Dear Forum members and VP’s
I am an academic, 38 years old and have little experience in corporate and business. I started investing in 2012 directly into stocks and made losses in early investments. Since 2015-16, I started to have positive returns, but the returns were well below the mutual funds. But, I never gave up and I kept learning from books and other resources. In 2020, I found this forum, Valuepickr, and it was an eye-opener. The knowledgebase and discussions on this forum helped me to improve my stock selection, allocation and holding. I am still learning from this forum everyday – making sense of the technical charts, connecting the dots by reading the company’s prospectus, reading concalls and AGM news, and understanding the customer to market sentiments.
Objective:
My current investments are 20% in mutual funds/ETFs and 80% directly in stocks. The MF/ETF basket follows the broader market sentiment. The market works in cycles – small/midcaps before 2018, quality stocks during the bear markets, small/midcap rallies, Covid slump, small/midcap rallies again; and so on. During each cycle, I keep adding to the growing segment. For the direct stocks, I compete with the MF/ETF basket. The objective of my direct stock portfolio is to achieve a better XIRR than my MF/ETF basket – even this modest goal is much more challenging than what I initially envisioned. I started my journal entries in 2015. During the COVID slump in the 2020s, my stock portfolio XIRR became better than the MF portfolio.
Current Portfolio:
100% of my current stock portfolio is based on ideas in this forum. Thank you everyone! This is also what took me so long to create this first post – there’s nothing new to add, this is just an assimilation of what I learned from this forum. I have two baskets:
A. Value: Outlook of 2-5 years (some even more), high conviction stocks, ~85% of portfolio
B. Technical: Outlook of 3-12 months (some even less), based on technical charts, most of the ideas are taken from the VP thread “52 week highs and all time highs strategy”, ~15% of portfolio.
| Symbol | Allocation | Average Cost | Net Change |
|---|---|---|---|
| A. Value | |||
| DELHIVERY | 3.71 | 416.71 | -3.9 |
| DMART | 5.65 | 3638.34 | 1.2 |
| HBLPOWER | 6.64 | 101.57 | 376.1 |
| INFY | 4.84 | 1380.91 | 19.6 |
| IRFC | 10.83 | 23.09 | 663.9 |
| ITC | 2.67 | 255.54 | 83.3 |
| KPITTECH | 3.19 | 1147.02 | 33.1 |
| KRSNAA | 4.29 | 526.12 | 29.9 |
| NYKAA | 4.58 | 172.55 | -0.9 |
| PAYTM | 5.26 | 801.39 | -1.9 |
| PHANTOMFX | 12.28 | 527.88 | -7.4 |
| SIRCA | 2.70 | 343.64 | 18.4 |
| TVSMOTOR | 5.62 | 672.38 | 199.2 |
| WOCKPHARMA | 3.76 | 459.90 | -2.3 |
| WPIL | 5.54 | 3219.18 | 37.0 |
| B. Technical | |||
| MANAPPURAM | 4.57 | 148.02 | 19.3 |
| NFL | 2.99 | 102.72 | 19.3 |
| SFL | 2.44 | 1214.11 | -2.7 |
| SNOWMAN | 3.10 | 73.35 | 1.3 |
| USHAMART | 2.94 | 349.96 | 0.3 |
Entry and Exit:
For the value stocks, I keep adding in dips and market corrections. I sell only when I lose conviction in the stock. For the momentum stocks, I keep tracking the chart and sell with an adaptive stop-loss. This is fast moving and I always move on to the next bet. The technical basket outperforms the value stocks during bull markets. During bear markets, the money automatically moves to free cash, because it becomes difficult to find such trending stocks.
Investment Thesis:
For the value stocks, I look at the capabilities of the company. I have very little knowledge in understanding the balance sheet and P/L statements. My professional competence is to judge the capability of any project. Over the years, I have learnt to trust my intuition and judgement regarding the capabilities of the company. I look for companies with:
- strong underlying capabilities / products / ideas that can generate revenue,
- highly uncertain future; may be due to unknown outcomes, dependence on third party factors, past failures, lack of experience, lack of catalysts, etc, and
- low risk, that is, to ensure the current value will not erode if the uncertain future does not play out in my favor.
I am deeply indebted to this forum, particularly for stock ideas and the risk evaluation (third point). However, the most important thesis is that the market has no rule – I always move to better opportunities.
DELHIVERY. Underlying growth of the Indian economy → rising demand for goods → logistics. In India, logistics is expected to grow at a CAGR of 9% up to FY26. The current market leader is Bluedart. Delhivery has the capabilities to grow based on scale, efficiency and technology. Their industry positioning is good and the management is really aggressive. In India, organized players account for only ~3.5% of the logistics market (as in 2020) – my conviction is that this will become more organized over the next 2-5-10 years as India transitions to a manufacturing economy.
DMART. Offline grocery leader with a growth longevity of 10-20 years.
HBLPOWER. I was monitoring the Indian Railways opportunity. Invested after the stock story in VP: A specialized technology intensive product in an oligopolistic set up with visibility of no more competition at least for 2-3 years. Clear capabilities were visible from their excellent track record in R&D.
INFY. WIth the recent pressure in IT stocks, I entered the position in Infosys with a view to profit from time arbitrage. I do not intend to hold this for the long term.
IRFC. Another stock from the time I was monitoring the Indian Railways opportunity. At the time, it was severely undervalued. The Government had a strong railway infra push, but the market was highly uncertain about the performance capabilities of a PSU company. I started accumulating in 2021. I am now tempted to sell because of the price action and unsustainable valuation. I am monitoring any trend reversal signal on the weekly chart.
ITC. The emotional / superstition stock, gifted by someone special. Since 2015, I keep adding 1 share every time I buy some stock for the value basket.
KPITTECH. They are one of the best examples of execution and investor communication. They have an excellent track record of R&D, they have reached the critical mass. My conviction is that they will continue to improvise better tech given their experience and expertise. When I entered in June 2023, the valuation was already high. So, this could still turn out to be a bull-market mistake and is liable to be corrected sharply.
KRSNAA. After their IPO, I chanced upon some of their test results. I analyzed the accuracy of radiology results from various providers (same sample, measured multiple times in different labs, blind test). They had the most consistent images, even better than the LabCorp, USA. I invested simply because of their quality. I have no idea how they provide such quality at such low prices, but I am ready to put my money in a growing company with such strong capabilities.
NYKAA. This is a curious investment. I am not convinced of their capabilities and there is a lot of risk in their business apart from the uncertainty. But, their valuation is more comfortable than many others in this raging bull market. The weekly chart is showing a Wyckoff accumulation (Phase B). I am expecting the capex from last year to be reflected in their revenue. Also, the institutions are accumulating and the retailers are selling – so I am expecting a solid base at the current price.
PAYTM. They have a unique business model. Most of their experiments to generate revenue are now sunk costs. They now have a crystal clear strategy for revenue, and the capabilities to pull it off (large consumer base, good leadership, brand value). Relatively risk-free from competition as it is difficult for any new player to get the critical mass of customers. They do not have credit risk as they don’t carry the loans. With the growing Indian economy, they will capitalize on the growth of the unorganized sector – this is the opposite of my conviction of organized sector growth tracked by Delhivery.
PHANTOMFX. Cinema/OTT to grow at 15% CAGR up to 2027. Video games are expected to grow at 19% CAGR. The VFX industry will benefit from AI models. Phantom VFX can provide quality content at a lower price. Within India, they are one of the few VFX studios who can provide quality content – they are at the higher end of VFX services. It will not be easy for a random VFX studio to come in because they lack the knowhow and processes to do creative work. So, they are unlikely to lose business. The real value will unlock with high value international projects. They can compete with lower pricing, similar to the IT industry. I am hoping to see direct projects with international clients. According to Mohnish Pabrai, heads (international projects), I win – tails (no international projects), I lose very little.
SIRCA. One of the very few small cap companies with good corporate governance, growth trajectory, stable financial track record, and competitive market positioning. This is an indirect play on India’s burgeoning furnishing market. All wooden furniture must require coatings and paints. Unlike many of the other companies in my portfolio, furniture is an example of a stable product, there is no foreseeable disruption or cyclical nature. I was more convinced of Sirca than any of the actual furniture producers.
TVSMOTOR. They have 13.6% market share of motorbikes in India in 2023, behind Hero, Honda and Bajaj. My investment in 2017 was due to the proposed thrust of the rural economy, increasing market of two-wheelers in India and continued growth of TVS Motors in this segment. Since 2018, the stock price continued to decline but the sector outlook always remained positive and I had no reason to exit the stock.
WOCKPHARMA. Another stock from the VP story. After two decades of research, capital injection, financial distress, dilution of promoter holdings, promoter pledges and a little bit of luck, Wockhardt has developed 6 antibiotics - WCK 771 and WCK 2349 have been launched (Emrok and Emrok O), WCK 4873 (Nafithromycin) has successfully completed phase 3, WCK 5222 is phase 3 trial, WCK 4282 will start phase 3 trial, WCK 6777 is in phase 1. Despite several red flags (regulatory warnings, data hiding, past erratic earnings), the upsides from regulatory approval of the above-mentioned drugs outweigh the risk from downsides. Another example of high uncertainty (only 17% phase 3 drugs are approved by the FDA), low risk (due to cheap valuations and expected sales of Emrok) and strong capabilities (QIDP drugs in pipeline).
WPIL. This is very similar to Sirca and I entered both these stocks at a very similar time around March 2023. Another example of a small cap company with good governance, strong growth trajectory, stable financial track record and more importantly, a stable market and product. I believe in the capabilities of the management led by Mr. Prakash Agarwal – they have shown positive intent and have been successful in its endeavors. Their overseas business is growing significantly. They sold Rutschi (water pumps for nuclear reactors) for 68.7m euros, which is about 625 crs to focus on its core business. Despite the recent price action, I believe there is still a long way to go.
Outlook
The main purpose of this thread is two-fold:
- Feedback and critique on my investment ideas and strategies. Having been a silent reader for a long time and a very lonely journey, I feel it is the right time to start active communication with this vibrant community.
- Force myself to have more regular journal entries starting this year; and be accountable for my investments.
Once again, thanks to all members of this great forum, particularly Donald, Ayush, Hitesh, Abhisek, all collaborators and contributors.