The harsh portfolio!

As of today, I reduced position size of biocon from 2% to 1% and increased position size of ashiana from 3.5% to 4.5%. The basic rationale is biocon is already pricing a lot of growth whereas ashiana is not pricing much growth. Cash position stays at 0. Updated portfolio is below.

Companies Weightage
HCL Technologies Ltd. 6.00%
InterGlobe Aviation Ltd. 6.00%
I T C Ltd. 6.00%
Larsen & Toubro Ltd. 6.00%
PI Industries Ltd. 6.00%
Power Grid Corporation of India Ltd. 6.00%
Ajanta Pharmaceuticals Ltd. 4.50%
Kolte-Patil Developers Ltd. 4.50%
Ashiana Housing Ltd. 4.50%
NESCO Ltd. 4.00%
Bajaj Auto Ltd. 4.00%
Suprajit Engineering Ltd. 4.00%
Housing Development Finance Corporation Ltd. 3.50%
Lupin Ltd. 3.50%
Manappuram Finance Ltd. 3.50%
HDFC Asset Management Company Ltd 3.00%
Reliance Nippon Asset Management Co 3.00%
CARE Ratings Ltd. 3.00%
Avanti Feeds Ltd. 2.00%
Cera Sanitaryware Ltd 2.00%
Indian Energy Exchange Ltd. 2.00%
Infosys Ltd. 2.00%
National Aluminium Co. Ltd. 2.00%
NATCO Pharma Ltd. 2.00%
Wonderla Holidays Ltd. 2.00%
Biocon Ltd. 1.00%
Ashok Leyland Ltd. 1.00%
Cadila Healthcare Ltd. 1.00%
Inox Leisure Ltd. 1.00%
Maithan Alloys Ltd. 1.00%
Cash 0.00%

My criterion for compounding stories is stated above (positive FCF + ROCE > 20% for a large part of the last 10 years). This is not the perfect criterion like any other. Cera is a very good business, having compounded sales at very high rates in the last 10 years. Post FY16, growth has slowed down due to real estate slowdown. About margins, cera’s margins are at par with competitors (net margins of 8-10% which is industry standards in building material companies). Cera has differentiated itself by spending more on ads (~4% of sales) to create a brand and enjoy pricing power. Last quarter commentary of cera clearly shows that they are enjoying pricing power, sales didnt grow because of labor union problem in their factory which has been resolved. Management said that real estate project sales demand are back to 2012 levels, growth will come back. However, a lot is already priced in.

2 Likes