ValuePickr Forum

Tar's Portfolio and Information Attic

For solid state batteries




Toyota is coming out with the first solid state battery car this year.

Tata Chemicals may figure out something but right now I don’t see them focusing enough on this space and I wanted concentration. Figured whoever makes batteries, EVs will still need electricity and charging infra so doubled down on my investment in Tata Power.
May enter Tata Chemicals again once they provide more clarity on their battery plant. Also, I don’t like their core business of soda ash etc.

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R&D for solid state batteries is still limited and companies like QuantumScape have a 5 year headstart. Solid state batteries charge faster, have 4 times the range and cost cheaper than lithium ion ones.

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I respect your views and decision. Thanks for pointing this out, I will delve deeper, also if any tech disruption for Tata chemicals or any company venturing into new vertical happens, it’s better if it happens sooner than later. Good it’s happening now and as you rightly mentioned need to see how battery companies or those interested in batteries respond…

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Current sector wise allocation

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Major changes in the portfolio.

Since my last update over a week ago I have further reduced my positions and removed some names. I have also hedged my portfolio by buying Dec Expiry put options on Nifty. I believe market is in a bubble and very overbought and there is possibility that it may correct this year. I don’t know when this bubble will burst nor I am capable of timing the market, hence this investment into a hedge position is my way of insuring my portfolio. The premium I have paid in buying these long dated option contract is my insurance premium. I am okay losing all of it by the year end if the market keeps rising.

If it however falls and corrects by 30 to 40 %, I will recover all my losses in the portfolio and some more.

There are clear signs of mania in the market and even my portfolio just keeps rising 1 to 2 % every day which is clearly not sustainable. More and more investors that I respect like Michael Burry and Robert Shiller are raising the alarm on this bubble. Even when I look at data Nifty PE is above 38, highest its ever been, Shiller PE is above highs of dot com bubble, CAPE ratios are above their normal levels. Everything keeps pointing to a bubble.

The current allocation to my hedge position is over 6% of my current portfolio amount which seems high but should come down to 3% as I keep adding to my existing position throughout this year. Yes, even though I believe that market is in a bubble, I plan to keep on buying as I don’t know how high this bubble might go and for how long before it bursts and even if it bursts I am insured against any downside risk.

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This is my final portfolio, any additions will be made to these names only and I may add a few IPOs as well to this list this year.

Sr.No Stock Name
1 Divis Labs
2 Borosil Renewables
3 Sequent Scientific
4 Laurus Labs
5 Indian Energy Exchange
6 Vinati Organics
7 Navin Fluorine
8 Tata Power
9 Biocon
10 Burger King
11 Deepak Nitrite
12 RACL Gear Tech
13 Syngene

Changes made to portfolio since last update

  1. Exited IOLCP and Avanti Feeds: Sales cooling off for IOLCP and I don’t want to be focused in 2 - 3 sectors so had to let Avanti go, it may still go much higher and once the headwinds for the sector clear, it may continue to perform well.

  2. Sold off some of my position in Biocon and invested that to Syngene. This was to capture the full value of Biocon investment and remove any holding company discount risks.

Resumed my SIPs into Nasdaq ETF and added one more SIP into Edelweiss China Fund.

From a full portfolio level I now hold
a. A focused 13 stock portfolio into high growth mid to small cap companies in India
b. Passive SIP into top 100 technology stocks in US (Nasdaq ETF)
c. Passive SIP into top companies in China (Edelweiss China Mutual Fund)
d. A very small exposure to some Bitcoin (which I invested in early 2017)
e. Hedges against any market risk and bubble risk

For rest of the year I will keep adding to the above and any new investments will only be made into any IPOs.

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Hi Tar,

I hold a lot of stocks that are in common with your portfolio, seen here.

As I learn and understand my companies and their value chains better, I’ve started to see gaps in my portfolio. This is my first portfolio, and I want to restructure it gradually once valuations become more attractive.

I’ve recently been studying Vinati Organics, and there’s a lot which relates it to IOLCP, such as their production of IBB and their links to BASF. There’s a lot to like about the company, except the current valuations.

I understand that you entered most of these companies when the valuations were attractive, and also withdrew your initial investment in IOLCP, but could you tell me what made you sell IOLCP and hold onto Vinati, as both have an exciting growth runway ahead, but IOLCP is more attractive on the valuation front.

I ask because I’ve realised that I have a lot of API manufacturers in my portfolio, and I’d like to have some exposure to a pure CRAMS company. I’m trying to decide which companies to axe.

Thanks!

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Reason for selling IOLCP were
Wanted concentration in my portfolio
Couldn’t track more than a few companies and researching new ones takes me at least a month before I decide to buy a company. My process involves, researching a company from screener, reading about it on value picker (the entire thread from start to finish), reading conference calls (at least of the last 2 quarters), researching the industry, listening to management, researching about them on LinkedIn and whatever material I can find and then finally building my one page thesis on possible triggers for the industry along with the company.
All of this takes me a lot of time and if a company doesn’t excite me in first few hours of research, I don’t follow it with further investing.

Having a full time job + studying for my CFA designation and having a life in between doesn’t leave me with much time. So I had to decide to concentrate my portfolio into companies I really believe in and understand very well.

This exercise left me with 12 stocks that I am most convinced about, so much so that if they were to fall 50% tomorrow, I would be taking a loan to buy them. Every other stock that didn’t meet this 50% drop criteria was removed from my portfolio.

This meant selling
Hindustan Foods (I bought it at 800, sold it off at 870. Its gone 2x since I sold it)
IOLCP (reasons for selling mentioned in detail below)
Happiest Minds (I decided to passively invest into Nasdaq ETF rather than track tech service companies in India, sold it off at 350, gone up 60%+ since I sold it)
Tata Chemicals (sold it at 480, gone up 70%+ since then)

Why I sold IOLCP
The company while cheap right now has various reasons behind it. I entered the company at avg buy price of 140 and sold it off in multiple tranches till it reached 900.

Its a single product company that is trying to remove concentration risk by diversifying into other sectors like specialty chemicals. IOLCP benefitted from the Covid related tailwinds and BASF temporarily exiting ibuprofen market. IOLCP also sells its product at current market spot rates without really having any purchase agreements in place with its customers. This also created temporary tailwind for them as demand for ibuprofen shot through the roof during the pandemic. All this helped the stock rerate itself.

These tailwinds will disappear or at least significantly diminish in the coming months. BASF has re-entered the industry, demand for ibuprofen is declining and reverting back to mean and as such elevated prices are reducing further.

IOLCP’s tailwinds from the past year will now become headwinds. It will find increasingly hard to keep growing its revenues by just being in Ibuprofen business and I think its management realizes that. They are diversifying into other products due to that reason.

Vinati Organics is on the other hand is a well run high margin already diversified business that will keep getting bigger as it identifies new areas to enter. It meets my criteria of 50% drop and I bought it at attractive valuations. I will just keep adding more to it as and when they keep delivering on their growth story. I have no doubts that Vinati Saraf will grow the business much more in the next decade than it has grown in the previous one.

A pure play CRAMS business is Syngene. Its a giant in the making.
If you want a CRAMS business within Specialty Chemical industry with high barriers to entry, look at Navin Fluorine.

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good stuff. IT is missing may be reduce some pharma and some mid cap IT and in consumer burger king doesn’t cover all, guess Tata Consumer would be a consumer king :wink:

Actually sold off Burger King as well.
If you read above, I have mentioned I am not interested in investing in Indian IT service companies as I want concentration in my portfolio. All my IT related exposure is taken care of by investing passively into Nasdaq ETF.

Not interested in consumer sector either.
Tata Consumer is a great company, infact all Tata Companies will do well for themselves in the next decade. The new Tata Sons CEO is a great well experienced man who single-handedly turned TCS into a world giant.

I am not interested in investing in every sector in India nor in every stock that will go up.

A small concentrated portfolio that can deliver 20 to 30 % returns for 20 years is good enough for me.

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Thanks for your reply!

I see why you chose to book profits, given how low your entry was.

This surprises me, because from their recent concall, page 11: So, we do
very less business on spot market, most of our businesses on long-term
basis.
they also claim to have yearly agreements, with the price decided around November for exports, and March for domestic markets. (Page 18).
They sell half of their ethyl acetate on the spot market, and have shorter contracts for the other half with their clients.

Is there something I’m missing that causes you to distrust these claims?

I’m invested to see how this story plays out, I like how cognizant the management is of having a large dependency on ibuprofen, and their efforts to diversify through internal accruals, but as I said, I’m studying Vinati to understand more about them. Like you, I only want upto 15 stocks, and hence I’m trying to understand if replacing IOLCP makes sense right now for a higher margin company, given my entry is higher than yours.

I already own Navin Fluorine! I’m studying Syngene, but I’m not clear yet whether an entry at these valuations is wise, or whether to wait until the biologics unit becomes public.

PS: I entered Hindustan Foods at 1170, and booked 25% of my profits when it ran up recently.

Liked your clarity. One question - what is the weightage for Nasdaq and China fund?

Thanks

They don’t have any long term contracts and if Ibuprofen prices correct significantly, they have to lower their prices irrespective of the contract as the customer will just go to someone else to buy. In that aspect they are selling a commodity product.

Vinati on the other hand has year+ long contracts with customers like BASF to sell IBB (a key raw material for Ibuprofen), so they skip the volatility in final product prices and thus have consistent and stable revenue visibility.

Both are SIPs to enable Dollar Cost Averaging. I don’t pause my SIPs or skip even a single installment. Very small weightage right now but by year end should grow to 5% of my portfolio and so on.

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If you want to take some risk go with IOLCP, if you want peace of mind go with Vinati. Or if you’re confused, allocate 50% to each. IOL may or may not play out but Vinati will definitely be higher in a year or two than where it is now. That’s the difference between the two companies.

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Adding a list of my investment checks and research steps (this is to adhere myself to a systematic process for each company I invest in)

Steps

  1. General Understanding of a company (What does a company do, what sector does it operate in, what its selling, who are its customers)

  2. Financial Screening of the company (What its market cap, How much its is debt relative to cash reserves, what is its ROIC, ROCE, ROE over a 1y,3y and 5y period, what are the margins of the business - will they increase in future, how many outstanding shares are there, if ROIC, ROCE is low why?, is the recent QoQ profit is growing much faster than previously - why?, What is its Book Value?, what is the value of cash per share on the balance sheet, what is its free cash flow, who are the existing shareholders - what are they doing?, how much of the company is owned by promoters)

If the company passes first two checks and interests me further

  1. Go through investor presentations, all information available on the website, conference calls of last 4 quarters, latest annual report and threads on value pickr

  2. Research about promoters, watch their interviews, are they of good pedigree? do they walk the talk? do they seem shady or honest? Are they involved in any issues previously? Do they appear too often on news channels giving outlandish stories and promises or are they focused on their business?
    (If promoter check fails and company is good, I will still not invest in it)

If the company still passes through the above checks

  1. What is the moat of the company?
  2. Porters 5 force analysis
  3. How will the sector and future most likely play out for the company?
  4. At what % can the company grow its earnings
  5. Does the company has enough target market to address or can it enter into other complimentary target markets?
  6. Does the company has interests in businesses that are not synergic to its core business?

If the company still passes through the above

  1. One page thesis on why I should invest in the company
  2. Technical analysis of the company (buy zones, sell zones, consolidation zones)
  3. Current PE, Market Cap to Sales and Price / FCF of the company and the market sentiment around it
  4. Decide % allocation of the portfolio
  5. Determine investment strategy (levels to buy at and how to buy)

After a company is part of my portfolio

  1. Update it to my core watchlist in screener, tickertape, trading view, google finance
  2. Set google alerts for the company
  3. Attend quarterly conference calls
  4. Monitor any developments and the company’s filings
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New Addition:

Jubilant Ingrevia
High growth, diversified business, great corporate management/promoters, finally the cash guzzling research intensive pharma business is hived off, available for less than 1 times sales with new capacities being added.

Was pretty much a no brainer buy for me.

Added 3.3% of my portfolio at a average buy price of 250.

Will add a detailed one pager note here on this.

Not a recommendation, please do your own research before investing.

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is it Motilal Oswal Nasdaq 100 ETF ?

Yes, selected it as it has the lowest expense ratio among all existing Nasdaq ETFs

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Buffett on when to sell a stocks

Favorite holding period for a stock: Forever

When you have more ideas than money - Sell some to raise cash for the new ideas
When you have more money than ideas - Don’t sell unless the competitive edge (Moat) changes/story you have told yourself while investing changes/ fundamentals deteriorate, economic characteristics of the business changes

When you are in terribly cheap market - may sell something cheap to buy something we think is even cheaper

Not our natural inclination to sell
Don’t borrow money to buy

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Hi Tar,
Can you please guide me as to how you are investing in the US Markets directly. Which broker are you going through.

Thanks.