Some updates on PF:
- After thinking about it a bit, I have decided not to pursue coffee can investing because as discussed earlier, it’s very difficult to “shut it and forget it”. A lot of these companies were also available at a very high valuation which also makes holding them psychologically challenging.
- In the core PF, I have added Neuland after some research which can be found on their thread. I also added a little bit of Suven Pharma because both of them seem very different types of companies although both are primarily being driven by CRAMs. Would be interesting to see how it plays out.
- Another company I added a little bit and that I intend to build a position over time is Amara Raja. The opportunity size for Battery makers in India is simply huge (specially with the switch towards EV). Amara is the better of the 2 battery makers because it is more efficient and profitable.
- Another company i added is Vaibhav Global: A vertically integrated retail ecommerce platform that is largely into discounted jewellery. They have some serious operating leverage going for them. Their market share in their target markets (US, UK discounted jewellery) is 3% (up from 1.5% few years ago) versus market leader’s market share of 93%. Average revenue per household is 3$ versus 60$ for QVC. Vaibhav global’s next leg of growth is being driven by their digital businesses (website, app, other platforms like Amazon). The valuation is a little outside my comfort zone, which is why I will look to build a position over time.
- I realize it is extremely difficult to hold a concentrated PF of stocks. This is especially difficult for beginners, and also difficult as the PF size increases. I also think it might be better to hold more stocks towards the beginning of a PF’s life cycle because that enables me to track the large set closely, and consolidate over time, as the distribution of my conviction changes. Number of stocks in Core PF is now 17 (including Vaibhav, amara, Neuland and Suven).
- I still want to keep a diversified investing style (specially given the inherent risks of investing in Microcap stocks). I have decided to diversify into dividend investing. This style has always seemed very attractive to me. A regular royalty + growth of capital is a deadly combo. Even if the dividend yield is only 5% today, as long as I believe the company can grow dividends at 10% PA, this is an attractive opportunity given that typically inflation has been 5-6% in India. As a part of this, I have bought heidelberg cement, ITC, National Aluminium Company, GAIL, Bajaj Auto, Powergrid.
- The lot size for Chemcrux is changing to 500 soon (yay!). I hold 2000 shares right now. I intend to at least half the position size to control for risk of owning an illiquid microcap. Chemcrux is now roughly 25% of my PF. This is an uncomfortably large position size.
- I am very interested in Shilpa Medicare and am reading about it a lot since last few days. The company has been investing into Biologics (both biosimilars and NBEs) since the last 4-5 years and consistently diversifying revenue away from oncology APIs while also forward integrating into formulations. This makes shilpa a difficult company to understand. While it is somewhat richly valued as per EV/Revenue, but if the biologics molecules fructify in the next 5-6 years, then Shilpa’s fundamentals will definitely see a quantum jump due to the market size of the molecules involved. At same time, I do not want my PF to be overly diversified into Pharma Stocks. I’m also actively considering which pharma stock to sell, if I do decide to own Shilpa.
- I think of PF construction as some form of gradient ascent. As we learn more about the stock market, PF churn is inevitable. However, after sufficient amount of time (acquiring knowledge), the churn should reduce down to 0. I consider most of my investing to have started around April/May. I fully expect some PF churn at least for another 6 months as I learn more and more about the specific companies and am able to find better opportunities than current PF stocks.