Seeking advice for Siva's portfolio

[sivaramtvl]

Hello fellow members and VP. I began my investment journey in 2016 when I took my first job and then by end of 2016, I started following valuePickr. Since then my view on equity has changed and improving day by day. Thanks for all your contributions, especially @hitesh2710 ji whom I used to follow for guidance.

Below is the current state of the portfolio, please provide your valuable suggestions. This PF is recently revamped as the ongoing correction has burnt my fingers badly especially my holdings in CANFIN, DCM SHRIRAM and KTKBANK got impacted a lot so I booked losses and entered into Bajaj, Maruthi, and Eicher.

My holding in Manappuram is in red as well but I want to wait and watch since it is fundamentally strong and believe it should be able to bounce back but not sure whether there will be a meaningful reward for parking a huge % of PF here. Please advice.

Ambika: This is for portfolio stability. I have been slowly accumulating this stock since the 600 levels. This is not a great company but definitely a good one with a credible management. Their ongoing expansion plans would produce a positive break out in the coming year

Manappuram: They have a strong network in South India. Hailing from Tamil Nadu, I could visibly see their presence and familiarity among the locals. I see this as a good business for at least the next 5 years as South Indians thirst for gold and land is continuing. The mortgaging land is tedious when the need is for short-term and small so people obviously going for gold loans. Recent corrections pulled my holdings to -ve territory.

Aurobindo: Managed by the founder. Unlike many other founders, he is willing to grow the company through both organic and inorganic way which shows his high aspirations. If things work out this could become a big story. Recovering pharma sector is another good news

Avanti Feeds: Another company that is being run by the founder with good leadership skills. People’s appetite for seafood is increasing so I believe the shrimp demand should pick up in domestic apart from the US. However carries a higher risk due to US regulations, Vietnam’s increasing competition, shrimp disease.

Bajaj Finance: Recently entered, I missed this stock 2 years back due to an early exit. Since then I have been watching it as I didn’t want to chase it due to higher PE. Used the recent correction to re-enter. Higher ROE and ROCE with a good management.

Eicher Motors: A past turnaround story under its new generation leadership. There is no doubt in the management’s execution skills and aspiration. The company is entering into its next phase, if the leadership’s plan to take it overseas and venturing into 600+ CC segment workout, another round of growth and compounding is possible. However, the current RE demand in India should provide the margin of safety for the next 3 years. So I initiated this position recently as there is a decent risk-reward. Based on the progress I will take a decision on this stock in the next 1 year

Yes Bank: Another watchlist for a long time. Recent slide game me an opportunity to enter. I feel Rana’s exit is overseen and the current valuation provides a decent risk-reward as the negatives are almost priced in.

Future Consumer: Backed by the strong network of the Future group which owns Big Bazar and Nilgris outlets. Bringing new items to the shelf is not a problem for this company. The FMCG war is heating up due to Amazon and Walmart’s interest over it as they see this as Retail 2.0 in India. Several acquisitions and merges are possible in the coming years and FConsumer has a great chance to get the strategic partnership to push growth.

Oriental Carbon & Chemicals Ltd: Dominant producer of insoluble sulfur which is used in tyres. The company has been expanding the production. Longtime holding in the portfolio.

Maruti Suzuki India Ltd: Recently entered after the meltdown. No need to explain the brand value in India. Its recent line up under NEXA is able to inspire a new set of consumers so the growth should continue

Aarti Industries Ltd: Recently started the tracking position to take advantage of China issues.

[Uservijay]

@sivaramtvl

Future Consumer : Backed by the strong network of the Future group which owns Big Bazar and Nilgris outlets.

Have they made profit and can they make profit in the future? We know history of future group and their lack of focus. Please revisit the reason and see if they can make profit in the future. [quote=“sivaramtvl, post:1, topic:20205”]
Avanti Feeds : Another company that is being run by the founder with good leadership skills. People’s appetite for seafood is increasing so I believe the shrimp demand
[/quote]

One may want to see how much margins is possible for a commodity and what is the entry barrier and possibility to scale.

[sivaramtvl]

Sector	Company	Current Price	Avg Buy Price	Entry Price	Entry Date	Allocation	Returns %	PE	ROE	ROCE
Finance - Gold	Manappuram Finance Ltd.	134.1	88	91	May-17	14.0	53	12.9	18	13
Chemical - Tyre	Oriental Carbon & Chemicals Ltd.	1147.3	1013	459	June-16	9.6	13	16.1	15	18
Finance - Consumer	Bajaj Finance Ltd.	3533	2053	2219	October-18	9.5	72	52.3	20	12
Manufacturing	GMM Pfaudler Ltd.	1366.3	1117	1085	November-18	8.3	22	47.1	20	29
Manufacturing	Acrysil Ltd.	97	112	125	January-19	8.3	-14	14.6	10	11
IT	Tata Elxsi Ltd.	849.15	939	962	April-19	8.1	-10	18.7	37	56
Chemical	Aarti Industries Ltd.	1727.7	1421	1270	November-18	7.7	22	32	22	16
FMCG	Godrej Consumer Products Ltd.	658.1	681	708	June-19	7.7	-3	32.9	25	21
Finance - Auto	Cholamandalam	280.85	246	237	February-19	7.0	14	19.1	20	11
Pharma	Caplin Point Laboratories Ltd.	412	386	358	February-19	7.0	7	17.2	48	63
Auto Ancl	GNA Axles Ltd.	269.4	294	281	May-19	4.9	-8	8.8	15	18
Infra - Basket stock	PSP Projects Ltd.	519	458	447	March-19	4.1	13	20.7	31	43
Infra - Basket stock	KNR Constructions Ltd.	287.05	250	243	March-19	3.6	15	15.1	26	24

Used the last 9 months months market turbulence to restructure my portfolio. Adding more whenever opportunity arises.

Manappuram - They have a strong network in South India. Hailing from Tamil Nadu, I could visibly see their presence and familiarity among the locals. I see this as a good business for at least the next 5 years as South Indians thirst for gold and land is continuing. The mortgaging land is tedious when the need is for short-term and small so people obviously going for gold loans.

Bajaj Finance : I missed this stock 2 years back due to an early exit. Since then I have been watching it as I didn’t want to chase it due to higher PE. Used the October correction to re-enter and sitting tight since then even though I am not comfortable with the valuation. Want to hold as long as the growth prevails.

Oriental Carbon & Chemicals Ltd : Dominant producer of insoluble sulfur which is used in tyres. The company has been expanding the production. Longtime holding in the portfolio. Recently increased the allocation.

GMM Pfauder : A proxy play to pharma with a dominant share in glass lined equipment. With good order book for next few years this seems to be a safe bet on Pharma.

Acrysil : A premium granite SINK and other kitchen utils manufacturer that has strong presence in exports now eying to capture the domestic market. Company is consistently growing and now expanding capacities. Has been a slow story but believe it would work well in 3 years if everything goes good.

Tata Elxi : Has a good track record and believe the distribution and modernization happening in auto industry would bring more orders to this IT company in long term.

Aarti Industries Ltd: With the roll over orders in hand for next 3 to 5 years, Business should perform well. Need to evaluate after that.

GCPL: Hold solid brands like “GoodKnight” and has been expanding into different markets and different consumer segments like car refreshers, detergents. If few of it work out, it will add to top line. Replaced Ambika with this as a long time compounder as I felt comfortable with the valuations.

Cholamandalam: Another company that I was tracking for so long, entered during the NBFC crisis. Good management (Murugappa group) with good track record.

Caplin Point: A non branded generic player with consistent growth record. Now expanding into multiple new countries and trying to increase sales aggressively. Betting on their growth story as the management has proven their capability in the last 5 years.

GNA Axles - A 500 Cr MCAP company with an annual sales of 1000cr. Has been growing steadily with a decent ROE even during the auto slowdown. Felt that it is undervalued.

PSP & KNR - Betting on India’s infra growth. A bit risky due to political interference in getting new contracts hence used the basket approach.

My portfolio is skewed with NBFC stocks (manappuram, chola, bajajFin). As I don’t want to sell any of them so reducing the exposure by not adding more allocation to them.

I am also watching ITC to start a position. I request fellow investors to share your valuable feedback.

[sivaramtvl]

Over the last 3 months, I made a bunch changes in the portfolio. Have added half dozen mid/small caps that are available at reasonable valuation and sold stocks that hit stop loss.

• Exited Tata Elixi (sold at ~730) as it hit my stop loss.
• Reduced Caplin point (sold part of my holdings at ~440) and added Biocon and Hikal. Instead of stock specific approach, moved to a basket approach in Pharma to reduce risk.
• Entered ZeeLearn (4%) - PlaySchool business is doing well, available at reasonable price. There is a risk because of pledging as zee group is in trouble. So just 4% allocation.
• Entered Mangalam Organics (4%) - Newly entered into B2C business with several camphor products. Available at reasonable valuation. Camphor price risk is there so having just 4% allocation for now,
• Entered KMC Speciality (4%) - Capex cycle is complete so returns should improve in coming years. KMC is located in Coimbatore (TN). I have visited the hospital and they have decent reputation in the locality. At the current valuation downside is low.
• Entered Mold-Tek Packaging (3%) - Niche business, Having several market leaders as client. Believe it has a long runway. Started doing monthly SIP, aim is to have 8% allocation by a year.
• Entered Piramal (3%) - Bought at 1660 as it was at very attractive valuation, before adding few more it moved up. Just a momentum play, don’t want to add more as I already having lot of financial stocks.
• Added GNA Axles, GCPL, Acrysil, and Chola

[shekar]

How was your returns till date. Also can you pls update your latest pf as it seems good

[sivaramtvl]

@shekar
At present, my portfolio is so diverse as I didn’t want to give high allocations for any of my new stock as most of these are small/mid caps and the recent bear market has created a fear in me to allocate high capital in any stock.

In the last 18 months of bear market, most of my portfolio stocks has survived compared to broader market as they have recovered from the all time low to some extent. One other reason is that I have grown my portfolio by 3x during this period so I bought most of the stock at decent valuation. I booked loss in Yesbank (45%), Tata Elxi (20+%), Eicher (5%) during this period.

Overall my returns (XIRR) is flat since my investment journey. I started investing around 2015 November as a dump investor, bought several good and junk stocks, sold good ones for 10% to 20% profit and booked heavy loss on junk ones. Only by 2018, after reading valuepickr, I started constructing some meaningful portfolio but sadly thats when bear market started so currently I have made nothing out of market as my XIRR is somewhere below 1.0. In contrast my mutual fund portfolio’s (that I started by 2014 mid) has given 12% XIRR till today. I have 25% allocation to MF and 75% allocation to stocks.

S.No	Industry	Company	Current Price	Average Buy Price	Portfolio%	Return %
1	NBFC - Gold	Manappuram	127.75	87.89	10.69	45.36
2	NBFC - Consumer	Bajaj Fin	3702.20	2053.00	8.03	80.33
3	Manuf	Acrysil	107.40	112.30	7.46	-4.36
4	Manuf / Pharma	GMM Pfaudler	1519.90	1117.07	7.45	36.06
5	FMCG	GCPL	684.75	673.80	7.15	1.63
6	Auto - Tyre	OCCL	1050.25	1013.43	7.07	3.63
7	NBFC - Auto	Chola Fin	290.35	247.25	6.17	17.43
8	Chemical	Aarti Ind	1623.80	1420.65	5.84	14.30
9	Pharma	Caplin Point	422.15	394.59	4.45	6.99
10	Auto - Aux	GNA Axles	260.20	287.81	4.23	-9.59
11	Pharma	Biocon	228.05	225.38	3.92	1.19
12	Pharma	Hikal	155.70	156.32	3.78	-0.40
13	Education	Zee Learn	22.10	22.02	3.32	0.34
14	Infra	PSP Projects	513.35	457.74	3.25	12.15
15	Manuf	Mangalam Organics	354.15	292.54	3.13	21.06
16	HealthCare	KMCH	11.60	10.83	3.06	7.10
17	FMCG	ITC	238.05	247.54	2.93	-3.83
18	Infra	KNR Cons	230.95	251.29	2.41	-8.09
19	IT - Pharma	Take Solutions	114.15	97.47	2.16	17.11
20	Manuf / FMCG	Mold-Tek	290.15	261.00	1.78	11.17
21	NBFC	Piramal	1848.45	1663.80	1.72	11.10

[Shivkumar]

i think you have a very good portfolio which would do very well over the next few years. You could increase allocation to Piramal and may be add L&T Fin holdings as well. Bajaj Fin could be held for a really long time. the new tax laws will make this company even better.

I know nothing about a few companies here but would certainly avoid Zee Learn.

I have no clue about stuff like XIRR and other management school stuff. If you could add from your regular income/salary on dips you should not have any problem.

[sivaramtvl]

@Shivkumar

i think you have a very good portfolio which would do very well over the next few years. You could increase allocation to Piramal and may be add L&T Fin holdings as well. Bajaj Fin could be held for a really long time. the new tax laws will make this company even better.

@Shivkumar
Thanks for your feedback. Yes I am buying from my regular income but not following any strict SIP kind of pattern. I purchase stocks 2 to 4 days every month mostly when market slide. Currently I am left only with emergency funds (1 year projected expense) so I would like this bear phase to run for few more months so I can deploy more money.

[sivaramtvl]

I have restructured my portfolio.

• Exited - GMM@1750(60% profit), Mangalam@299 (2% profit), Piramal@1750 (5% profit), Mold-Tek@273 (2% loss), Take Soln@110 (12% profit), KNR@255 (NA)
• Reduced - AarthiInd (sold 40% @ 1020), Acrysil (sold 50% @ 130), OCCL (sold 50% @1050), Caplin (sold 20% @360), GNA Axles (sold 20% @285), Zee Learn (sold 30% @22)
• Entered a bunch of new stocks and added more to existing stocks.

Portfolio Rational

• Betting on Finance, Chemical, Pharma and Hospital sectors. To avoid risk going with a basket approach.
• Trying to exit zee learn and reduce caplin and hikal when fair price is reached.

[sivaramtvl]

Updated Portfolio

After the recent uptrend, my unrealised profit has covered my realised losses (booked between 2018 to 2020). Overall my portfolio return is just above zero, till to date (started investing from 2014, active investing since 2016).

Portfolio Rational

• It remains same, betting on Finance, Chemical, Pharma and Hospital sectors. To avoid risk going with a basket approach. Have allocation (SIPing) to Auto and Metal hoping for a recovery in next two years

I track my portfolio CAGR periodically. As my contribution to my stock portfolio is increasing YoY, I ended up investing more on the peak. Since 2018, after small and mid cap downturn, my portfolio performance is terrible as I hardly had large caps in it, and all of my previous year profit is gone. Hope I will make use of this opportunity to build the portfolio at lower valuation.

Lesions Learned so far

• Book Profits Partially during uptrend - Bajaj Finance, Chola, Avanti Feeds
• Don’t sell all at one go during uptrend - GMM
• Mind Valuations - Avanti Feeds, Eicher Motors
• Respect Stop Loss - Kajaria
• Retrospect and find value traps - Acrysil
• Don’t catch falling knife without knowledge - Yes Bank

Portfolio Cash Flow

Year	Amt Invested - %
2014	1.78
2015	2.73
2016	7.61
2017	11.49
2018	16.74
2019	47.91
2020	11.75

Portfolio Returns CAGR

Record Date	Portfolio Return CAGR (excluding dividend)	Month for Clarity
03/06/17		jun
10/09/17	26.79%	oct
03/12/17	22.65%	dec
29/04/18	12.69%	apr
05/08/18	4.71%	aug
08/12/18	0.00%	dec
31/01/19	0.00%	jan
17/03/19	2.61%	mar
19/04/19	2.66%	apr
08/06/19	2.78%	jun
03/09/19	3.58%	nov
31/12/19	2.29%	dec
09/05/20	0.00%	may

[abdul_hakkeem]

Too many stocks, It is hard to track companies results and news. There are more than three companies in some of the sectors. It is good have only market leader and runner-up on each sector. That’s the approach to build portfolio. Better trim the positions and concentrate on market leaders on every sectors.

[sivaramtvl]

Completely agree with you. I’ve been mostly investing in micro/small/mid caps, not fruitful so far, but don’t want to jump ship now. Due to my bitter past, I’m afraid to hold a concentrated portfolio. Believing this bucket (auto, pharma, metal, chemical) approach will reduce risk and allow me to test the water before building a concentrated portfolio. Once market recovers, planning to consolidate holdings inside buckets based on earnings and recovery.

[abdul_hakkeem]

Auto, pharma, metal and chemical those sectors link with economic cycle. During bad cycle portfolio performance majorly affect. It has to be sector allocation is very important to avoid major drag in portfolio return.

[sivaramtvl]

Updated Stock Portfolio

• Exited Opportunistic bets Quess Corp, INOX, Bharti Airtel and booked profit. Will relook if it comes down.
• Entered Coromandel and UPL under agri theme as the story seems structurally strong for next 1 to 2 years. Believe it to be a relatively safe sector until corona is mitigated.
• Rebalanced / Accumulated some stocks in Pharma, Chemicals, and Auto basket.

Current Allocation

• ~ 49% in Indian Stocks
• ~ 14% in Indian MF
• ~ 29% in Nasdaq listed cos (Mostly through ESOP)
• ~ 08% in Cash

[sivaramtvl]

Updated Stock Portfolio

I’ve been consolidating my portfolio over the last month.

• As Pharma trend emerges clearly in the market, supported by earnings and future growth visibility, accumulating some stocks in my portfolio.
• Exited auto basket entirely as most stocks has ran up and I’m not comfortable in deploying more money at this price and circumstance. Booked profits in Lumax, Frontsp, varroc, jamna, ppap. Booked loss in GNA @Rs200 as earnings are disappointing, and heavy vehicles recovery could take more longer time. Would relook when clarity emerges or price drops.
• Booked profit in Heidelberg and Sirca. Nothing wrong with Sirca but not comfortable in adding more (due to missing clarity in Italy covid impact and recent fire accident in Ind plan ) so makes sense to sell it instead of holding tracking position
• Strategy remains same, mainly focusing on Pharma and Chemical.

[mylu]

You surely need to plan on pruning the portfolio…its not a good idea to track so many stocks.

[sivaramtvl]

Yes, feeling the same, but not mentally prepared enough to handle concentrated portfolio. So sticking with bucket approach, as and when my confidence level increases on the stock stories I track, I will minimise the portfolio size. I used to hold four stock in finance sector, and now I have reduced to one (should have been two but ok for now to hold Manappuram alone). Planning to follow the same when I am comfortable with selective stocks in other baskets.

[Southern_Cross]

Here is my analysis of your portfolio

• I think you have knowledge of identifying good businesses. So, first part of investing is done.

• What is your rationale for buying 11 stocks in pharma when you can also deploy the funds via a thematic fund like SBI Healthcare or Nippon Pharma or DSP Healthcare? Just evaluate the options. 11 active tracking Vs 1 passive tracking. As I see, you identified pharma sector in March and pharma funds gave substantial returns from then. I think restricting the basket approach to 3 or 4 is better?

• I assume you are more into fundamental analysis - Do you like or have good understanding of any sector? If this is the case, I would suggest you to keep a higher allocation to your top 2 or 3 stocks in that sector based on your conviction. When your conviction becomes stronger, you are more certain about getting your returns. If you are here to make money you need to beat FD & MF returns as you don’t need to put more time and effort for investing in FD & MF. On an average, you can expect 10 to 12% CAGR from MF if you take long term horizon like 10 years.

• You are talking about opportunistic bets. I think if you can mix your knowledge with technical analysis skills it can reward you more. I am yet to learn it.

Disclosure - Not an expert

[sivaramtvl]

@Southern_Cross

• You are talking about opportunistic bets. I think if you can mix your knowledge with technical analysis skills it can reward you more. I am yet to learn it.

• Bucket Stocks vs MF - Lot of us have a perception that, buying MF is better than holding a bucket of stocks as individual can’t track all of them. But there are lot of pros in holding bucket of stocks. I’m not getting into whats the right size of the bucket as I’m still exploring it but I can share few points on how bucket approach helps me and why I like it.
  • Small/Mid Caps - I don’t have conviction and risk appetite to bet 10 to 20% on a small or mid cap stock. Also I don’t think I can predict the next leader accurately without some luck as there are several candidates, so by investing in a bunch of potential candidates and by adjusting the allocation over time based on how they progress, I am increasing the chance of building a decent 5% to 10% on the next-leader business.
  • Regulated Industry - Sectors like Pharma always have regulatory risk. No matter how good the management is, a single notice or observation can create huge mess for prolonged period. Bucket approach de-risk this to some extent. Also from export restriction, import duty and other regulatory decisions.
  • At-least one of the stock in the basket will be a value buy most of the times, it allows me to slowly build the position by looking at the company performance and valuation. This works well for me as I’m salaried. I started with a < 2% allocation in Neuland, laurus and Biocon. When I felt that the business has the potential to grow for long term, and sector has tail winds, I slowly pumped more money and invested > 5% on each. In the next 2 - 3 years. As you said, the basket size need to be reduced definitely, once I have more clarity I will shrink my basket size by moving money to businesses that emerges well among the basket.
  • I don’t track companies too closely. I follow respective valuepickr pages, track quarterly results, read con-call summaries. So I don’t see tracking that hectic.
  • In MF, I can’t control the allocation and can’t bet more on emerging leaders so I don’t like it.
• Fundamental Analysis - I closely track my XIRR returns of MF and Stock Portfolio to understand whether my effort and time does anything good. For the last two years my stock returns are lesser than MF returns. But now the trend is reversing, I will give some more time to my stock investing voyage as I’m still learning from my mistakes.
• Technical Analysis - I’m not into technicals. When I see severe under-valuation, I but the stock with a view of 1-2 years as I can’t find the reversal trend from charts, mostly insignificant position to taste a quick 2X. Few examples, INOX @ 180, Quess Corp @ 170, Metals @ decade low.

[Southern_Cross]

I think you already have all the answers and its only matter of time you will move towards lesser basket size and eventually higher allocation to your high conviction ideas. Tracking XIRR regularly is also the way I assess my performance against other options.

I found the below post very useful and hope it also helps you. Even though, it is about PMS funds, we can also use it to our portfolio building.At the end of the day, we need to fight the inherent market volatility and so have to understand risk adjusted returns during bull and bear phases.

PMS Funds - India

Hi Yatharth, Thanks for this data. When I look at this data, I can’t help but comment because I somehow find too many gullible investors fall for statistics at exactly the wrong time. So, for the benefit of all, I want to lay down few points. Compounded Annual Returns is something not intutive to human mind. For instance if I ask you what will be your net retuns per year in 5 years if your performance is like this : +40%, +40%, +40%, +40%, -50%. Most likely it wouldn’t seem to us that perfo…

Lastly, regarding pharma mutual fund, I have recency bias here. I am invested in DSP Healthcare MF. Why did I chose the fund?

• I don’t know or have pharma background/understanding but I anticipated sector tailwind is due
• Indian pharma companies have good export market in US. The person who is tracking closely the US market can be at an advantage here as he needs to understand the business of pharma companies & regulations there. DSP Healthcare invests 25% in US pharma companies. No other pharma fund in India does this. For me, I don’t have exposure to US markets directly. This fund invests in Apple, Google, Amazon etc of pharma for me. Say, if Abbott Laboratories in US gets a vaccine for Covid-19, this fund will jump the trigger as it can be a huge opportunity.
• The fund manager(Aditya Khemka) seems to have reasonable overseas experience and also good understanding of pharma sector - generic & domestic. I saw this video of him, way after investing in this fund.

Choosing Right Stocks With Madhusudan Kela & Varinder Bansal

• The fund was having very less expense ratio and low AUM. Recently, they increased the expense ratio.

https://www.valueresearchonline.com/funds/38201/dsp-healthcare-fund-direct-plan/

I invested only in Laurus Labs and Dr. Lal Path Labs in pharma from March. The returns are better in the case of direct investing but if I compare risk adjusted returns, I feel I am lucky.

Having said all these things, I completely agree that each investor’s style and journey is different. Also, it is better to go with your strengths. Happy investing journey!!