Samir Portfolio Review

Q&A: Questions & Answers Portfolio Q&A
1

Dear All,

I have had the pleasure of reading articles and improving my knowledge through this forum. I had like to understand your views and suggestions (I welcome your criticism as well) that can help me get better. In this regards I am putting across my portfolio for your review and request your valuable feedback.

My financial portfolio has a decent exposure into equities through 50% each into equities (direct) and 50% through MF done in an SIP manner (Mirae asset emerging - high allocation, opportunities and Birla SL - comparatively lower). My thought process is to see how I would fare in the next 3-5 years bechmarked against my MF portfolio.

1.) Adani Ports - 4% - Economic Moat. But after my recent analysis have questions regd the management’s approach towards minority SH. Will need to do more work?

2.) Ashiana Housing - 4% - Contrarian Play. Trust the management. Would like to hold it for 2-3 years but keep a watch. Recent results very disappointing. Want to keep a close watch.

3.) Bharat Forge - 5% - Sector Leader. Could be an interesting bet with its recent happenings (collaboration as well) in the defense sector

4.) Granules India - 6% - Trust the management and taking their business higher up in the value chain. Would like to add more in 2016.

5.) Gruh Finance - 5% - Should have got into it at better valuations (got at around 260). But believe in this compounder and would like to hold it for medium to long term.

6.) Heritage Foods - 4% - OPM a concern. But with the management taking into 3 new states and adding more of bakery products which has higher profit margin (reducing retail) can turn out to be an opportunity

7.) Jagran Prakashan - 7% - Got at decent valuations. Future of advertisement industry looks good if the economy bounces back. Loss making newspaper biz are also slowly going thro a turnaround.

8.) Lumax Auto Tech - 5% - A mid cap that I would like to hold for 2-3 years and do a timely evaluation. Can be a beneficiary with the revival of auto sector.

9.) MCX Ltd - 5% - Believe in the economic moat and would like to hold it for 2-3 years and do a timely evaluation

10.) Motherson Sumi - 5% - Bought at an avg price of 270. Thinking of moving out of this as get into another housing finance - CAN FIN may be?

11.) Repco Homes - 5% - Believe in the housing sector growth opportunity. If they can work on certain aspects their business can get as better as Gruh but a long way to go. Would like to add more in 2016 when there is an opportunity

12.) Shilpa Medicare - 5% - Can it be a leader in the Oncology? Will wait till 2017 and evaluate when more details are to emerge.

13.) SBI - 6% - Holding this for sometime now at an avg price of 165 which is the price it has come to. Would like to hold for sometime and get out on the rise

14.) Suven Life - 5% - Believe in their CRAMS space. Would like to keep a close watch on their upcoming products and do a timely evaluation

15.) Vidhi Dye Stuff - 4% - Recent entry after going thro their AGM updates. Growth opportunity.

The remaining I am holding in cash and I am looking at around 4-5 years term for the above portfolio. Some of the watchlists include - Camlin Fine, Ambika Cotton, Welspun India, Astra Microware, Avantel, some IT companies in digital space (havent done any homework yet)

Thanks
Samir.

2 Likes
2

Any comment/criticism/suggestion is welcome by all.

I would specially be obliged to get a review from some of the seniors - Hitesh, Abhishek Basumallick, Vivek Gautam, Aniket, Irshad and many others from whom I have learnt a lot.

3

Mentioned below is my latest portfolio. Please feel free to provide your comments, criticize or inputs. In general I have tried to avoid momentum stocks, cyclicals and companies where government interference is high.

image.png846Ă—352 12.4 KB

Following is the rationale for investing in each of the stories.

Ambika Cotton Mills - A high quality yarn manufacturer run by ethical management. Ambika has stood the test of time and performed much better compared to its peers in debt reduction, working capital management and generating free cash flow . A conservative company, there is little that can go wrong and I would be fine to put my money here instead of bank.

Canfin Homes - NBFC in the housing segment which has grown rapidly in the last 5-6 years. The company’s guidance of growing the loan book to 35,000 Cr by 2020 will be a metric to watch out for along with other quality metrics. The loan book growth is coming down compared to previous years and with too many players in this segment how Canfin performs every quarter need to be closely watched.

Gruh Finance - A steady compounder in the portfolio with good management. The government’s push for transparency in real estate coupled with Pradhan Mantri Awas Yojana, Affordable housing (AH) and infra status to AH have set tailwinds to the industry.

Manappuram - A play on NBFC space, with ethical management and diversified business portfolio. Strength lies in huge branch network, reducing gold loans tenure from more to 3 months, using technology by providing digital lockers to keep gold and disburse loan through mobile app and in the process making whole process smooth. Their plan to increase the non gold biz to 50% of the overall biz with focus on Affordable housing,Commercial vehicle loans and microfinance by 2020 will need to be watched closely for quality.

Oriental Carbon and Chemicals - Oligolopy business in the insoluble sulphur market with 10% market share. With their recent brownfield expansion, the upcoming capacity expansion along with new markets in China, USA should help drive the volumes. This is well matched with the need for much higher amount of insoluble sulphur in ultra high performance tyres.

Shilpa Medicare Ltd - Good Management and niche player in the oncology segment having market presence in India, Europe, Japan and Korea. With good pipeline of 26 ANDAs pending for approval and their entry in US market should help garner better revenues in the medium term.

Tata Elxsi - With migration in the IT space to emerging technologies like IOT, Cloud Technologies, AI etc., Tata Elxsi is rightly placed as an IT product company. Automotive and Communication present huge opportunities and can turn out to be the fastest growing verticals.

MCX - The growth of overall economy is expected to drive the underlying demand for commodities. Commodity to GDP in India stands at 0.49 against 2.39 in US and 1.98 in China. Introduction of new participant classes such as financial institutions in commodity derivatives market, along with introduction of future options should set the trigger in the medium term. As per the latest updates SEBI has given nod to introduce options in gold and exchange is planning to launch this before Diwali of 2017.

PI Industries - India’s consumption of pesticides is very less when compared to developed nations and it will only go up from here. It operates on the platform of exclusive tie-ups with patent originators (like Mitsui Chemicals and BASF) and has stood out for its policy on respect for IPR (intellectual property rights). It has a niche portfolio of targeted products aimed at the domestic market and with focus on Agriculture this can reap the benefits. Their diversification into other chemical industry along with Pharmaceuticals can provide better value proposition in the long run.

Shermaroo - One of the largest content provider with huge tailwinds for migration of content from traditional sources to digital. With management having expressed confidence of growing the digital segment by 40% (over the rest of industry 30%) and if traditional segment grows at a lower double digit, this can be a decent compounder. (~20%)

Ashiana Housing Ltd - Taking a contrarian bet, ethical management and their asset light model were the key for investment. Government’s push for bringing transparency through RERA act should help the company in long run.

Wonderla Holidays Ltd - Ethical management with first mover advantage having established parks in Kochi, Bangalore and Hyderabad. While numbers reveal concerns over stagnation in footfalls of mature parks, the operating leverage can start playing if and when the management looks at increasing the non ticket revenues. Satisfied with the answer provided by the management in recent concall on how they plan to take the debt, addition of new parks and the strategy of increasing ticket prices.

Accelya Kale - An IT company with niche focus on airline industry, unique business model and wide moats. Companies services can be broadly classified into Revenue accounting, Other financial solutions and Industry solutions. The revenue accounting forms the core business and it crossed 1B transactions recently. Company has a track record of paying high dividend yield which I could find an alternative instead of savings account. With downside limited, I feel their BI services and recent collaboration with Mercator should help in improving the topline.

Max India - Health insurance segment in India is under-penetrated and has a long runway for growth. Similarly is the case for the hospital business segment which has turned profitable from FY 2016-17. With regulatory headwinds, the stent pricing etc will need to be watched and with the company in initial stages can have their growth planned accordingly. The insurance segment is particular appears to be very scalable and with breakeven from 2019 should help in growth.

Cash - 40%

Specially want to thank @Amit009, @hitesh2710, @suru27, @desaidhwanil, @Value_Seeker (Aniket), @sajijohn, @dd1474 (Dhiraj), @bheeshma whose posts/portfolios have helped me a lot over the last few months in understanding the business fundamentals. I prefer not to churn too much going ahead. But would still like to keep a watch on those 2-3 stocks which are pulling the portfolio down as a whole and take action accordingly. My expectation is a 18-20% CAGR over the next 5 years.

5 Likes
4

Overall your portflio is good in my opinion. You can expect aruond 20% compounding from portfolio in medium term. However, please keep eye on valuation in NBFC/HFC which are moving into relatively higher zone. Further, Canfin, Gruh, Manapuram and MCX account for 36% of total portoflio value to financial sector which may be high concentration in my opinion.

Discl: I am not SEBI registered financial advisor and you should do your own due diligence before taking any decision.

1 Like
5

Hi Sameer,

You have a good portfolio.

Interesting that you are holding 40% cash, I could never do it :slight_smile:

The crux to achieve a 20% or higher Compounding is to buy growth / scalability prospect / proven track record companies at reasonable P/E’ / P/B’s.

In financials, I hold Gruh, Canfin for few years and relatively more recent additions are MOSL, PNB HF, L&T Fin, Manappuram - I expect that all these companies should deliver earnings > / = 25% CAGR over the coming 2 to 3 years.

As @dd1474 rightly stated, valuations are tending to get frothy and if promised growth does not materialise corrections / derating may not be ruled out.

Am glad to know that my posts could add value to you. All the very best for your investment journey!

P.S.: These are not buy recommendations, just sharing my thoughts.

2 Likes
6

Thank you @dd1474 and @value_seeker.

Aniket - Your initial thoughts on Tata Elxsi helped me dig more into the business and I could initiate some buy when there was a big correction. The recent announcement around bonus and other initiatives they are working (from the AR) has helped build conviction.

Talking about maintaining cash, I usually save as much possible from the monthly income and this adds to the cash reserves. Over the last few months times like demonetization, surgical strike and the recent nifty correction helped to add more :slight_smile: otherwise I try to stay away from news.

7

Hi @samirhuli

You have a robust portfolio containing good businesses. I have stayed away from businesses connected to financial sector & pharma as i dont understand them too well. I also dont understand agrochem. From amongst your portfolio i like Wonderla & Accelya the best. These are the type of businesses that i would invest in if the valuations were in my favour. Overall, i think you have a little too much exposure to businesses connected to the financial sector

Best & all the best in your journey
Bheeshma

1 Like
8

Hi Samir,

I exited my small position w.r.t. Tata Elxsi.

I was not be able to get a grip on their offerings / identify disruption potential that Tata Elxsi could pose / disruption risk that it would itself face from other players - it is beyond my understanding…

Best regards,

Aniket.

9

It seems a very balanced portfolio with high pedigree businesses with decent opportunity size and credible management. I feel it may be possible to generate 20% CAGR from these kind of business mix. What I like more though is that more than 50% of the businesses are priced for perfection at the moment, while few of them seems ignored by the market.

Personally, I would like to have a portfolio where there are some decent under-performers in the portfolio every year even though the business model is very strong. Essentially, these businesses are not getting due credit for some reason or the other by the market.Though one may feel that these businesses are dragging down the performance of the portfolio, in fact,these are the candidates in the portfolio that can drive the out-performance of the portfolio in the next year or two. So companies like PI, Manappuram, Wonderla, Shemaroo- I feel can give decent out performance and may add a bit of zing to overall portfolio returns.

7 Likes
10

@samirhuli congrats on picking up compounders for your portfolio. It’s a good policy to avoid companies with govt interference. I would keep one or two momentum/cyclical stocks just to give a fillip to the portfolio during drawdown and to keep the uptrend. What I do is to identify a stock in the pf which is likely to give more than double the average return of the overall portfolio and allocate maximum into that. Avanti did that for me! ?Shilpa/Piind in your list may serve that purpose. HFC’s has had its share till now. I believe pharma is slowly turning around. Ambika is a slow mover. Overall a very stable pf. Good portfolio allocation is what will help us get stable returns.

3 Likes
11

Yours is a very well thought out decent portfolio. I like the crisp logic you put out for each of your picks. As long as you know why you have bought the company and have a strong investment logic, you should be fine.
I cant forecast the kind of returns but since you have a basket of good businesses the returns should be good.

As mentioned by dhiraj, I would also like to be careful about frothy valuations in some financial cos. I myself am not too worried about the quantum of exposure to financials as long as it is not too skewed. Things like gruh etc should be great anytime.

8 Likes