Sahil's Portfolio

[Guarndian_Nettings]

i am glad…most of ur portoflio os similar to mine…and even conviction levels r similar…

[greengoblin]

Reading your research and threads has been great source of learning for me, Sahil. I am amazed by the clarity in your thoughts and how well they are put - simple, yet in-depth.

A question I have been trying to find answer to; but haven’t so far. How do you deal with businesses where prices run up too fast? What’s your buying strategy? Do you go all in once you have conviction?
In the era of social media, information flows fast. Oftentimes, I have found myself loading up shares of a business I like, only partially, and before I could purchase another tranch, the valuations rup up far from comfortable level. Other times, while I am mid way researching the companies, before I could take a decision, stocks prices are up 60%. How do you deal with such situations?

[sahil_vi]

I dont care about price run ups. Only care about valuations.

If  VALUATIONS LOOK CHEAP compared to my estimate of intrinsic value & I dont own the stock
    load up
else if I hold the company already
    SIP
else
   avoid

I sell if future growth looks low compared to valuations AND i have found a MUCH better (10% CAGR at least) risk adjusted returns alternative (this also means not reducing PF stocks since that increases risk).

Classic example of 1st branch is Angel broking. Was in constant UCs and i still bought.
Classic example of 2nd branch is VGL and Saregama where i am SIPing now.
Classic example of 3rd branch is prince pipes where i did not think future growth supported valuations so i avoided.
Classic example of 4th branch (sell on valuations) is Poly medicure.

[greengoblin]

Thanks Sahil!

@sahil_vi

I sell if future growth looks low compared to valuations

Which brings me to the next question
How do you know a business is overvalued? Do you follow a framework for this? Like if future growth is < 20% CAGR, you would buy it within a certain P/E or P/S, given sustainability of cash flows ( durable competitive advantage)?

[sahil_vi]

@greengoblin

How do you know a business is overvalued? Do you follow a framework for this? Like if future growth is < 20% CAGR, you would buy it within a certain P/E or P/S, given sustainability of cash flows ( durable competitive advantage)?

My guess is that you have already read this:

Sahil's Portfolio

I have been thinking deeply about how to decide what stock to sell out of, when i want to add a new PF stock. I realized the only way is to to do the grungy work of building out some sort of a model for what returns I expect stock to give in next K years, and comparing all PF stocks based on that metric. This would require me to estimate 2 critical components for each PF stock, exit valuations, and fundamentals (earnings for non lenders and book value for lenders) growth. That, along with curren…

because that is the framework i follow.

The part which is most unstructured and most ‘art like’ is deciding what exit multiples to model for. There is no way to justify them. It is like asking a person how they walk or drive a car. Intuition developed from reading a lot, from following other PFs, from tracking how valuations of stocks evolve over time.

Fundamentals based Investing CANNOT all be quant IMHO. There will always be an element of art in it.

[arunjacob]

@sahil_vi Whats your opinion about intellect design . Its one of the few Product IT companies listed in india ?
i discovered it after the last runup in march & is expensive at PE of 38 … but look cheap compared to global peers.

[sahil_vi]

@arunjacob

@sahil_vi Whats your opinion about intellect design . Its one of the few Product IT companies listed in india ?

no opinion. Have not studied it.

[rshankv]

Refer to Malcolm’s thread I have explained my view over their, but that was when it was trading at 430~ , I will keep buying every time they win a new deal, and i expect them to win one deal atleast every quarter or three deals every two and if they dont, then I assume that growth is slowing down and i will exit.

Malkd's Core Portfolio

I think with so many products, their growth @10 % is way too conservative ,and management has accepted that they want to under promise and outperform. I think they are planning to have another call to go over the tech aspects of their product sometime next month, which i am looking forward to. Earnings Call: [Intellect Design Arena Earnings Call for Q3FY21] Link to ICIC Direct https://trendlyne-media-mumbai-new.s3.amazonaws.com/reportPDF/2021-02-03/46063-882c676e92fe44cda677a9e31…

[sahil_vi]

@sahil_vi

A few changes to the PF:

PF now:

Instrument	Avg. cost	LTP	Net chg.	% allocation	% PF
RACLGEAR	151	486	221.85	0.083	0.16
SAREGAMA-BE	1767.63	3426.75	93.86	0.087	0.101
IDFCFIRSTB	36.96	53.65	45.15	0.115	0.1
MASTEK	1324.11	2255.95	70.38	0.085	0.087
NEULANDLAB	1407.64	2160	53.45	0.091	0.084
VAIBHAVGBL	542.85	815.65	50.25	0.089	0.08
LAURUSLABS	343.68	676.85	96.94	0.063	0.074
SEQUENT	195.39	280.85	43.74	0.06	0.052
ANGELBRKG	661.62	895.75	35.39	0.051	0.042
PIXTRANS	461.36	709	53.68	0.046	0.042
SASTASUNDR	202.09	325	60.82	0.041	0.04
KILPEST	434.6	617.75	42.14	0.046	0.039
DYNPRO	442.18	527.55	19.31	0.052	0.037
GRWRHITECH	840.44	934.6	11.2	0.053	0.035
RPPL-SM	145.95	168	15.11	0.03	0.021

1. On major change was swap of axtel for Rajshree. This was on 2 grounds: Higher and more easily trackable growth for Rajshree, lower valuations for Rajshree, capex coming online right now. Quality of clients, stickiness of clients based durable competitive advantages are very similar.
2. More capital deployed into RACL: concall was great, learned a lot about biz, a clear average up kind of a biz for me. Deployed more capital. Is a large position now.
3. Scope to deploy lot of incremental capital into IDFCF bank at current valuations. Planning to do so soon.
4. Right now sequent looks like the prime candidate to be replaced due to relatively lower growth compared to rest of the PF along with stretched valuations. Evaluating Strides.
5. Sold the REIT because of additional data points: I am able to see many people who are willing to and allowed to WFH. Cos benefit due to lower opex. While offices are not going anywhere and embassy is my favorite reit, there is too much uncertainty. Planning to deploy somee of it to equity PF and some to FDs.
6. Sold the Negen capital Smallcase. I dont like the smallcase a lot now that I have studied the cos a bit. Also fund manager’s behavior is clearly towards executing the higher alpha strategies/positions in the PMS so one cannot help but feel short-changed.
7. Capital deployed grew by 22%.

Disc: Invested and biased, this is not a buy or sell reco. Do your own due diligence before investing. I can modify any of my positions w/o prior notice anytime.

[Sanjeev_Bansal]

Hi Sahil,

Given IDFC’s reverse merger opportunity (I believe you agree to it as per your post on IDFC forum), wouldn’t it be better to invest your incremental capital in IDFC instead of IDFC first bank?

[sahil_vi]

@Sanjeev_Bansal

Given IDFC’s reverse merger opportunity (I believe you agree to it as per your post on IDFC forum), wouldn’t it be better to invest your incremental capital in IDFC instead of IDFC first bank?

Too much risk. I prefer taking risk in other ways: microcaps. Regulation, reversee mergers, auctioning off MF probability they wont be able to do it, are not risks i am willing to take

[Sanjeev_Bansal]

If I may also ask, what is your strategy regarding Saregama given the recent increase in valuations? Are you still going to buy more or hold on to what you already have. I saw you are talking about SIP in it, would it be on a monthly basis or based on price fluctuation (±5%, 10%)?

[sahil_vi]

@Sanjeev_Bansal

Are you still going to buy more or hold on to what you already have. I saw you are talking about SIP in it, would it be on a monthly basis or based on price fluctuation (±5%, 10%)?

SIP yes, and some combination of both: dips + time. very subjective, not quant.

Will also add significantly if i see any key triggers playing out (like high growth of subscriber base visible in acceleration of streaming growth) .

[SmitBhut]

Hey Sahil,

Is it a norm for a growing infra company to have negative FCF and very low CFO for prolonged period?

I am following PSP Projects. The company is growing revenues and earnings at a great speed but it’s six year cumulative CFO is not even 50% of cumulative PAT. It’s FCF is also negative for five out of six years. Is it a red flag?

Thanks in advance!

[sahil_vi]

@SmitBhut

Is it a norm for a growing infra company to have negative FCF and very low CFO for prolonged period?

Would request @ashkrithik to comment. He owns PSP and knows much more.

FCF generation is not something i expect from construction companies. CFO to PAT being low is a concern, shows receivables or inventory going up. Dont know much, Ashwin can possibly comment better.

[SmitBhut]

Thanks for the reply and explanation!

Looking forward to @ashkrithik 's comment.

[amishra]

I have a similar strategy of allocation. SIP is fixed amount every 15th of the month. That’s straight forward. But I am not very sure how much above SIP to do based on Nifty (-ve % from peak) or based on declining Nifty PE or other metrics. I read a % wt allocation between cash vs equity can be used to determine that. Essentially this is Time based averaging + Value based averaging.

Any specific model you follow - would be happy to learn.

[sahil_vi]

Models are overrated. I am still a learner. Still trying to figure out best way.

Whether to invest how much to invest has nothing to do with nifty levels.

Only concerned about my specific pf stock annd what valuations it is at.

[yrm91]

Hi Sahil, How do you think about Saregama’s valuation? Also hold it in the pf, but struggling to figure out what it could be worth in the future and whether current valuations are justified.

[ashkrithik]

Hi! Yeah, it’s something to monitor. If you see pre-SDB the CFO to PAT had been pretty healthy. SDB is a large project for a company of its size. As the company reached the peak of its execution in SDB, the receivables and inventories the company has to hold has gone up quite a bit. It stretches the WC and reduces cashflow generation. Another contributor has been the rise in unbilled revenues. Need to watch out for how these two things evolve going forward.

Disc: invested.