I agree with you on past track record , Muthoot’s track record has been exemplary , however the question is can it sustain the same track record with this competition?
For me I don’t know, the answer is less clear now than when I bought the shares in 2020. So I bailed out.
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No change in the portfolio.
However I would like to share some mistakes I have made during my investing journey. Hopefully it will be helpful to anyone interested.
I’ll start with the one which lost me most money
-PTC india Financial services-
| 1st buying date | selling date | loss% | size in portfolio when sold | average holding price | average selling price |
|---|---|---|---|---|---|
| Jul-18 | Mar-20 | 45% | 44% | 15.5 | 8.5 |
Investment thesis-Let me start with a little background. I had seen PFS trade in 40s .so when it had fallen to around 15 and dividend of Rs 1.2 per share I was interested. The thinking was that the dividend will keep the share price from falling too low a classic case of low downside and substantially higher upside and so I thought.
When I was analyzing the company in 2018 it had a lot of legacy bad loans which pertaining to 2012-2015 era, due to which the provisions were very high . The PBT was 529 Cr of which 150 Cr was provisions and the market cap was around 1000 Cr.
I was hoping with resolution of bad loans the provisions will come down and in turn PAT will increase and with it the dividend, even with low AUM growth. Already dividend yield was 10% any further increase in dividend yield will surely increase the share price.
However what I didn’t know that bad loans don’t resolve so easily, every other quarter there was an unexpected spike in provision , the resolution dates for bad loans kept going further to the future, new bad loans appeared .
I could never predict how the quarter results will turn out .
Every concall the management gave new dates for future resolution of bad loans , AUM growth didn’t translate to net profit due to high provisions and management had new reasons for why it was so(I don’t fault the management , maybe the business was tough but I have no capability to judge) .Finally during covid crash I sold my position at almost 45% loss. This was my largest position and my largest loss till date.
Learnings-
- If you can’t roughly predict how the company will do 1-2 year down the line , that means you don’t understand the business, stay away from the company. You should have a rough idea how the company will perform 1, 2 quarters into the future, so that and deviation is accounted for.
- I bought PFS when it had a PE of 3 and a dividend yield of 10% , today net profit is a seventh of what it was in 2017 and PE of 19. Learn to identify a difficult business and stay away from them.
-Turnarounds normally never turnaround . if a company is in bad shape make sure that the reason is not the company itself, maybe the company go lucky like PFS (it rode the infra boom of 2010-2015) and if it has seen bad days before.
I’ll add more of my mistakes in coming days
Thanks for reading
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My present portfolio is as follows
| Company | Weight by Cost | Weight by present value | Avg purchase price |
|---|---|---|---|
| KEI Industries | 75 | 93.6 | 503.5 |
| Chola Finalce | 25 | 6.4 | 788 |
I have sold Jamna auto in mid 2023 and added Cholamandalam finance in batches .
No buy or sell in KEI industries
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Thanks for sharing the latest portfolio… Please do write more analysis of watchlist / pf companies, your personal experience and new leanings… Great to read your writings… Thanks Again!!
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congratulations…KEI has become 6 bagger…Only 2 stocks in portfolio??
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congratulations.kindly share your batting average
Thank you Mudit!
I haven’t been doing much research on stocks since last 2 years and I feel the market is pretty heated.
My whole position depends on how the capex cycle pans out. So iam sitting and waiting.
Iam trying to be a more regular contributer here! So lets see how that goes.
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If you mean annual returns ! I 'd rather not share my returns in a public forum .
@G_Sandeep I know you are concentrated small cap invested .I would like to know much more about concentrated portfolio .I just wanted to know that to keep a concentrated Portfolio the holding stocks at minimum (like 2-3 ) .how are you doing that ?(How are you going to select the stocks )
1-if any stocks moved against you the entire PF will be down 10-15 in that case do you have any Stop Loss if please give some more clarity on the same
2-if the stocks in a good momentum how are you taking maximum profit (kindly give some insight about Trailing Stop Loss )
3-suppose one of your stock not moving and which is trading in a range what is your approach on the same
I normally start out with a bigger portfolio of about 10-15 stocks which I find promising. As I research businesses more , I keep selling companies which ,I don’t understand or whose business I don’t like or who are not performing business wise . I keep adding to my best bets and In the end I end up with 2-5 companies . So as per company performance improves or my assessment of the company improves I add to my position.
1.I am not much worried about monthly fluctuations in my portfolio . As long as the underlying businesses are healthy I am not much worried. However it still stings if portfolio value drops substantially but I think that is part and parcel of investing and you get used to it.
However If companies business deteriorates I try to exit.
2. I don’t look at price trends and I don’t think I can predict where I can take maximum profit. I have sold stocks at 70% below high value. I try to look at fundamental trends only. I have no idea about technicals.
3.If the stock is not moving but underlying business is improving I’ll add to my position. There is one caveat ,the company should have a reasonable long runway of growth(5 years minimum ) and the underlying fundamental parameters or the industry prospects should be improving.
Regards
Sandeep
Curious about your sell decision on Jamna auto. If I look at the numbers, company has shown decent growth. Price hasn’t reflected that. No PE rerating despite earnings growth.
Jamna auto was one of my earliest picks in 2017 . However unlike my other pick at the time KEI industries which seems to have a pretty long runway of growth Jamna auto has already captured the market and the margins are highest they have ever been . So for me the two avenues of growth -market share growth and margin expansion seems to be behind them.
Further there isn’t much capex from them .
So I shifted my position to a company which I think has a longer runway of growth Cholamandalam .
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