Southern_Cross's Portfolio

Here is the latest portfolio

Sr. No Company Sector Capitalisation Allocation % Rationale
1 HDFC ASSET MANAGEMENT COMPANY LIMITED (XNSE:HDFCAMC) Financial Mid Cap 11% Financialization theme
2 LAURUS LABS LIMITED (XNSE:LAURUSLABS) Healthcare Mid Cap 9% Growth
3 BSE Limited (XNSE:BSE) Financial Small Cap 9% Financialization theme
4 AVENUE SUPERMARTS LIMITED (XNSE:DMART) Services Large Cap 8% Long-term retail play, debt free
5 HCL TECHNOLOGIES LIMITED (XNSE:HCLTECH) Technology Large Cap 8% Coffee Can
6 OLECTRA GREENTECH LIMITED (XNSE:OLECTRA) Automobile Small Cap 8% EV theme
7 DR. LAL PATHLABS Limited (XNSE:LALPATHLAB) Healthcare Mid Cap 7% Coffee Can
8 DEEPAK NITRITE LIMITED (XNSE:DEEPAKNTR) Chemicals Mid Cap 6% Growth
9 ABBOTT INDIA LIMITED (XNSE:ABBOTINDIA) Healthcare Mid Cap 6% Coffee Can
10 ASTRAL LIMITED (XNSE:ASTRAL) Chemicals Mid Cap 5% Coffee Can
11 GATEWAY DISTRIPARKS LIMITED (XNSE:GATEWAY) Services Small Cap 4% Promising sector for future
12 TITAN COMPANY LIMITED (XNSE:TITAN) Cons Durable Large Cap 4% Long-term retail play, debt free
13 PSP PROJECTS LIMITED (XNSE:PSPPROJECT) Construction Small Cap 4% Asset Light business in construction
14 ADITYA BIRLA SUN LIFE AMC LIMITED (XNSE:ABSLAMC) Financial Mid Cap 4% Financialization theme
15 Fsn E-Commerce Ventures Ltd (XNSE:NYKAA) Services Large Cap 3% Growth
16 INDIAN ENERGY EXCHANGE LIMITED (XNSE:IEX) Services Mid Cap 2% Growth
17 HDFC BANK LIMITED (XNSE:HDFCBANK) Financial Large Cap 2% Coffee Can
Stocks
Top 5 46%
Top 10 76%
Top 15 98%
Market Cap
Large Cap 25%
Mid Cap 49%
Small Cap 26%
Sector Split
Financial 27%
Healthcare 21%
Services 17%
Chemicals 11%
Technology 8%
Automobile 8%
Cons Durable 4%
Construction 4%
Defensive 29%
New Age/Theme 11%

Investing Objectives –

Return of Capital - :+1:
Beat BSE Sensex in terms of CAGR :+1:
Beat FD returns :+1:
Reach 15% CAGR :+1:
Beat MF(direct) returns (21% Vs 17% CAGR) :-1:

Changes -

  • Bought 4% ABSL AMC based on this rationale

  • Sold 1/3rd of stake in BSE Limited

Notes -

  • BSE Sensex is almost neck to neck with PF returns

  • The gap between returns from MF and stocks has increased even further. Thanks to fund managers

  • Ideally, I would have increased stake in HDFC AMC in place of adding new entrant ABSL AMC but valuation wise, ABSL AMC is very attractive. The only thing which can hurt can be any possible corporate governance issue which HDFC AMC is considered to be quite good. It also means, I spread my risk in financialisation theme from 2 to 3 - BSE Limited, HDFC AMC and ABSL AMC. To be very honest, UTI AMC is even better in terms of valuation but the promoter share holding is going to be a recurring problem there. HDFC is also attractive in its valuation especially with real estate upcycle however, in financials, but I am little biased towards exploring financialisation theme specific to AMCs.

  • Olectra lost 5450 mega electric bus tender to Tata Motors due to lowest cost quote. I did a very good research about Tata Motors in 2018/19, especially their R&D spend was one of the best in the world at that time. However, I did not go further looking at its debt. During the March 2020 crash, the price of Tata Motors has fallen below its book value and in fact, the market cap was below 30k crores. With a strong promoter like Tata, given that it was its down cycle, it must have been an easy pick, given the fact that with so much of liquidity around, the interest expense also can be brought down. For now, comparing between Olectra and Tata Motors, the chance of Olectra giving higher returns is much more given that the market cap of Olectra is below 5k Crores and recently they won 2100 Electric Buses Order which is worth ~3600 Crores. As Olectra has to deliver them in an year’s time, the price/sales is going to be less than 1. Apart from that, the promoter is rebranding Olectra where they are no longer going to be dependent on BYD from China. With government itself looking for 50,000 Electric Buses in 5 years, the sector can give multiple winners with demand in place and also with localisation policy enforcement in place, costs also can become less in future

  • The reduction in share price of Dr. Lal path labs is significant. Diagnostic space is attracting multiple big firms as the opportunity size is gong to be huge. The latest one is Tata 1mg which started with promotional pricing of 100 Rs for some medical tests whereas the existing players are charging higher. Now, the valuation multiple got reduced immediately. My idea of staying put in this company is - the company is nimble in upgrading its technology, have deep understanding of target market and looking for adding the next level tests. Mr. Arvind Lal who is the MD mentioned that they are not going to cut the prices due to the competition. As per Dr. Velumani, ex-CEO of thyrocare technologies, to capture B2C market of diagnostic space, around 1 billion dollars of money needs to shell out. For a Tata backed company, funding should not be a problem but then Tatas are also not successful in all of their ventures. I could have sold my shares immediately after Tata 1mg news came up and sit on the sidelines till I get the confirmation but then I wanted to stay put. The experience is going to be more useful here
  • Studied a mining company called OZ Minerals by going through their annual report. The company gives dividend regularly and also is a big beneficiary of post-covid commodities boom. Their incentive structure for executives is well worth replicating in cyclical industries.

Interesting Videos -

Astral is one of those few companies which has increased their cashflows significantly. Their enterprising foray into adjacent segments is worth listening to from the founder & promoter himself in this video. From pipes and adhesives, now they are expanding into the new segments - tanks, valves, faucets, paints and some infrastructure divisions. Many companies are entering the paint business with Grasim recently announced 10,000 crores capex to their paints business. I have a vague feeling that Saurabh Mukherjee in his appreciation for Asian Paints business spilled out to the market that its not about the quality of paint but mastering the logistics in selling paints. Astral is targeting 600 cr revenue in coming years from its paints business. With signs of real estate cycle in the uptrend, may be Astral wanted to capitalise the opportunity the market is presenting now.

@harsh.beria93 has explained well about correlation between returns and the valuations here. The art of selling has to be mastered to beat index returns.

5 Likes

Interesting Insight. Do these promoters listen to PMS managers like Saurav Mukherjea before venturing into any segment? I mean didn’t they already know , what is the strength of companies in general, being in Indian Business community for so long? Because , I have always found Saurav Mukherjee to be wanting in his research and data analysis. He is a Macro storyteller, which hypnotizes the lay retail investor and he always paint all with same brushes, missing out on small nuances as he may be incapable of giving proper attention to details. I have read all his books and find that he exaggerates too many thins , just to support his already decided narratives. So in my opinion, retail investors may get carried away with his style, but experienced promoters of established companies may not give him any attention. Your views are welcome.

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It is a given fact that every established company will have a market research team to continuously evaluate the competitors and also look for areas of expansion. Like you mentioned, Saurabh Mukherjea is a storyteller, the quality which inherently compels him to give more details to entice the audience further.

In the above video, he is giving out the numbers, underlying business model and strengths & weaknesses. Now, as and when his research team comes to know about some other snippet, he unknowingly will also share it with others as part of evaluating some other opportunity. When I say, I have a vague feeling, I mean to say I’m not sure but the story teller mindset can spill out information more than required to the market. In my opinion, Saurabh Mukherjea has got good research team. And this story telling helps him in getting more clients, selling more copies of his books and eventually gets more intellectual satisfaction.

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Here is the latest portfolio

Sr. No Company Sector Capitalisation Alloc % Rationale
1 HDFC ASSET MANAGEMENT COMPANY LIMITED (XNSE:HDFCAMC) Financial Mid Cap 12% Financialization theme
2 BSE Limited (XNSE:BSE) Financial Small Cap 8% Financialization theme
3 AVENUE SUPERMARTS LIMITED (XNSE:DMART) Services Large Cap 8% Long-term retail play, debt free
4 HCL TECHNOLOGIES LIMITED (XNSE:HCLTECH) Technology Large Cap 8% Coffee Can
5 OLECTRA GREENTECH LIMITED (XNSE:OLECTRA) Automobile Small Cap 8% EV theme
6 DR. LAL PATHLABS Limited (XNSE:LALPATHLAB) Healthcare Mid Cap 8% Coffee Can
7 GODAWARI POWER AND ISPAT LIMITED (XNSE:GPIL) Metals & Mining Small Cap 7% Cyclical debt free & Value
8 DEEPAK NITRITE LIMITED (XNSE:DEEPAKNTR) Chemicals Mid Cap 6% Growth
9 ABBOTT INDIA LIMITED (XNSE:ABBOTINDIA) Healthcare Mid Cap 6% Coffee Can
10 ASTRAL LIMITED (XNSE:ASTRAL) Chemicals Mid Cap 5% Coffee Can
11 PSP PROJECTS LIMITED (XNSE:PSPPROJECT) Construction Small Cap 5% Asset Light business in construction
12 ADITYA BIRLA SUN LIFE AMC LIMITED (XNSE:ABSLAMC) Financial Mid Cap 5% Financialization theme
13 GATEWAY DISTRIPARKS LIMITED (XNSE:GATEWAY) Services Small Cap 4% Promising sector for future
14 Fsn E-Commerce Ventures Ltd (XNSE:NYKAA) Services Large Cap 3% Growth
15 LAURUS LABS LIMITED (XNSE:LAURUSLABS) Healthcare Mid Cap 3% Growth
16 INDIAN ENERGY EXCHANGE LIMITED (XNSE:IEX) Services Mid Cap 2% Growth
17 HDFC BANK LIMITED (XNSE:HDFCBANK) Financial Large Cap 2% Coffee Can
Stocks
Top 5 45%
Top 10 76%
Top 15 96%
Market Cap
Large Cap 22%
Mid Cap 47%
Small Cap 32%
Sector Split
Financial 27%
Healthcare 17%
Services 17%
Chemicals 11%
Technology 8%
Metals & Mining 8%
Automobile 8%
Construction 5%
Defensive 25%
New Age/Theme 11%

Investing Objectives

Return of Capital - :+1:
Beat BSE Sensex in terms of CAGR :-1:
Beat FD returns :+1:
Reach 15% CAGR :palms_up_together:
Beat MF(direct) returns (19% Vs 15% CAGR) :-1:

Changes -

  • Sold off Titan & 60% of Laurus Labs
  • Bought 7% of PF in GPIL based on this rationale

Notes -

  • BSE Sensex is performing slightly above in terms of returns

  • PF is down by 14% in Calendar Year 2022

  • The MF portfolio is more resilient than the stock PF as I did not deploy capital in MF after Dec 2020 but I still bought/sold in stock PF after Dec 2020. Ideally, if there is no incremental capital, I should have reduced my equity component as part of rebalancing exercise of my Equity: Debt ratio.

  • It takes a lot to drop a company like Titan, but like Charlie Munger says, investing is akin to Parimutuel betting. I see better risk-reward in the case of GPIL than Titan. Same is the case with reduction in Laurus labs.

  • Mid-cap and Small-cap indices have corrected a lot. I am contemplating on restarting SIPs in my existing MFs

  • Growth continues in Dmart & Nykaa. Avenue Supermart: a compounding machine? - #1958 by akash_das - Dmart revenue jumped 95% YoY growth. I don’t want to advocate BAAP(Buy At Any Price) but holding Dmart gives a sense of safety even though it always stays at high valuation. In the end, investing is about paying for the certainty of returns - predictability and sustainability of the earnings. I convinced myself to not sell it even though the stock was way overvalued when it was quoting at more than 5000 Rs as I felt staying put is more profitable for my PF in the long run and big corrections if any can be bought on dips.

  • Long-term Investing in small/micro caps is very difficult. As I mentioned in the beginning of the thread, Muthoot Capital Services was selected as part of Coffee Can Portfolio stocks mentioned in the namesake book by Saurabh Mukherjea. That means, the stock displayed a consistent sales growth YoY and also ROCE for 10 years. Even then, the stock is now a fallen angel. The chance of it raising is very less as compared to its market cap of 276 Cr, it has a PBT of -229 Cr. I sold this last year as I could not convince myself staying on course with this even though, management is good, consistency in execution till March 2020. Especially, in finance sector, it is better to stay with leaders. The stock has fallen more than 50% from my sell price.

  • For a part-time investor like me, I see two approaches to make profit in stock market

    1. Looking at index’s long-term PE or develop some other mechanism where we already track the company and get an estimate of normalized earnings and then enter when risk/reward is better. This PF thread explains this well.

    2. Study a company in-depth, do extensive research and if the conviction is very high, enter at full force even in the middle of a bull market. The number of companies in the watch list should be very less and also conviction should be very high.

Based on the investing style, top-down works well with 1) and bottom-up with 2).
I am more of a top-down investor.

  • Few years back, while I was working in Paris, having seen different regions of France, I asked my then French manager about what would have been the motivation of general public(not government) to leave this resource rich, beautiful and highly developed region and work in relatively tough climates & foreign conditions elsewhere during French empire. He is a wise man and thought for sometime and told me, the primary reason must have been about inflation, security of future and then of course the attraction of high lamps & services. Reading about high inflation these days, I remembered those words

Words of Experienced Investor -

@zygo23554 has explained about the last decade in investing in this blog and I found the below words worth reading again

From whatever experience I have as a money manager in India, I can tell you this -

At an annual pre tax return of 8.5% from fixed income, many investors will happily take that over the volatility of investing in the equity market.

The most likely outcome of buying and holding the headline benchmark index in India over a 5-year timeframe has been a CAGR of 10-12% p.a. Across the world, investing gurus and academicians agree that the equity risk premium is broadly in the range of 5-6%. From here one can do the math and see how a 12% p.a. return from equity isn’t very superior to a credit risk free 8% p.a. in fixed income on a risk adjusted basis.

Doesn’t mean one stays away from equity, it is still one of the only few asset classes that has been proven to beat inflation over longer time frames.

It just means that one should be more demanding of above average growth from businesses rather than happily pay up 50 PE for a 10% growth based purely on 5-year average multiples. Consider 10-year average multiples to demand a higher margin of safety from here, of course adjusted for changes in business quality over the timeframe.

For this very reason, valuation is an art and not just a science.

7 Likes

Where are such opportunities apart from PF / PPF ?

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PPF returns is 7.1% and not 8.5% and going forward this return will come down…

I did not explore much into debt category and right now, my debt portfolio contains only FDs/Savings Account.

Apart from this, the fixed income constitutes debentures, bonds, debt mutual funds & ETFs.


In the above screen-shot you can see that Aditya Birla Low duration fund has a 7-year CAGR of 7.55 and the category average is 6.62

In the below screen-shot, UTI Treasury Advantage Fund 1-Year returns are close to 9. Usually, the higher the risk in the underlying bond is, more will be the returns. You may explore the underlying securities from this debt fund to find high yield ones. I have seen bonds from big listed firms like Muthoot Finance giving close to 10% yield as well in the past. As a cautionary note, government of India & RBI bonds are gold standard but even bonds from state government corporations carry risk.

In the past, Franklin Low duration fund was giving more than 9 as 3 year CAGR and I invested in it. In the first stint, I did not see any issue but in the second stint, even though I got my money back but I felt fixed income is not really fixed in debt funds.

What the author means here is, as soon as the debt funds/bonds/debentures give secured returns of 8.5%, the institutions/FPIs/FIIs leave much of high risk equities and prefer debt funds.

Rajeev Thakkar from Parag Parikh Mutual Fund actually started his career as a debt fund manager and continued in that role for many years - in fact, MF AUM has been much more on the debt side till 2014 as institutions are happy with debt fund returns. You can see that debt funds were quite popular back then. Aditya Birla MF Equity AUM jumped to 41% in FY22 of its overall AUM from 26% in FY17. FDs itself used to be touching 9% in 2000s & early 2010s. If those days are back, the demand for equities which we see now(ref high PE stocks) is meant to fall down drastically. The retail will be left high and dry. I just want to explain this to tell the importance of equity : debt mix in the portfolio.

Hope this helps.

4 Likes

Thanks a lot, it throws lot of light on the aspect.

Sharing may experience, for understanding of your readers who might be interested in debt options:

  • Historically my debt portfolio was divided in 2 components : EPF with my employer & Debt MFs.

  • For last 2 years, returns on Debt MFs had been dismal. I was not lucky enough to have invested in UTI Treasury advantage fund & thank you so much for sharing this example, shall help to deepen my understanding on debt funds. Shall study further what exactly happened from 20th Sept to 15th Oct 2021.

  • So i initiated renovation of my debt portfolio, have found few interesting material which is guiding me in addition to above post.

So am diversifying my debt portfolio with inclusion of Senior Secured bonds through Wint Wealth & RBI bonds too.

All the best in your investing journey.

1 Like

Thanks and wish you the same

2 Likes

Happy New Year!!

Here is the latest portfolio

Sr. No Company Sector Capitalisation Alloc % Rationale
1 HDFC ASSET MANAGEMENT COMPANY LIMITED (XNSE:HDFCAMC) Financial Large Cap 15% Financialization theme
2 GODAWARI POWER AND ISPAT LIMITED (XNSE:GPIL) Metals Small Cap 15% Cyclical debt free & Value
3 OLECTRA GREENTECH LIMITED (XNSE:OLECTRA) Automobile Small Cap 13% EV theme
4 HCL TECHNOLOGIES LIMITED (XNSE:HCLTECH) Technology Large Cap 9% Coffee Can
5 AVENUE SUPERMARTS LIMITED (XNSE:DMART) Services Large Cap 7% Long-term retail play, debt free
6 DR. LAL PATHLABS Limited (XNSE:LALPATHLAB) Healthcare Mid Cap 6% Coffee Can
7 DEEPAK NITRITE LIMITED (XNSE:DEEPAKNTR) Chemicals Mid Cap 6% Growth
8 ABBOTT INDIA LIMITED (XNSE:ABBOTINDIA) Healthcare Mid Cap 5% Coffee Can
9 ASTRAL LIMITED (XNSE:ASTRAL) Chemicals Mid Cap 5% Coffee Can
10 PSP PROJECTS LIMITED (XNSE:PSPPROJECT) Construction Small Cap 5% Asset Light business in construction
11 GATEWAY DISTRIPARKS LIMITED (XNSE:GATEWAY) Services Small Cap 4% Promising sector for future
12 ADITYA BIRLA SUN LIFE AMC LIMITED (XNSE:ABSLAMC) Financial Mid Cap 3% Financialization theme
13 LAURUS LABS LIMITED (XNSE:LAURUSLABS) Healthcare Mid Cap 2% Growth
14 Fsn E-Commerce Ventures Ltd (XNSE:NYKAA) Services Mid Cap 2% Growth
15 HDFC BANK LIMITED (XNSE:HDFCBANK) Financial Large Cap 2% Coffee Can
Stocks
Top 5 58%
Top 10 85%
Top 15 98%
Market Cap
Large Cap 32%
Mid Cap 31%
Small Cap 36%
Sector Split
Financial 21%
Metals & Mining 15%
Services 14%
Automobile 13%
Healthcare 13%
Chemicals 11%
Technology 9%
Construction 5%
Defensive 22%
New Age/Theme 15%

Investing Objectives

Return of Capital :+1:
Beat BSE Sensex in terms of CAGR :+1:
Beat FD returns :+1:
Reach 15% CAGR :+1:
Beat MF(direct) returns (21.8% Vs 20.1% CAGR) :-1:

Changes -

• Sold off BSE Limited after change of CEO announcement in July 2022
• Sold off DSP Healthcare MF units completely in January 2023 due to personal needs

Notes -

  1. PF is down by 5% in Calendar Year 2022 following great returns of 62% in 2021
  2. 2023 has been another good year in terms of returns in direct equity. The portfolio 1 Year returns are 43% and beats Sensex (19%) & NIFTY 500 (25%)
  3. Overall CAGR since inception (Feb 2018) is just above 20%
  4. Direct Equity: MF stands at 77:23 & Equity: Debt stands at 68:32
  5. I have intentionally stayed away from stock market most of the time after July 2022 to focus on my new job & subsequently increase my investible corpus
  6. What investing in stock market has helped me is to think clearly to understand the drivers that determine bottom-line/desired target state, appreciate the process than outcome, understand core human nature, appreciate time - I am understanding & investing in myself more now
  7. Studying annual reports of clients have become a pre-requisite for me before engaging with them to get a good overview about them
  8. I strongly believe equity investing is one of the safest & fastest ways to achieve Financial Independence given you have a sound temperament & process aligned to your goals
  9. I’m glad I stumbled upon this forum, it helped me not only to understand different thinking patterns but also refining my thoughts by way of journaling
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