Hello everyone,
I am excited to share my portfolio on ValuePickr today. This forum and its wonderful members have significantly contributed to my growth as an investor, offering invaluable insights and learning opportunities. The journey has been incredibly transformative, with a steep learning curve. Here it goes:
Overarching Philosophy: Growth with a bit (preferably a lot) of Margin of Safety
Strategies
- Quality + Growth
- Mean Reversion - > Quality business trading at dirt cheap valuations due to the act of god / cyclicality of the industries
- Margin of Safety / Deep Value - > Valuations so cheap, that minute improvements = share price movements
- Special Situations - > Demergers / Mergers where value unlocking potential is there.
The Framework
- The company should belong to the sunrise industry OR aligning with Macro trends.
- Competitive Advantage - Quantitatively (constant/rising margins, balance sheet ratios, FCF generating) + Qualitatively. (pricing power, IP based, first mover advantage, Porterās 5 forces)
- Market Cap >1000. Probability of finding mirrors increases (than just āhopefulsā).
- Look for:
- Margin of Safety by playing on:
- Pessimism
- Distressed valuations
- Sector out of favor
- Turnaround etc.
- NPM Expansion
- Product mix change , geographic expansion
- Operating leverage kicking in
- Debt repayment
- Industry outlook turning positive
- Special Situations:
- Demerger/Merger
- Rights Issue
- Margin of Safety by playing on:
- Management quality should be impeccable. They should know what theyāre doing ā Capital Allocation.
- Return on Capital (ROIC, ROCE,ROE) should be on a rising trajectory.
Fact: Companies making <10% ROE in 2003 compounded at 80-90% CAGR in subsequent 5 years. This was supported by earnings growth (low ROE ā high ROE + EPS growth)
Having all these characteristics means that the stock wouldnāt be necessarily undiscovered. But stick to valuations and do not overpay. There will always be some exceptions in the portfolio. Being rigid in anything hasnāt done anyone any good. 
Positioning Sizing is strictly based on my understanding of the business and the conviction I have.
Current Portfolio:
| Instrument | Allocation (%) | Net chg. (%) | Holding Period |
|---|---|---|---|
| AZAD | 5.96 | -1.81 | < 1 month |
| CONFIPET | 8.76 | 19.24 | 4 Years (Averaged Up) |
| ETHOSLTD | 11.78 | 55.96 | 1.5 years (Averaged Up) |
| HDFCBANK | 6.07 | 55.14 | 4 Years (Averaged Up) |
| HINDOILEXP | 9.74 | 12.06 | 5 Months |
| MAHABANK | 3.12 | 148.03 | 1.5 Years (Averaged Up) |
| NSLNISP | 7.51 | 24.15 | 1.5 Years (Demerged, Avg Down) |
| PERSISTENT | 3.72 | 1118.5 | 4 Years |
| POWERGRID | 9.80 | 79 | 2.5 Years (Averaged Up) |
| SBFC | 7.28 | 3.7 | 2 Months |
| SEAMECLTD | 9.29 | 5.22 | 2 Months |
| TEGA | 10.83 | 26.21 | 9 Months |
| TRACXN | 6.13 | -17.32 | 6 Months |
| Stock | Investment Rationale |
|---|---|
| AZAD | An exception to the framework given its lofty valuation. But Iām betting on their brave approach towards manufacturing and playing a huge role in the critical technology in the defense sector in the times to come under the atma-nirbhar Bharat theme. Security soverignity will be a key theme in Modi 3.0. Azad recently received an order from GTRE/DRDO for engines. First time they have received such critical order where they will not only manufacture sub-components but also assemble an entire engine. |
| CONFIPET | Have been averaging up (since Rs. 20/share) on this counter due to the promoterās pedigree and execution. CNG and recent partnershp with worlds largest VLGC Fleet BW LPG will lead to strong growth. Riding the rising trend of ROEs in the yers to come. A long term bet. |
| ETHOSLTD | Premiumisation play - Megatrend. Store additions, increase in SSSG and ROCE are key triggers. Their acquisition of Favre Leuba will also provide a huge optionality moving forward as their in-house brand. India-Swiss FTA will also lead to margin expansion. |
| HDFCBANK | Have reduced my holding by more than half in the last 2 years. Sold recently too. But will hold on to the remaining quantities of share. It has underperformed and will mean revert eventually. |
| HINDOILEXP | Pure mean reversion play with multiple near term triggers (Check Historical PE). 1. Dirock getting connected to the national grid. 2. B80 - D1 Well being fully operational - TBC in Q4 concall and 3. Global geopolitics will keep oil and gas prices elevated in times to come. |
| MAHABANK | Low investment at right time when PSU Banks had just started doing well. Improving all the important metrics YoY, QoQ. Building into a strong franchise and regret not being aggressive in adding this stock. |
| NSLNISP | Recently only sold my entire position in NMDC after a good run. Holding on to NMDC Steel due to 1. Business turning profitable shortly as soon as op. leverage kicks in 2. Raw material at cheap rates from NMDC 3. Disinvestment and acquisition by a Private player. |
| PERSISTENT | Riding my winner. Company has proved to be agile and muscled its way into the big boy club. Will hold on to it for the long term. |
| POWERGRID | Everyone talks about Power, Energy and Renewables but all of this is nothing without transmission. A near monopoly which is only going to play an even more of an important role as India increases is power generating capacity. Its telecom segment is growing fast and not many are talking about it. See this as a consistent compounder which also pays out hefty dividends. Have been buying regularly on falls but allocation stands complete at this point. |
| SBFC | Aseem Dhru. Thatās the thesis. SBFC is a secured lender in the micro-finance space growing cautiously in a severely underpenetrated fast growing 5 lakh to 30 lakh ticket size segment. A way an NBFC should. A long term bet. |
| SEAMECLTD | SEAMEC has the biggest fleet of high margin DSVs in the region and has recently entered into long term contracts at higher prices. Also, participating in a rising ROE/ROCE journey. Promoters have good capital allocation skills as they didnāt invest heavily like other players during the boom. There is a huge demand supply mismatch now which will remain as we enter into a 'super cycle as per many ship brokers. This is also an ancillary theme to Oil and Gas/Energy as a lot of subsea activity is anticipated in the times to come. ONGC has $11bn for offshore activities. |
| TEGA | Critical Minerals like Lithium are going to be play a central role in the times to come. Tega helps us play this theme as its operations in Chile, which has one of the largest lithium reserves, are likely to commence in the next FY. Also, the fact that its DynaPrime can disrupt the mill liner segment globally opening up a huge market share for them. High switching costs and recurring revenue along with the recent acquistion of McNally Sayaji make Tega a very attractive play for the next 3 -5 years. |
| TRACXN | Another exception - optically atleast, based on the high valuations. But Iām looking at this as a free cashflow generating business with a strong operating leverage given its business model. Weāre currently in a down cycle but with interest rates more or less peaked in the US and in India, we can see a pick up in their business in the next 2-3 quarters. Promoters seem sound and with their background (ex-Copal, IIT), we can expect them to deliver. It will test patience, but looking at this for the long term. |
I will only sell if I think that my thesis is broken or if I find a better story elsewhere or if I think that it is better to have some cash to make the most of any potential market fall (when things are really overvalued or thereās a major uncertainty around to knock off the markets like central elections)
Iām currently sitting on 10% cash. I would love to know your feedback and thoughts on my portfolio and strategy.
I will be using this as my digital diary to chronicle my journey in my personal investment journey.
