I think Harsh has answered this well, so I’ll just leave this meme here. I’m not saying that I’m the jedi on the right (far from it!), but I’ve been around long enough to acknowledge that there is a ring of truth to this meme.
Translating into English, the person the left and the one on the right do similar things, but for different reasons.
The person on the left side sees all those factors you mentioned (so many things, so many con calls, so many annual reports …Then different investing books and continuously following different parameters for different industries, then global markets, macro factors like interest rates, unemployment rates, updates on that) as too complicated and so does some simple thing e.g. Index Funds.
The person in the middle sees all the complicated factors you mention as a challenge and exciting, and tries to solve for it. And this often has a not-too-great-outcome.
The person on the right realizes that there is actually a lot of noise. S(he) knows that a few parameters have an outsized impact on outcome. E.g. such a person may realize that asset allocation plays a much bigger role in wealth creation than stock picking. And then voila, goes for…Index Funds.
(The index funds example is just a crude illustration, to bring the point alive).
Hello Harsh…It looks like balanced decision to sell 50% in chamanlal…I still hold full…
Have u checked Bajaj consumer? Do u think it has the potential to become atleast 3x over next 5 years? Margin at bottom, getting diversified from single product, possible PE expansion if everything goes well, and can’t missout good dividend as well…
Thanks
As of today, I have created a 2% position in Aptus Value Housing which reduces cash to 3%.
I have been working on Aptus’ value proposition for the last couple of years and have been very impressed by the kind of lending model they have built. Their niche lies in maintaining a balance of high yielding business loans (20%+) and medium yielding affordable housing loans (14-15%), which gives them higher blended yields (17%) while maintaining an ultra low cost structure (2.5-3% opex). Their cost structure is a reflection of centralised credit underwriting operations, which means most of their local branches only needs to have sales personnel, who draw lower salaries compared to credit underwriters. In lending financials, we can only infer a few things from numbers due to the opaque nature of the business.
Cost structure of organization
Credit performance in bad cycles by studying performance of static loan pools.
I have seen that organizations that are good at lending also tend to have lower costs (e.g. HDFC, Canfin, HDFC bank, etc.), as lending is a commodity business and in any commodity, one can only control costs. Aptus has the lowest cost structure amongst peers like Aavas or Home first. Additionally, Aptus has the lowest credit costs amongst its peer set. You can see an illustration of their unit economics below.
Having tracked a lot of lending cos, I haven’t seen any company with this kind of unit economics. These numbers make Gruh Finance look like an average underwriter. Given that valuations have cooled down significantly after the IPO (from 6-7x PB to 3.6x PB), I am willing to take a bet and see how things turn out. My two worries are:
Reported nos are not scalable as they expand beyond their core geographies
The true credit costs are higher than whats being reported.
@harsh.beria93 are you trackking ddev plastics, last year got de-merged. Company is into making plastic compounds like cables, footwares, emginnered plastics for automobile, appliances, electronics etc. Clients are KEI, finolex, havells.
And
Company is forayed into producing Halogen Free Flame Retardant compounds with production facilities of 6000 MTPA are expected to be commissioned by Q1 of FY24.
Its a general question from your investment style.
Do you follow any exit strategy or any stop loss you maintained for any stock.
If yes, Please share it.
I dont use stop loss or any share price based criterion to exit stocks.
Skant is a formulations co whereas Anuh manufactures API. There is a lot of information on their group website and their respective rating reports. I have shared some of these on Anuh Pharma thread.
Hi there,
I’m beginner in investing. In your profolio I saw stylam under cyclical. But their margins never shrink. How it comes under cyclical industry. Can u please explain is it because of raw material? Thanks in advance
Ashiana Housing is a great pick for real estate. I believe this is the only company on which I can bet on in the sector.
ITC : It is a great pick. But since you have allocated 6% in FMCG, you can look at nestle as well. Nestle has an absolute dominance of about 97% in children cereal industry. And due to India’s regulation regarding advertising the children cereal industry, competition affecting Nestle’s position in this growing market is difficult to disrupt.
Interglobe : I do understand your thesis of airline being a growing industry. Globally, the most profitable airlies are those of the developed nations. So, if you have a very big time horizon for aviation (about 20-25 years) , then I believe you are at a good spot. But, if its not for such a long duration, I believe you can think it once again. But, no doubt Indigo is a better investment than other listed airlies in India.
HDFC : You should be loading HDFC bank I believe. The stock has not moved much in the last 2 years, but the earnings have compounded on a healthy rate, making it relativelty cheap right now since earnings have grown but the stock price has not. Thus, a good time to enter the league.
Would like to advice you to see IDFC first bank as well. Stock is lead by very good management. The CEO has built the retail business of ICICI bank back in the days. The COO of the company is ex-ICICI COO guy and a very respect person in the industry. And naturally, good management translates to ethical banking practices → good asset quality → less NPA/defaults. Also, this is a retail focused bank now.
Feel free to express disaggrements if any. Happy to learn!
I am not an advisor. These are not recommendations. These are based on my understandings.
I came across the Q1 results and investor presentation for Best Agrolife - here
The Q1 results are impressive for this agrochem player in tough environment. Besides, management is very clearly guiding for 30% growth and 20% margin for FY24. They however had negative cash flow for last couple of years. Longer cash conversion cycle. High amount of inventory. The management mentioned during the concall that they will address this challenge in next 2-3 quarters.
Did this company catch your attention? Do you any thoughts to share about this business.
You can call it non-cyclical if you want. Most building material cos go through cyclical highs and lows which generally correlate with residential cycles.
Results were good with them recovering margins. They are running at close to full capacity which might lead to muted growth for sometime.
Their results were really good this quarter, especially amidst all the agchem problems. I have been contemplating my future course of action, but haven’t yet made up my mind.
2+ years back you invested in HDFC Bank, later and I could see you reduced the position size to 2% from 4% and increased HDFC from 3% to 4%, thus in effect reducing from 7% to 6% and remained there since.
Now many things changed including the merger. I could see historical PB is close to lowest of 10+ years near 3.0. How do you see HDFC bank going forward? You seem to have taken 4 year point of view in bank and 2.4 years already passed. How do you view HDFC bank in the light of the merger and leadership changes? Are you keeping the whole position intact - which is 4% from HDFC and 2% From Hdfc bank making it 6%. What would make you to increase the investment to 8% like ITC at some point or on the other side to exit/reduce the position from 6% you had.
Note: I recently invested about 3.2% of PF on reversion to mean as I expect profit growth and PB go up once merger process firmly behind in few quarters and consider this as an investment with less risk with increased margin of safety. I am not well versed in deeper analysis of banking stocks.
I am surprised how well you have tracked these transactions, my current allocation to HDFC bank is ~5%, as a result of their merger with HDFC and general share underperformance. But I haven’t sold anything (either in HDFC bank or in HDFC). About upgrading it to 8%, I can do it if there is a sharp upmove in the market and I am unable to find better opportunities. However, currently there are lots of other opportunities.
About HDFC bank, there is no other lending company with such consistent nos for such a long period of time. Currently, people are more fascinated by loss making banks making profits and ignoring how well HDFC and HDFC bank managed the 2020 downcycle. This kind of environment reminds me of 2017, when people were more fascinated by Repco/Indiabulls/DHFL. Generally, I tend to be conservative when it comes to banks or NBFCs. Also, given how HDFC bank is priced currently, its easy to make 25%+ CAGR and I am reasonably confident about it working out.
I have a query related to generic Pharma companies. I have heard few of investor saying the price erosion for them would be in between 4-5% and as they are coming out of 7-8 years of down cycle, next 4-5 years will be better for them.
What’s your view on it ?
I dont think its possible to predict price erosion in US generic pharma market. Forget about analysts, even the best managements have been often caught on the wrong foot, by doing capex at the wrong times. That being said, one doesn’t need to predict pricing erosion to make profitable investments. Just by buying through the pain period when price erosion is 15%+ is generally sufficient to make good returns.
I have been lucky to play the pharma cycle twice by buying through pain. One was during 2018-19 which paid off in 2020, and then buying through pain in 2022-23, which has benefitted me recently. I think thats a better framework to follow, than pretending to understand whats not possible.
I will ask questions 1 & 2 at their AGM.
About their size being small, the weird part is despite their small size, they are the biggest amongst peers. I think selling data is very hard in India, when one can buy the same from the registrar office.
4. Here’s the exact sales breakup you are looking for. Propedge is a 80% subsidiary and houses their valuation busines.
