Seeking Portfolio Advice - ruffles

I have started investing to make big buck but I am loosing money every day at accelerated pace of around 25000-75000/-.

Some of the picks in portfolio came with some research, and some came due to trading but couldn’t put stop loss.

V2 Retail- Largest holding in my portfolio bought around 23Jan18 of 26lacs. I was looking out for smallcap which can give big return in long term. But it is going down since i bought and now it is down by more than 60%. Thesis behind buying was B2C business which is good for long term investment. I was looking for smallcap idea in the B2C type of business and saw this holding in the PMS of edelweiss hexagon portfolio. PMS holding gave me courage and after reading their business model in AR and success of VMART in the same market gave further confidence. In Alpha Moguls Ravi was also talking big about this kind of business opportunity which V2 is tapping. So overall got convinced and bought it.

I see V2 retail falling from > 1.5 yrs and couldn’t really understand the reason of this much fall so didn’t sell it. Except one thing that SSG is negative which is not good but businesses go through ups and down but recently it falls by 4-5% every day which has shaken me and compelling me everyday to think about selling or holding it.

DeepakNitrite- bought in 2 tranches first 14lacs amount on 19Jan18 and second of 8lacs on 6may19. Recently sold at 315 of 7lacs amount.
Thesis brokerage report of edelwiess for buy recommendation and I found phenol plant will change the revenue prospect of the company. Each conference call of the company shows positive about business future and also results have been good. But for some reason, which i don’t understand, this holding is not giving return but not even loss.

Himadri Speciality Chemical- Bought on 2Aug18 of 10lacs this was a trading call to get out as soon as i make 10% but this went down and i couldn’t put stop loss. Thesis even for trading I have seen Himadri in the edelweiss PMS and i liked the business beacuse they have 70% market share of coal tar. It is fully backward integrated company and zero discharge. They have future plans like special carbon products and Adv carbon material for lithium batteries. But now this is also falling freely and I am here also down by 40% which is compelling to think about selling.

Eclerx- bought on 15Mar19 of 10lacs amount. My spouse works here and that is how i see it as good business. So when they announced buyback i bought the share thinking it will make some quick bucks but after the purchase it started falling everyday. Even though buyback was at 1500/- price, no one paid any heed to it. And I was not aware of buyback percentage only 4% of my stocks went in the buyback so i gained only 15K on 50,000/- buyback and rest of the stocks fell more than 43%. Nothing explains such a fall in Eclerx this is a good company and low P/E. Yes their revenue is not growing but business is solid.

Sterlite technologies - Bought recently 24June of ~8lacs. Recommended by Value Research Stock advisory and found their result very good inline with all the news about growing market of optical fibre cables and netwoking services requirements. Once the pledged share are removed I bought them thinking they are at cheap valuation with bright future only time will tell if i am right here.

I am struggling with my portfolio stocks whether to sell them now or hold them to see some upticks and sell them then. Right now these stocks are giving 23lacs losses. Please advise.

Eclerx is going through a structural shift from offshore to onshore. So, margins & profitability are getting affected. This is a medium term issue & things may take few years years to normalize.

HDFC Security report of Q4F19

eClerx has witnessed three consecutive years of USD revenue stagnation with declining profitability & cash generation. Return ratios have stumbled, RoE is at 18% (vs. >30% in FY17). The structural change in eClerx’ operating model (shift to onshore) has resulted in EBIT margin contraction from 31% to 18.5% with onshore rev% increasing from 13% to 22% in the last two years. We reckon that the shift to onshore will continue given the on-site heavy (North Carolina center expansion) digital projects coupled with low demand for traditional KPO services which are at risk of getting automated. We remain cautious on high concentration (68% of rev from T-10 accounts), shorter duration projects providing limited visibility, lower quality of revenue mix and growth lag to onsite investments.

HDFC Security has given sell call for the first time in last quarter. Not that I bother about that but the scenario is indeed testing patience and its better to get out now and enter in better times. Note that scenarios like this are not possible to know by an employee (your wife). They are still profitable & having projects but the growth visibility has been blurred.

P.S. I like this business & so continue to track.

Really surprised to see Eclerx is someone’s portfolio. I don’t think I have seen it anywhere else in VP.

I actually work for a direct competitor to Eclerx (CRISIL GR&A). I see that your spouse is working for the company itself. So in any case, if you have doubts regarding this industry, feel free to ask.

Perhaps some questions, I may not be able to answer publicly. So if you’d like a detailed conversation instead, feel free to DM me.

Also, why the extremely negligible allocation to Shalby?

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The broader market is witnessing a melt down similar to 2008 while the indexes are managed by heavy weights. Most of the portfolios are down by significant amount. However, I think your portfolio is way too concentrated. A portfolio with 10 stocks would also be a concentrated one whereas you have just 6 stock. For such a concentrated portfolio, you should understand each business as good as promoters if not better. Even if you do understand these businesses that well, there is a high risk of some accident in many ways. I run a concentrated portfolio too with around 10 stocks.
From the stocks you own, Deepak Nitrite is an interesting one because it seems to be a potential beneficiary of US China trade war and Ashish kacholia has recently taken a position in it. I had read good reports about it but because it has run so much in last 3 4 years, I stayed away from it. I also remember that they have recently finished a capex which can continue the growth.

Sterlite technologies is in my portfolio with highest weightage. Market is afraid of cyclical slowdown in this business and hence it has been derated. However, in latest results their margins have shown improvements and it seems like the worries of market are not playing out. Few more good quarters and market will probably rerate it because of potential upcycle which can trigger from 5g deployments internationally and network upgradation domestically. That could easily take a year though. I am positive on this stock and am holding it with conviction.

At this point of massacre in small and midcaps it’s not a good idea to sell anything at lower valuations for long term investors. Wait for 1 to 2 years and things should definitely change. In the mean time, I would look at other good stocks which have corrected and try to shift some capital to them so that I diversify my portfolio without making losses. What I mean is that, one can reduce holding in a stock which has corrected 20 percent and invest that amount in another new good stock which has equally corrected.

Good luck

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Shalby came as IPO allotment and didn’t sell them. Eclerx is not reasarch bet just bought due to some knowledge about it and primarily buyback story.

I would suggest debt/equity allocation and a part of the portfolio to be invested in mutual funds until you gain confidence to be on your own. You can start with 25% personal stock picks and 75% in mutual funds for a few years and depending on whether you can beat the market and MF returns, you can increase allocation for your own stock picks. For your own stock picks, a portfolio of 12 to 15 stocks would reduce black swan and concentration risks.

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I had discussion on risk mgmt right now it seems to me book losses and go for other good stories. So I am thinking to sell V2 retail and Eclerx. Rest I am still thinking to wait. But all this idea can change based on inputs on this thread.

Diversification can protect capital but can it make money. I didn’t go with mutual fund or a PMS for the same reason that they diversify a lot which is good for not loosing money. If we have to play with diversification then why to enter the market. I am here to make large money and it is possible with concentrated bets. If one-two stocks turned good they will change the return. I am not able to convince myself for diversification may be time will change me…

Ashish Kacholia is also invested in thee V2 retail but that is bleeding. He hasn’t diluted his position there.

I don’t follow either of them so I can’t say anything, generally speaking, its not a good idea to sell in such environment unless fundamentals are not in place and thesis is no more applicable.

Diversification vs concentration is an old debate and you’ll find lot of good discussion on it but in my opinion its good to have a portfolio of around 10 to 15 stocks at least especially when majority of the stocks are small caps because things can change real quick with them. Even with 15 stocks, we can make good alpha if majority of them do well. It’s tempting to bet big on high conviction stocks but I think diversifying is acknowledging our experties and experience in investing. It should be proportional to experience.

wrt to v2 retail, i feel its ssgr is closely linked with consumption, employment etc given the fact that most of v2 retail is focussed on tier2 and tier3 cities and towns.
so its more of a macro impact than some deterioration of company fundamentals.

what is making u sell v2 retail except the -ve ssgr ?

The free fall is inexplicable and I don’t want to keep on faith of revival. There are other triggers as well like CEO and CFO both have resigned. No positive movement in last 1.5 yrs.

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