Southern_Cross's Portfolio

[Southern_Cross]

Hi Ranjith,

Thanks for the detailed comments. Here is my response.

@Ranjith

JSW steel,NMDC :- Metal until we know when to enter and when to exit its difficult to track and understand cycle. If strategy hold and sit tight long time then this kind of stock will derail returns.

Totally agree. I am closely tracking this sector and will not see this as buy and hold.

@Ranjith

Kaveri seeds,Graphite: This also look cynical. If allocation is less you can increase same on other company as 1 or 2% don’t feel much advantage

Right. These companies are cyclical and so will not fall under long term holding. We need to seize the opportunity and get out. I am actually doing the same. Regarding the allocation, I think I am still not that confident in playing cyclicals. Consider that I am in learning stage, trying to understand the game. Once I get a good hold of cyclicals, that’s where I think I can go for higher allocation.

For example, NMDC is going to give a very good Q3 result considering the fact that there is increase of both volumes and iron ore price. In December itself, NMDC hiked the price from Rs.4000 per ton to Rs.5700 per ton. The iron ore price was around Rs. 2600 per ton in March 2020. Most of the sales increase due to iron ore price increase is going to add to the bottom line as NMDC does not have any vendors to pass the price benefit.

@Ranjith

Lupin: 1% with pharma side they constantly disappointed growth side last few years. You can increase Laurus or abbott instead of keeping one stock with 1% allocation.

@Ranjith

Exide I like much better than AMAR raja and again 1% allocation is kind of may not return PF return.

@Ranjith

Instead of Muthoot,Bandhan stick with prominent player, since you have HDFC bank, how abt kotak? Why two small ant instead of having big elephant in portfolio and have great visibility with credible promotor.

Basically, I bought all these as part of Coffee Can. So, these were one of those 12 companies where sales have grown every year by some 10% consistently. From what I understand from Saurabh Mukherjea in the book - Coffee Can Portfolio, In a period of 10 years, not all years a stock can give positive returns. May be 4 or 5 times in 10 years they give and then there is sector rotation. I see coffee can stocks as a basket and so unless something extra-ordinary comes, may not sell any of the original allocations till 2028.

@Ranjith

SBI parents available cheap and any day SBI is PSU. SBI cards may look good but any policy change may come from govt and promoter is prone to govt intervention. In future sbi if need money they may need to dilute SBI life or SBI cards to cover NPA mess.

Yes, SBI is at a very cheap valuation. I was actually probing on why HDFC AMC funds were not performing. One of the big allocation companies is SBI. So, then I started reading about SBI and its subsidiaries and bought some shares at 183. SBI has fantastic subsidiaries(SBI cards, SBI Life, SBI Capital, SBI MF,SBI Pension funds etc) and also not many people know that SBI & by way of its subsidiary SBI Capital has around 8% stake in NSE which is hovering around 50,000 Crore market cap in unlisted form. However, based on the same rational you mentioned I sold SBI at 240. Eventually, I think I will also sell SBI cards. This is the reason why I did not add/average after IPO.

@Ranjith

If you wish instead of BSE which going doldrums in volume of transaction, consider CDSL for financial theme. Most discount broker have CDSL and volume /transaction looks good. Bse losing market share gradually

My rational for BSE is written here.

BSE (Bombay Stock Exchange)- Bet on Financialization?

Here is my analysis of BSE Limited Stock Exchange Sector Analysis Financialization theme - India is a developing country and the average age of Indian is 29 years. With literacy rates and per capita income increasing, the share of financial assets as a percentage of GDP is bound to increase.Stock exchange business is like a toll bridge for financial instruments like stocks, mutual funds, derivatives with relatively stable operating costs. Companies approach stock exchanges for benefits of lis…

The current market cap is 2832 crores. The cash equivalents are 1843 cr as per screener.
BSE’s stake in CDSL(5500 crores market cap) is 20% - 1100 cr. Let’s give holding company discount of 50% - 550 cr. India Inx, which is its subsidiary at GIFT city was valued at 300 cr by ICICI. Currently, BSE has 90% stake.
BSE Star MF which is like a part of its business is commanding around 2000 cr as per below article. Let’s give 1000 cr as a lesser estimate.

BSE may sell minority stake in StAR MF, shares jump 4%

Basically, what I would like to convey from these calculations is - there is very less chance of downside here. On the upside, it can give me disproportionate returns if India INX and Star MF clicks. Right now, I am at 50% profit which is giving me some valuation comfort.

Regarding opportunity cost, like why not invest in a consistent compounder like Abbott India? Or why not a B2C companies like Godrej Consumer products, Marico, Dabur, Nestle India, Britannia, HUL etc.? Yes, I do get these doubts time and again. the answer I get is I have to understand valuation and business cycles properly and that’s what I am going to do now.

Regarding allocation of minimum 5%, I completely agree and it is in progress.

Apologies in case of lengthy writing.