Sumukh's Portfolio: Requesting feedback

[Sumukh]

Hello Everyone,

I entered the stock market scene in 2016 with a few thousand rupees in my hand and no prior knowledge of what buy and sell actually means. Thanks to MBA, I did gain strong understanding of what financial fundamentals of a company means. I started with Sun Pharma, Hitachi Johnson controls, Havells, Crompton to name a few. Though many of my stocks performed well, I no longer retain shares of any of these companies now. When I look back now, some of these companies have performed really well in last 2 years and my decision to move away from my original portfolio was, in a way, poor. What led me to such poor decisions? Confused mind, Fear of missing out, listen to every stock analysts voice and many such things. Be that as it may, here is list of my stocks which I have held on to for over a year now. I have seen many great posts on valuepickr and I believe I can get some valuable feedback on what I should and shouldn’t do for next 5-10 years. My investment style is more inclined towards fundamentals rather than technical, hence I am looking from a long term perspective.

Company Name (Allocation %) - Avg Price

Large Caps (44%)

1. Voltas (11%) - 570 - The stock performed really well during the sweet period of 2016-2017. It has lost its momentum for obvious reasons now.
2. ITC (6%) - 283 - Bought it last year when the govt. announced increase in taxes on tobacco products. Encouraging to see ITC expanding its presence in FMCG.
3. Dabur (4%) - 342 - With Patanjali scare waning out, It could be an interesting company to look forward to especially in rural market.
4. Reliance Industries (5%) - 763 - Really positive about its big leap into non petroleum segments (Jio, retail etc.)
5. HDFCBANK (9%) - 1768 - Evergreen stock, planning to hold this forever
6. India Bulls Housing Finance (6%) - 1054 - Was really positive last year when management talked about its strong cash flows. Starting to think now, after IL&FS impact, where it is going to make its bottom. Need suggestion on this stock.
7. L&T (3%) - 1102 - With a strong order book for next 3 years, L&T remains one of the best companies to look forward to in Infra space.

Mid Caps (36%)

1. TVS Motors (9%) - 633 - Really not positive about growth of two wheel sales in next few years. Launch of Jupiter was a positive but don’t see any new product from TVS which could match sales of Activa and Access. Need recommendation on this.
2. VIP Industries (6%) - 362 - Positive on travel and tourism industry. Luggage industries would be the biggest beneficiary. Also, VIP has brands ranging from mid to luxury segment.
3. Rain Industries (6%) - 318 - Sanctions on Russian Aluminum (and other metals) companies and Supreme Court ban has it the company really hard. I have heard news about sanctions being lifted from Rusal, but nothing has come out yet. Should I hold this stock?
4. KEC (4%) - 374 - It is one of the good EPC companies to look out for. It has a strong presence in power and utilities space. I believe that its fundamentals are good, but I am really confused as to why the shares have been falling for quite some time now.
5. NIIT Tech (4%) - 992 - Bought it because I wanted to enter IT space again after selling TCS. Looks like a good company and has signed many mid-sized deals in last 2 years.
6. Sonata Software (3%) - 310 - Bought it because I have heard a lot about its expansion into digital tech space (AI and stuff)
7. Mahanagar Gas (1%) - 844 - Bought very recently. India is going to increase its LNG consumption (going to be 2nd highest importer after China in next 5-6 years). Also, being a subsidiary of GAIL, it takes up almost all of its pipelining activities.

Small Cap (20%)

1. Suprajit Engineering (2%) - 216 - I was really positive last year when the management spoke about adding more customer accounts and expanding its product line. However, lately, I have been think otherwise about its corporate governance and its promoter’s shareholding pattern.
2. Avantifeeds (11%) - 777 - This was a stock which I entered purely on fear-of-missing-out. I feel this company is more cyclical (dependency on feedstock like soya) than pureplay FMCG. Not sure if I should average out considering that it is available at an attractive valuation. But, does this stock stiil hold the magic?
3. KEI (5%) - 319 - I am really positive about this company. Good fundamentals, has shown good returns over the years.
4. Fineotex Chemicals (2%) - 68 - Will the WHO approval ever come at all? Even despite that, do you think it holds the edge with its current product mix?

Total # of stocks: 18

Thanks for you patience for reading through my portfolio. Would really appreciate feedback on what I should/should not be doing for next 5 years

Best Regards,
Sumukh

[axiskumar]

@Sumukh

Suprajit Engineering (2%) - 216 - I was really positive last year when the management spoke about adding more customer accounts and expanding its product line. However, lately, I have been think otherwise about its corporate governance and its promoter’s shareholding pattern.

nothing got chnaged from past 1 year on promoter holding…so now tell me where is wrong in coporate govenrace what went wrong…please advise

[Sumukh]

Hey! Thanks for your response. I was scanning through VP and found this. I feel these are some valid points that user has raised. Would really appreciate if you could help me understand if these concerns are pertinent.

Suprajit Engineering

Promoters have a Private Company which is Suprajit Automotive Private Limited which is into Manufacture of special purpose machinery. The listed company is into General Purpose Machinery. Do anyone know how there is no conflict of interest between the listed and unlisted entity. How the products offerings are different. Both the Companies have Same Email Address as well as Same Registered office Address ! [Suprajit] There is continuous disposal by Director and Immediate Relative who are not …

[starpenchal2018]

Fineotrex Chemicals: Management has expressed WHO approval will come by FY18-19, I heard this news in the CNBC TV. I am not sure about this news really changes company future.

Dis: Invested

[hitesh2710]

@Sumukh

Nice to see a portfolio with a good balance of all genres of companies. large cap, midcaps and small caps.

Coming to individual companies among large caps, I would tend to prefer Bajaj Fin over Ibulls HF. (or preferably another strong private bank as I think these private banks are going to benefit due to the fiasco in the NBFC space. I would also increase allocation to L&T.

In the midcaps space too there is a good selection of companies. I like the picks in tech sector. Both are good cos. KEI also seems to be on a roll like all cable companies. Not too much knowledge about fineotex.

What I think you need to do is to work on the allocation part. Wherever you feel the company has good future and is available at decent valuations you should increase the allocation. Another thing you should always be mindful is about what to do in case of the inevitable mistakes that happen in investing. Its always a good idea to sell or alteast trim the holding if the thesis has not worked out or if the investment process has been wrong.

[homemaker]

@Sumukh

Would like to know your rationale of picking KEI. Its a cable manufacturer…and I suppose cable is not a new product category… Then what are the key drivers here. Thanks!

1.Is the market for cables recently opened up like for optical fiber its 5G and broadband
2.Exports
3.Raw material cost down
4.Is it cyclical or stable
5.Is competition Weakening

[Sumukh]

Thanks for your response @homemaker . My pointers about cable industry and KEI in particular are:

1. Good presence in emerging countries, especially, those which want to emulate India’s Rural Electrification projects.
2. It is not just a transactional seller of its product but also provides EPC solutions, so that way they have strong customer relations.
3. I work for a heavy electrical company and know for the fact that there are not many players in the high voltage cable segment.
4. Not many known brands in this segment aside from Havell’s (operates in low to medium voltage segment) and KEI. KEI spends a lot on advertisements which is good for brand recall.

Regarding your questions:

1. I am not sure if KEI is into optical cables. I need to check, but KEI’s strong hold is in electrical cabling - low to high voltage.
2. As mentioned above, there is a lot of potential in emerging economies, especially our neighboring countries.
3. I guess this is one area which has affected cable industry. I am not sure if this would subside anytime soon.
4. I have never understood the concept of cyclical vs stability. Every industry, in a way, is cyclic in nature - some are long and some are short. Maybe, cable industry is more in the mid-range which does well when the infrastructure space is doing well.
5. As mentioned above, it does score well in certain niche segments such as EPC solutioning, High Voltage cables etc.

[Sumukh]

Thanks for the suggestions @hitesh2710. I have noted down your points and will work on it to calibrate my portfolio.