ValuePickr Forum

Sahil's Portfolio

Thanks for the post and introduction to the company.
How does it stand against Shanti gears? Shanti being more diversified though P/E is bit high

2 Likes

On a lighter note, Would it be ok if I called this the understatement of the year? :rofl:

Thanks, I have not studied Shanti gears before, following is based only from a screener comparison:

All in all, I would not be surprised if the Shanti gears bubble pops sometime in next 1 year. RACL (in my opinion) would get rerated once it reaches some scale (Ive covered above why I think it would reach some scale) and some institutions start covering it.

Shareholding for Shanti Gear:


Shareholding for RACL:

3 Likes

Adding it in the structured way for Neuland Labs. Will add others over time:

7 Likes

Adding a PF update after ~2 months:

Instrument Avg. cost LTP Net chg. % Allocation % of PF Type
IDFCFIRSTB 25.71 37.25 44.87 0.096 0.109 Core
ASTEC 1033.77 1267.75 22.63 0.087 0.084 Core
RACLGEAR 86.55 145.6 68.22 0.062 0.082 Core
CHEMCRUX 181.5 245 34.99 0.075 0.08 Core
NEULANDLAB 1110.08 1144.15 3.07 0.091 0.074 Core
VAIBHAVGBL 1938.48 2294.6 18.37 0.069 0.064 Core
NCC 29.1 59.7 105.13 0.036 0.059 Core
POLYMED 385.04 525 36.35 0.05 0.054 Core
LAURUSLABS 277.4 349.3 25.92 0.052 0.051 Core
AXTEL 228.21 225 -1.41 0.064 0.05 Core
APOLLOTRI 734.55 852.5 16.06 0.045 0.041 Core
SEQUENT 154.07 171.35 11.21 0.041 0.036 Core
MASFIN 834.6 939.95 12.62 0.034 0.03 Core
SANDUMA 676.59 1060 56.67 0.019 0.024 Core
ITC 178.04 212.3 19.25 0.033 0.031 Dividend
GOLDBEES 44.62 43.64 -2.19 0.037 0.028 Hedge
NATIONALUM 33.08 42.3 27.86 0.016 0.016 Dividend
NMDC 84.64 116.3 37.4 0.014 0.015 Dividend
HEIDELBERG 187.88 219.05 16.59 0.014 0.012 Dividend
POWERGRID 164.18 190.45 16 0.013 0.012 Dividend
RITES 256.64 268.5 4.62 0.011 0.009 Dividend
BAJAJ-AUTO 2948.76 3432.1 16.39 0.009 0.009 Dividend
AGIIL 56.01 60.9 8.73 0.009 0.008 Exploratory
TITANBIO 127.45 147.15 15.46 0.007 0.007 Exploratory
NEOGEN 733.95 745 1.51 0.003 0.002 Exploratory

Total realized+unrealized profits (only for Core PF): 40%
Note that my capital deployed has gone up 4x compared to 1 year ago, so a lot of it has been deployed in the 2nd half of the year. I will only measure the total returns on capital deployed not the CAGR because it is too cumbersome to maintain a log of each and every buy/sell/capital deployment. I do hope that zerodha provides a CAGR facility soon.

Some Updates on the diffs:

  1. I’ve sold Alembic Pharma and replaced it with Sequent scientific + additional buying in Laurus Labs. In general, as per my earlier post, I’m always on the lookout for replacing PF companies with better quality companies and this is a step in that direction. Sequent is play on animal pharma and has characteristics of FMCG in terms of industry structure, level of consolidation, pricing of the end products and certainty of earnings. Recent promoter change to Carlyl will help Sequent move to the next orbit of growth, helping them enter China, US and companion animals. All significant opportunities. EBITDA margins are improving by 1.5-2% every year.
  2. KEI has been replaced with Apollo tricoat. Tricoat has a much better value addition proposition (including exclusive use of DFT and ILG technologies to create superior products) and with their Rs 2,000 chaukhats replacing Rs 6,000 and worse wooden chaukhats, this company in the structural steel section is expecting to grow at 30-50% in the next 3-4 years at least. I estimate their market share to be < 1% and hence they have a long growth runway in front of them.
  3. I found RACL to be quite under-valued and hence added a bunch there.
  4. RACL and NCC have moved to higher % of PF due to large price appreciation.
  5. Added Axtel industries. They make machines for FMCG companies to make their products. They are able to deliver European standard quality at Indian price (aided by better manufacturing and labor costs). Backed by a technocrat promoter and several years of long lasting client relationships, I consider the probability for complete loss of capital to be low. They are a primary supplier to all large FMCG companies (inside and outside india), and have barely scratched the surface in terms of the market share.
  6. Sold GAEL. In general I’ve come to observe that I like owning companies with small but growing market shares backed by some competitive advantages. GAEL does not fit the pattern, already holding 40% market share.
  7. Sold Sirca paints. The company has a lot of potential but are already a large player in their primary market. The wall paints play is more of a hope rather than a certainty IMO. I have studied Indigo paints well and intend to add it when it IPOs, unless the price is ridiculously high.
  8. Sold Rain industries. Bought Sandur manganese. It’s a very well run company which was very under-priced, not very levered and a purer play on commodity cycle turn around than RAIN.
  9. Given the ridiculous prices at which ITC was, I have increased that position after studying it a bit more.
  10. New companies that I intend to study are Neogen and Navin Fluorine. At some point, it can become difficult to ascertain between a company that I expect compound earnings at 25% and one where the compounding might be 30%. For this reason, unless there is a compelling reason to switch, I would like to stick to current companies and also maintain only 15-16 non-commodity core PF companies at most.

Disc: This is not a buy or sell recommendation. I am not a sebi registered advisor. Please consult your own advisor before investing.

17 Likes

@sahil_vi …good going… do you track deepak nitrite? If yes your reviews pls…

1 Like

You can use XIRR for calculating returns. You simply need to keep track of cashflows (transfers between your bank account and Zerodha account), and apply XIRR formulae in excel. Baically you are calculating return on money deployed in your trading account.

I personally feel this as practical and efficient way to calculate portfolio performance as you don’t have to track everyday buy/sell transactions. Let me know if you need any help there. Link below has the summary of my XIRR values, it don’t have the methodology though

2 Likes

I did check out the link but could not find an XIRR in that post. Maybe I am missing something.

I think automation is certainly possible since we have a complete tradebook including account pay-ins. Only trades which touch a certain whitelist of stock should count towards the PF returns. Im just too lazy to automate all of this (another way to put this is that I think i have better use for my time). The other thing is, what we feel/go through in real life is not XIRR IMO it is the total returns.
The pro for XIRR is it gives a % number which we can then compared to benchmark indices etc. But in reality IMO what we experience is the total returns. the XIRR number would be even larger in my case since a lot of capital was deployed very late (<6 months ago), but i also feel that we might be conflating 2 things here:

  1. Judging the stock picking skills
  2. Tracking how much wealth we are creating.

For 1. I would prefer to track companies fundamentals growth (sales, EPS CAGR), valuation gaps.
For 2. I would prefer to track total returns since that is the number that I experience in my real life. If i put in X lakh rupees and take out Y lakhs rupees, the Y-X is the wealth I created which is what I probably care about the most.

I did try to track XIRR at some point but it was quite cumbersome, this is because i do keep buying more and more stocks in small quantities every week, sometimes multiple times a week. For someone that buys stocks once a quarter, XIRR is much easier IMO. Please do share your XIRR excel whenever you can. I will give it a second shot. The best thing would be a utility where i could upload a bunch of zerodha excel sheets to and which would spit out the XIRR number. :slight_smile: Maybe ill try pestering zerodha to do this for me.

Thanks for the kind words. I have read a bit about Deepak nitrite. A lot of their margin expansions come from cyclical shortage of commodity chemicals and hence the margins could deflate in the near time when the cycle turns. It is definitely a very growth minded management. I do have a bias towards small companies. A company with >20-30% market share IMO does not even have the optionality for the high growth minded investor to hold it for 10 years for consistent high compounding. Profitable (high ROCE) Companies with small but growing market share are the true wealth multipliers IMO (in the range of returns I am looking for). Deepak is already a 1B$+ market cap company. What kind of a growth runway does it have, I do not know. I’m always looking for the smallest most profitable (in the future, not the past) player. Deepak does not fit the bill there. Admittedly I have not studied it as closely as many other companies I track. I would like to study it more closely (and correct for any knowledge/perception gaps).

1 Like

Hi Sahil,
Do you follow companies overseas (US markets preferably)? I ask this, because I am assuming like me (who holds MSFT and AMZN stocks in good amount that dwarf my holding in Indian equity), you have Google stocks.
What’s your strategy in this? Do you follow Google ARs and ConCalls and size your PF? Or you prefer to keep accumulating it passively through bonuses and ESOPs?

I’m sorry if I asked something personal you don’t to share. I have been accumulating MSFT and AMZN shares through bonuses/ESOPs, and I never track it, simply because of the high faith and trust in Nadella and Bezos.

1 Like

I do not hold google stock for a lot of time. I keep selling from time to time. As of right now I’ve sold >90% of the stock I’ve been granted over last many years. My life is already quite dependent on Google (Job, salary, salary increments, future equity). I do not have any direct exposure to US stocks. IMO it is a kind of a fad to own foreign stocks. Right here in India, we have the largest wealth creation that can possibly take place. While it would make sense to own a few innovator companies like Lonza, Thermofisher but those are extremely overpriced.

IMO this is not a good strategy. This can lead to financial ruin. Any company, howsoever innovative can have blindspots. You are already “long” the company which employees you by continuing to be employed by it. Why compound the position by continuing to hold lot of stocks too? Besides, IMO all tech stocks are overvalued (by varying amounts). A correction is due in FANGMAN. The correction might coincide with any weakness in earnings IMO.

1 Like

Can’t agree more on this. That’s the reason I have stayed away from stocks abroad, apart from the ones where I didn’t have any choice.

One of the facts that I can correlate with this is that, most of the FANGMAN companies have surpassed trillion dollar valuation. Growth of runway from here onwards seems to be slow (going by crocodile in the pond analogy). Apple (and may be Netflix) can be exception as it hasn’t penetrated Indian market well. Do you see any other reasons?

3 Likes


Look at the valuations of Apple. They’ve been moving in cycles, as do perceptions. The best time to buy Apple is at 2x revenues. Second best time is at 3x revenues. It is trading at 8x revenues right now. It is not clear that this valuation change is supported by any tangible change in fundamentals.

The reason it is almost impossible to reason this way about these for these mega tech companies is that when they grow too large for a pond, they create a new (larger) pond.
Have you seen the list of subsidiaries for alphabet?


They create markets where none exist. I’ve been practicing ML research and applications for about 6 years now. Google’s is next to none. One of the greatest biology breakthroughs of 2020, was the protein folding solution that Deepmind created. Some of the best minds of CS/ML/AI are now working for Google. That is an intangible which is very difficult to value. We created ML algorithms to optimize the power consumption in our data centers that saved us 30% in power costs.
Alphabet subsidiary Calico is working to solve Aging. What is that market worth? $10B? $100B? $1T? I do not know. It surely is worth a lot.
Waymo is solving self driving. They’re going to hail in a world where humans do not need to drive. Admittedly not the only ones trying to do that, but by my estimation, they’re miles ahead of everyone else (except maybe Tesla but that is debatable).
Loon is creating floating balloons that provide the internet.
Google even has a private equity subsidiary that invests in start-ups.
Despite all these intangibles and reasonable valuations, I continue to sell my GOOG because a large fraction of my future net worth is anyway dependent on google performing well. My future equity, salary, promotions are all tied to google doing well as a company. In addition to that, holding a large fraction of my present net worth in Google stock just does not make much sense.

Frankly, I don’t think these tech giants can be modelled very accurately by anyone anymore. They undergo cycles of pessimism and optimism where the valuations inflate and deflate. IMO the best time to enter is at a point of maximum (or near maximum) pessimism. Definitely in Apple this is the point of globally maximum optimism. Not saying that valuations have to crash. If the valuations sustain until FY24 and apple iCar is a successful launch with $100B of sales in FY25 then valuations might be justified. When the market starts pricing in lots of optionals as if they are a given, that is when I feel valuations are stretched.
Everyone can look at the valuation charts of their own choosing and make up their minds on which of the FANGMAN are clearly overvalued:

13 Likes

Hi Sahil

I am still reading your excellent research, analysis and mental model. IDFC being the highest in your PF. Here are the few counter arguments.

Retail Loans

High street banks (banks that has physical presence ) - I don’t think this kind of model is needed going forward

Let me highlight few here, more or less all the banks now offering service to open accounts online by using the smart phone, technologies are matured and one can do digital KYC with face recognition and all

Most of the banks are selling (hard sell) various products to the customers who visits the branch (it is not easy to to sell a product to a customer over the phone , this is really difficult in small towns )

In this digital age the customer has more awareness and they go to aggregator sites and find a cheap loan deal on these sites. Interestingly unlike before it’s not only banks who are ready to give personal loans, car loans and education loans , there are many other digital lenders like from PAYTM to small players in the market

Business Loans

Same is the case with business loans

Unlike before businesses has access to loans in very customer friendly way starting from
PE firms
Digital lenders ( example : https://www.niyogin.com/unsecured-business-loans )

Below are the ways where banks make money and all these sources are disrupted in my opinion

Collecting deposits ( if one wants to deposit they can go and find a better rate , better than bank FD at the click of a button and they can sell it whenver they want unlike locking periods by FD example : https://goldenpi.com/

Loans (Disruptions from small finance banks to large lenders like Muthoot etc )
Other products like Life , General Insurance and Mutual Funds
Business loans
Agri Loans
Loans against assets

Let me give an example in UK many banks are reducing the number of physical branches month after month, the only thing the customer will miss is to deposit cash, they tied up with post office, so customer can walk in to post office and deposit cash in any of these major banks. The same is already happening in India where many banks have now setup CSC points for such services. It will not be far where they are going to have aggregators for CSC services where you can walk in and do basic banking of any of the bank accounts.

Curious to know your thoughts.

-Rafi

3 Likes

Hi Rafi,

thanks for your questions.

Would suggest you to please provide evidence for these kind of statements. As far as my understanding goes, this was not true at least few months ago. For example HDFC Bank did not have this.

All of these top down arguments suffer from 1 problem: they are not backed by data. Hence, they can very well be false. These are narratives at best and what I have discovered about the nature of reality, is that CNBC TV18 (or any other business news channel) does not decide how reality turns out. Understanding the nature of reality requires a lot of hard work and a lot of scuttlebutt (and a lot of research report reading). The strata of customers you’re talking about, would certainly NOT get online loans. A lot of them do not even have a credit history. How could any institution lend to them without a physical verification of their business, and projecting their cash flows. Lending to the underbanked and unbanked is a high touch sort of business, it is very difficult to automate. I would suggest you to read about MFI industry, VP has a lot of good threads. Has some very good insights on why its difficult for things to be digitized for this strata of people.

Please see this:


Besides, it is not that easy to compete with a bank which has access to very low cost funds. Incremental CASA to IDFCF is at 7% RoI and would become even lower over time. Cost of equity is generally 12% and hence you see interest rate charged by the very company you quoted to be 19%. For that set of customers (which is small IMO) who do compare loan rates, it is not likely for them to go for Niyogin but rather IDFCF bank which has much lower interest rates.

This example has nothing to do with the reality in which we live. India is so far behind the west in financial inclusion that it is not right to compare the two situation. Its an apples to Karela comparison. India has a long way to go before we become like UK. Our country is very diverse. Hence you can find pockets of places which are more like the UK (say posh areas of metro cities) but the vast majority of Indians do not think, act, or associate with Westerners.

Lastly, I would suggest reading through the IDFCF bank thread if you do that a lot of these questions would get answered. :slight_smile: In fact there is a specific set posts about VV addressing a Fintech forum about how FinTech will actually help existing banks, not compete with them. This is also visible in the way that IDFCF has tied up with many leading FinTech companies.

The fundamental core competency of a bank is underwriting risks. The data and wisdom gained by IDFCF (through IDFC and CapF) over a decade and more of underwriting risk for cashflow based borrowing is not something any tom dick and harry can compete with easily. In fact a lot of these digital loan companies tie up with IDFCF so the relationship is that of collaborators not competitors. :slight_smile:

6 Likes

Thanks Sahil , always joy to learn from you.

Here is one link to open an account with Kotak with Digital KYC

Kotak 811 launches India’s first zero-contact, video KYC savings account.

ICICI direct thought so that with the kind of expertise that they no one can beat them. Their dominance is history now with the entry of discount brokers :slight_smile:

1 Like

Hey Sahil!
I like your stock collection! Hope you have a long way ahead with these great picks!
Was just wondering that your portfolio doesn’t have any exposure to IT sector? Is this due to high valuations or there is some other reason?

1 Like

This has come to my notice too. The irony is also not lost to me, since I work in the IT sector (Google). My key reasons for not owning any IT company is:
My area of interest is smallcap and midcap in general. In that universe I’m not sure what competitive advantages any IT service provider has. They are easily substituted. Hence, I don’t find certainty in earnings. This could very well be my own bias at work and reading any IT companies could change my view.

If anyone thinks any Indian midcap or smallcap IT company has a differentiated business model and is growing at 15-20%+ per annum for 3-4 years, please do let me know I’ll be happy to read more about it.

2 Likes

Another beautiful cover drive from Sahil (let us celebrate the great win today :slight_smile: ) , I think Tata Elxsi and Xelpmoc Design and Tech Ltd falls under this category . We are yet to see some fintechs like Visa, Mastercard or Software Stacks like Twilio , Etsy, Cloudflare, Docusign, Autodesk, Zoom etc… from India or still they are unseen to me

4 Likes

Thanks! Can you please describe in a para or two why these companies are interesting and why anyone should read about them?

Truly historic win for india!!! I had stopped watching cricket for many many years but started again with this test match and I got my money’s worth. What a wonderful chase, a what a wonderful innings from Rishabh Pant, what a wonderful knock from pujara, GABBA fortress breached at last.

Go india
:india::india::india::india::india::india::india::india::india::india::india::india::india::india::india::india::india::india:

2 Likes

Worth covering LTI, Ltts and Tata Elxi :slight_smile:

4 Likes

Please look at Sasken Technology

2 Likes