Srini's portfolio

Q&A: Questions & Answers Portfolio Q&A
1

Team,
After lot of research, I have come up with this portfolio. Please provide any feedback on this.
Stock Sector Weightage

ITC FMCG 4.01%
MCDOWELL FMCG 3.17%
IDFC FIRST BANK BANKS 11.97%
BHARTI AIRTEL TELECOM 5.98%
BIOCON PHARMA 8.98%
SYNGENE PHARMA 8.98%
NATCO PHARMA PHARMA 2.99%
TITAN CON DISC 5.98%
TATA CONSUMER FMCG 5.98%
KOTAK MAHINDRA BANK BANKS 11.97%
DABUR FMCG 5.98%
PIDILITE CHEMICALS 5.98%
PGHH FMCG 5.98%
ABBOTT INDIA PHARMA 5.98%
COLGATE FMCG 5.98%

Sectoral allocation:

Pharma 26.94
FMCG 31.14
BANKS 23.95
CONS DISC 5.98
TELECOM 5.98
CHEMICALS 5.98
TOTAL 100

I am into direct investing of late as MF fund managers did a not so great job of giving returns. Large cap gave only 3% over 6 year period. I am also investing through index funds + 2 active funds (15% nifty index + 15% nifty next 50 index, 35% s&p index 17% axis small cap 18% SBI small cap)

Rationale for each of the investments:

CRITERION:

  1. Companies should survive for 20 years atleast
  2. They should be able to have some level of pricing power and/or growth. Possibly leaders having great market share in segments.
  3. Some stocks chosen for dividend for some periodic income.
  4. Debt to equity =0 preferably
  5. High ROCE type companies in FMCG
  6. Good capital allocation policies

Banks:
IDFC First Bank --> Vaidyanathan jockey bet + next HDFC bank + opportunity to grow in large market like India --> dark horse
Kotak Mahindra Bank --> value unlocking in subsidiaries + conservative management + established top tier private bank.
Concentrated to 2 banks one emerging, one established.
Avoided NBFCs completely as most of them don’t survive for a 20 year period. Cipla experience of NBFCs etc… Also borrow long lend short currently. if interest rates were to rise and reach 9%, they may have challenges accessing capital + NPAs. Banks get RBI liquidity window.

Pharma:
Bet on Syngene + Biocon --> future listing of Biocon logistics + Syngene to be next TCS of Pharma. Biocon owns large shares of Syngene.
Bet on Natco Pharma - leadership + product pipeline + different mindset when compared with sun or liupin
Abbott - great innovation engine in Pharma.
Concentrated to 4 names

FMCG:
Colgate - dividend +daily essentials
PGHH- not everything is listed under listed enterprise. But whisper + vicks have a long growth runway. HIGH ROCE + huge untapped market for feminine hygiene products
Dabur - Great naturals focus - Knowing our country with emphasis on ayurvedic/natural , this will do well.
ITC - cigarette (declining business) but FMCG will give it a fillip - dividend focus
McDowell - premiumization pending in india - Diageo is a great company globally. seeing turnaround in key metrics. -alcohol play
Tata consumer - Starbucks + Tea

Cons Disc
Titan - great company with great products - can only get better.

Telecom
Airtel - tough business currently - ARPUs can only rise from here - debt is a major concern. So less allocation. More of a utility.

Ask is to see if you feel any changes to be done+ feedback on Allocation % of sectors . Please do remember that this is a 15- 20 year portfolio. If you believe these companies may not survive, please let me know as well. I cannot be checking portfolio often as well so it should be minimum maintenance.

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Hey Srinivasan. If you want minimum maintenance I’d suggest you go through the coffee can thread and watch videos/read the book by saurabh mukharjee. Im not a huge fan of the concept but it’s the only way that you can set and forget in the stock market (imo you have to be hands on atleast quarterly for each company). Once you set companies via the coffee can filter on screener you can be a bit more sure that they’ll perform for the next 10 to 20 years too.

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Portfolio looks fine. Don’t break head over sector allocation. It will keep on changing depending on market mood.

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My suggestion is to include IT large or midcap stocks as well

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I agree this view and I feel coffee can is overrated but my opinion may change as I continue to learn.

6

can you pls elaborate what do you mean by Cipla experience of NBFCs?

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Looks good…any reason why IT is completely missing?

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Multiple reasons:

  1. The reasoning here on IT sector (in my view) is that on the periphery it appears to be a sticky business but it is not. Every 3 years, clients open up the existing contracts to vendors and they are able to change the vendors through transition plan etc . Indian cos keep bidding lower and lower.
  2. IT companies in India do not innovate. So if any company that does not innovate, is likely to die. Most or all IT service companies don’t innovate. They only show employee additions in the presentation but not things like patents etc. In 15 to 20 years, they will be gone
  3. IT service companies are playing game of cost control through replacing experienced staff with junior staff. This is playing out now and can play out for max 2 to 3 years. After which you will have most staff under 10/15 lakhs max. All high playing employees have been rotated out. What’s the future of cost control post this?
  4. IT cos benefitted out the tailwinds of globalization etc and they no longer exist today.
  5. PPFAS does not have any IT service co in their portfolio but only 1 company. They know that era of IT services co growth/profitability is over. Persistent which has a product DNA focus is there in their portfolio. Products are risky but worth the bet according to them.
  6. Lot of digitization has happened already in most parts of the world.
  7. In general rate of obsolescence in technology is faster (vs other industries) and hence good chance that they will not offer growth/survive in 15-20 years.
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I remember reading that Cipla failed in their NBFC and had to shut it down. (unrelated diversification). I will find name of NBFC & let you know.

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Yes It was Alpic finanance.

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Yes you are right. CIPLA in reverse =ALPIC finance.

12

Interesting…you can add an ITC to the list as well…the failure was ITC classic finance…

13

Good point Srini.

What is your view on
LTTS – They do file patent too. Some for themselves, and mostly with client collaboration.

INDIAMART – Product based companies.

Disc: Invested in both.

14

Alcohol sector more poor than cigarette. Twin head winds in form of taxation and license acquisition issues. Highly regulated.

Airtel: why put your money down the drain in a broken car which may take who knows how long to get fixed, when it can work on monopolies and grow. In companies like Nestlé, Asian paints, pidilite, gmm pfaudler, vinati organics etc.

The appreciation in share price from a high quality, consistent earnings and free cash flow generating prowess of a company is much more long lived and permanent than a turnaround/PE expansion.

Best roast of average Indian value investors & most fund managers, by one and only Saurabh mukherjea.

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