing SIP in above funds but will add lumpsum if there is some correction

[ChalakPadiku]

Thank you VP members for all the help and guidance through out the year.

All the index performing well this year. After 2011 , this is almost 12th year where nifty end the year on positive note. Midcap and Small cap leads the overall performance.

Category	Percentage
Stock	19%
Equity MF	16%
Debt MF	36%
FD	7%
Gold	3%
Cash	7%
Other	13%

I haven’t made any major changes in allocation, continuing my SIP and allocating additional funds to a Debt fund while increasing cash holdings.
This year I was focusing on consolidating everything be it MF or portfolio. Still not seeing too many opportunities in the market hence going slow but at the same time don’t want to sit outside completely as well.

MF Portfolio:

DSP launched quality small cap fund and at the same time Pankaj Tibrewal quits Kotak. So I have booked all the profits in small cap of Kotak, HDFC & DSP. Anyways I am more comfortable with index fund for long term so moved into DSP quality small cap fund

Equity Portfolio:

I exited positions where the allocation was too low or targets were achieved, reducing the number of stocks to only 11.

I made several exits, even in cases where conviction was high but allocation remained low. Other reasons for selling included reducing exposure in specific sectors, promoter groups, or due to high valuations. The stocks involved in these exits were Devyani, LTTS, UBL, USL, Apcotex, RBA, TTK Prestige, Syngene, Bajaj Finserv, TCS, Dr. Lal, and HDFC.

Make a lot of exits even though in some cases where conviction was high but allocation was low. Some other reasons are to decreasing allocation in sector or promotor group or valuation. Such names are Devyani, LTTS, UBL, USL, Apcotex, RBA, TTK Prestige, Syngene, Bajaj Finserv, TCS, Dr LAL, HDFC.

Although no major changes in core holdings, in fact increased position in those stocks.

Sr No	Ticker	Inv Price	Curr Price	Allocation
1	NSE:ITC	206	464	20%
2	NSE:HDFCLIFE	559	648	16%
3	NSE:ICICIGI	1,232	1,438	16%
4	NSE:HDFCAMC	2,018	3,203	12%
5	NSE:KOTAKBANK	1,787	1,920	11%
6	NSE:MUTHOOTFIN	1,017	1,490	5%
7	NSE:SUNDARMFIN	2,336	3,541	4%
8	NSE:NAM-INDIA	224	435	3%
9	NSE:CDSL	1,026	1,835	4%
10	NSE:JYOTHYLAB	206	483	4%
11	NSE:ARE&M	610	820	5%

I know that I am currently making a lot of changes but as I said, I am in learning phase. I am becoming more comfortable with certain type of businesses. Allocating 0-1% wasn’t yielding any rewards, even when I was right.
I like to add more mid caps stocks as these companies reached a certain scale and at the same time, they have long runaway for growth. But almost all the stocks in FMCG, IT, QSR, FMEG, new age sectors are currently trading at more than 60-70 PE, so not comfortable at the moment to add.
I will focus on large cap stocks for now and consider adding small/mid cap stocks when suitable opportunities arise.

[hardik_shah1]

Hey Ronak,

Just looked at your portfolio for the first time. Splendid thought process.

The portfolio is concentrated on overall financials. So why not diversify to metals, old age industrials, Pharma, FMCG etc.

I get that you believe FMCG is expensive, but with inflation moderate, or reducing, and corresponding decrease in Interest Rates expected through 2024, rural fmcg buying should pick up.

[ChalakPadiku]

Higher concentration in financials as I have started building the portfolio since last 2 years and it is the one sector which is giving some what valuation comfort.
While I have invested in Pharma, Chemical, and Industrial in the past (e.g., Ajanta Pharma, Eris, Cochin, Gail) based on balance sheet/valuation comfort, now my focus has been primarily on companies where I have a better understanding, particularly in B2C or IT-related businesses.
Regarding FMCG most of the companies trading at more than 60PE and single digit growth.
I know this can be tricky but I am still waiting for market to cool down a bit in Mid/small cap before adding more positions

[ChalakPadiku]

As I mentioned earlier, I want to streamline all my investment this year and am trying to decide my strategy going forward.

At one end, the theory is that large caps have not performed well, and Nifty PE is 23. But on the other end, it is true that Nifty has given positive return for 8 straight years, and major companies in Nifty are not trading at cheap valuation.

keeping aside the overall index, if we try to take very quick sense check across key sectors and market cap, it does not appear anywhere in range where we can feel confident to invest.

For example starting with IT, If we look at IT in various categories, none looks reasonable at these valuations.

Similar case for FMCG

In Building material even if we ignore Asian paint, Pidilite or Astral other stocks such as Cera, Hindware, Apollo pipes, HIL are trading at higher than historic valuations.
Similar case for the likes of Polycab, Havells or QSR companies
Diagnosis players are trading at more than 60 PE
Even if we look at some overlooked sector such as logistic, it’s hardly trading anything cheap.
Not going into EMS sector at all.

Hearing interview of Manish Sonthalia of Emkay investment on NDTV profit and he said that kalyan jewelers will do PAT of about 1000 cr in 2026 so at 70 PE, will have 70000 market cap. Marcellus buying Metro brands at 101 PE. This got me worried that we have become so comfortable with such high PE.

Now I know PE is not the only way to conclude anything but it does give the direction.
There can be space in the market where still value is there but it is not easily available. Now either I am looking at all the stocks where story has been identified and hence I find everything costly or this time is for industrials so time for B2B where I do not have any edge.

For all the success stories we hear in the market the summary really is that the starting valuation was low and that clearly is not the case. I would like to swing my bat but when there is free hit.

So for now I am just thinking to pause my investment , not booking any profit but wait for the time when I feel confident.

In watchlist (mid and small cap) : Devyani, Westlife, Bikaji, Affle, Latentview, Cera, Carysil, Apcotex, LaOpala, Syngene, Dr lal

Meanwhile, I will keep following @ranvir , @harsh.beria93, @Investor_No_1 , @hitesh2710 and other VP members for ideas