Vineet Jain portfolio

Hello everyone

It gives me imense satisfaction today to be putting down my portfolio on Valuepick. I have learnt a lot from this forum and its wonderful members, and have attempted to add value to the forum whenever possible. VP has completely transformed me as an investor, the learning curve has been extremely steep.

The purpose of making this thread is two fold: (1) To receive constructive feedback from many of you which will help me improve my portfolio construction, stock selection and approach to investing, and (2) To create a repository of my thoughts and actions in the markets and learn from them.

Early mistakes in the equity markets

I opened my first demat account in 2017 and started buying small quantities of shares that my broker would recommend. I had no knowledge of the businesses I was buying, apart from the narrative fed to me by my broker, and by CNBC/Moneycontrol. Thankfully, I started a few SIPs in some mutual funds in parallel. Over the next couple of years, my portfolio of stocks did poorly. While some of the stocks I picked did well, many tanked badly. I made all the mistakes that many new comers made in those years, and more! I was so naive that I used to load up on stocks that would fall 50% in the hope of a turnaround, and hold them all the way down. Lost money on YES Bank, HEG, Va Tech Wabag, Texmaco Rail, Glenmark Pharma and a few others.

On the bright side, the size of my portfolio wasn’t very large as not all my money was invested. Besides, the MFs did ok and offset some of the losses. And then covid happened, and my portfolio hit rock bottom, 30% in the red on an aggregate basis. It was about then that I came across Valuepickr and some fresh content on Youtube (some of whom are very popular now :slight_smile: ). The level of in-depth research that many people did stoked my curiosity, and I started spending hours (work from home helped!) reading and learning about the businesses that I owned, only to realize by June 2020 that my portfolio was rotten and needed a complete overhaul.

The transformation

Over the past 15 odd months, I have systematically cleaned my portfolio up. Some of the stocks I held prior to 2020 turned around and I used the bull markey to exit them at better levels, some at great profits, and moved the money to companies that I have studied in depth, understand well and have conviction in. Made a few swing trades too where near term triggers boosted stock prices.

Presently I am fully invested. I own 24 stocks in India which make up 92% of my portfolio. I also have a couple of ETFs on Nasdaq, some gold through ETFs, a very small allocation to crypto and some cash. One common theme across the portfolio is that all companies are from sectors that I believe are experiencing / will experience sustainable medium to long term tailwinds. Some of the companies are defensive deep value (may be considered as value traps by a few) to lend some stability to the portfolio in case of downturns (during which I will sell them and buy growth conviction companies which will have fallen a lot more), many are high growth companies with sustainable cash flows which I expect will compound wealth quickly, and some are turnaround stories where I believe the risk-reward is favourable and potential upside is high when my triggers play out. There are a couple of cyclicals as well in real estate and commodities, which I feel bought close to the bottom of the cycle. I am always near the door on these.

Overall on a base of say 100 rupees that I have put into the markets (counting only fresh money, not reinvested money) since 2017, my PF value today is about 170 rupees . About 50% of the fresh money has come in since July 2020. Given the fact that I made uninformed choices prior to 2020 and was 30% in the red (on invested amount) when covid happened, I feel I’ve done well. Absolute returns from July 2020 have been about 125%.The bull market has been kind ofcourse, and there is always a lot of room for improvement.

Below is my present portfolio:

Sector Company / Asset Buy price CMP P/L % of PF Brief rationale Risk perception
Conglomerate Reliance Industries 1928.14 2425.6 25.8% 5.8% Telecom/Retail/Renewables boom Low
Commodities Rain Industries 105.35 243.4 131.0% 5.8% Carbon based inputs for aluminium supercycle High
Real Estate Sunteck Realty 284.03 384.85 35.5% 5.5% MMR RE pick up + asset light + strong balance sheet High
FMCG ITC 199.5 212.65 6.6% 6.1% Cash like (FD) + FMCG improvement optionality Low
FMCG Globus Spirits 695.1 1155 66.2% 5.5% Growing consumer brands + Ethanol policy Medium
Pharma/
Healthcare
Strides Pharma 586.37 596.1 1.7% 5.7% Growing US generics + biologics CDMO Medium
Pharma/
Healthcare
Neuland Labs 1605.84 1766.8 10.0% 5.1% Transition to speciality APIs + CMS optionality Medium
Pharma/
Healthcare
Caplin Point Labs 465.38 933.3 100.5% 5.4% LatAm + Africa branded generics, first mover Medium
Pharma/
Healthcare
Laurus Labs 520.66 656.05 26.0% 2.3% Integrated APIs + biologics CDMO Low
Pharma/
Healthcare
Kopran 213.72 212.7 -0.5% 1.6% Niche carbapenems and antibiotics High
Pharma/
Healthcare
Sequent Scientific 233.07 236.15 1.3% 1.1% Animal pharma companion animal boom Low
Pharma/
Healthcare
Kilpest India 478.47 514.7 7.6% 3.4% Molecular diagnistic boom + special situation High
Financials Apollo Finvest 516.7 572.05 10.7% 4.5% Fintech revolution / Like an angel investment High
Financials Federal Bank 78.09 82.4 5.5% 4.7% Well capitalized and super cheap + digital push Low
Financials IDFC 44.11 54.75 24.1% 3.3% Special situation + bullish on IDFC First High
Financials IDFC First Bank 42.7 46.9 9.8% 1.6% Top liability franchise, Assets likely to improve High
Financials Edelweiss 69.93 81.3 16.3% 2.7% Stated value unlocking strategy + turnaround High
IT/Digital Mastek 2445.24 2888.75 18.1% 5.5% Digital ransformation + huge discount to HM Medium
IT/Digital Intellect Design Arena 597.94 631.9 5.7% 2.2% Banking digitization push + operating leverage Medium
IT/Digital Expleo Solutions 1032.99 1016.25 -1.6% 2.4% Special situation + cheap Medium
Chemicals Jubilant Ingrevia 425.87 703.55 65.2% 4.0% Comodity to speciality + huge doscount to LO Medium
Chemicals Black Rose Industries 73.96 183.65 148.3% 2.1% Acrylamide and derivitatives niche Medium
E-commerce MSTC 267.62 303 13.2% 2.9% Special situation + cheap + scrappage policy Medium
Music streaming Tips Industries 1114.53 1261 13.1% 2.4% Music streaming revolution Medium
International KWEB (China Internet ETF) 47.98$ 51.86$ 8.1% 2.3% Deep value due to near term uncertainty Medium
International ARK-G 83.86$ 83.74$ -0.1% 0.7% Genomics revolution led by inovators in the US High
Store of value Gold BEES + SGB -3.6% 2.5% Hedge Low
Store of value BTC, ETH, MATIC, MANA 29.2% 1.0% Hedge - don’t compltely get it but risk reward high High
Cash Cash 1.6% Low

Risk management and churn

I am happy with churn if I find that something in my thesis is broken, or if valuations look stretched and other more attractive opportunities are available. As a risk management policy, I do remove some money from perceived high risk positions if there are sharp run-ups. For example, I had sold off my entire position in Expleo when it ran up from my buy range of 650 to 1300+ in a month. Re-entered with a smaller position when it pulled back. Have traded portions of Rain, Sunteck, Reliance, Kopran,Caplin, BlackRose from time to time. Recently booked some loss in Neuland and Strides and bought them back a day later, to offset some tax.

Most likely will churn out a few more over the next couple of months. Studying FDC, HCG, RPSG Ventures, Indoco Remedies and a few others presently, and have about 20 odd companies on my core watchlist which I will look to add if valuations become attractive.

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Hi For Apollo Finvest
Just check once the points raised by Kumar Saurabh

Please validate and cross-check the points before investing :slight_smile:
Exposure to large-cap is a little less and when the party stop trust me in no time your portfolio became half, I have experienced a similar situation in small-cap meltdown in 2017-18

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Thank you for your post. I have gone through this thread - it was also posted on the Apollo Finvest VP page. IMO a lot of the points raised in the twitter thread are down to the fact that the author has looked at the financial statements like AF is an established company. While AF used to be a traditional NBFC, it has transformed itself over the past couple of years after Mikhil Innani of PharmEasy and Hotstar fame took over. It is now a tech enabled platform for fintechs, with an NBFC license.

AF in its present form is for all practical purposes, a start-up. I think an investment in Apollo Finvest should be viewed as participating in a series B or C fund raise. This is an industry and model which is evolving - they trying to create a market, and so the bet is largely on the pedigree of the Mikhil and not pure play business fundamentals yet.

My guess on the employee salary point is that a large part of the employees are likely getting equity. On the building and land bit, thos are legacy assets as this is a 20+ year old NBFC. And finally on the product itself, my room mate from college who sold his fintech company to Wibmo a couple of years back has taken a demo of AF’s product from Mikhil directly, and he was happy with what he saw. For me, this works as a sufficient validation of the product. The size of the opportuity is humungous, Mikhil comes across as a young and passionate founder with a proven track record of success having co-founded PharmEasy and headed product for Hotstar India. VCs would be queueing up to invest in Mikhil Innani, if they had the chance. Many of them have invested in personal capacity, like Kunal Bajaj from Blume Ventures. Checks all the boxes for me.

On the large cap exposure, I don’t believe that the riskiness of a portfolio necessarily depends on the “cap”. My endeavour is to identify businesses which will survive downturns, and grow, at reasonable valuations. In fact in many of the industries that I am focused on, like Pharma and IT, I think the smaller companies have a distrinct competitive advantage and growth potential. They are focused on the areas that are experiencing tailwinds, like APIs, CRAMS and digital transformation, and in my view they will far outperform their large cap counterparts which are largely focused on hyper competitive US generics and IT services respectively.

That said, risk management is very important and I always prune high risk positions when they run up too much. I have marked out which stocks I believe are high risk and monitor them closely for structural changes or changes in cycles.

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My 2 cents…my view is that every portfolio needs to be balanced. Pl chk sector wise allocation too.
Risk mgmt is key and having some large caps will be useful.

Personal view, as i dont know how much of these stocks form your overall portfolio e.g you might have large cap exposure via MFs.

Wish you the best !

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Thanks for your comments @Riyaz_Sayed

I completely agree with your view on the need for balance in the portfolio. My understanding of balance however is not based on different market caps for my investee companies, but on how different the businesses are, and how well I understand them. I am comfortable holding through periods of volatility, and also using it to add to my positions.

I don’t ever allocate to any company or sector - optically pharma may seem like 25% of the portfolio but all companies operate in their separate niches as I have mentioned in the rationale column. They are mostly delinked from each other’s industry and market.

I will soon put down my investment thesis for each of the companies I own. These are my only investments, own no other assets.

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I have made some changes over the past couple of weeks. Sold Kopran and Federal Bank completely, and replaced them with similar weightage of Indoco Remedies and Equitas Holdings respectively.

Kopran to Indoco Remedies
I am still bullish on Kopran, and especially their carbapenams portfolio - they have a lot of new launches coming up in the next year with the Panoli plant coming online. However, the lack of information in the absense of concalls or any credible research out there is making me slightly uncomfortable, and so I find a better risk-reward in Indoco Remedies which offers me exposure to the domestic pharma market which is booming, and this seems to be a credible turnaround story aiming to double revenues in a couple of years. Willlook to add more on dips.

Federal to Equitas Holdings
Federal will rerate at some point I think, back to 1.5-2 times book. Their asset quality is stabalizing and their neo-banking partnerships and digital initiatives are encouraging. But in this potential credit upcycle, I am not sure if Federal is aggressive enough to push for growth. Equitas SFB on the other hand already has higher RoA, in line with banks with much higher P/B valuations, which I expect will catch up at some point. I’m not sure enough market participants realize that a majority of their book is secured. Plus there is a clear arbitrage with the reverse merger looming large. In all, Equitas Holdings offers better risk reward in my opinion, and so I switched.

Other trades
I have added RPSG Ventures (1% of PF) as a tracking position which I intend to increase once numbers start matching the narrative. Their FSL holding itself is worth about 7000 crores. Plus they have ambitious FMCG plans with brands like Too Yum and Herbolabs. Plus their venture investments in start ups. All of this at a market cap of less than 2500 crores.

Added some to Sequent, Laurus and Tips and reduced some from Expleo, Rain and Reliance

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Hi Vineet,

A lot of my portfolio matches yours and my recent additions Indoco, Equitas holdings are also there. Was just curious as to what was the reason for you adding Tips and not Saregama, as I’m still studying both and leaning towards Saregama for their huge catalogue and also their plans to acquire new content.

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@Gaurav_Bhandari and @Vineetjain111 What is thesis behind adding indoco remedies?

Hi @Vineetjain111 - Can you please point to the source for information on ‘revenue increasing to double in a couple of years’. Thanks!

Hi @Madhu_BD, Indoco does a little over 60% business from domestic formulations, about 30% from international formulations (75:25 in regulated and unregulated) and about 10% API.
Over the past 4-5 years, growth has been slow. Domestic formulation grew at about 6%, and international business de-grew due to regulatory issues. Both these segments are now improving rapidly.

In the domestic business, Indoco is fast moving away from largely an acute portfolio to just about 40% acute, and the rest chronic and sub-chronic. They have recently launched drugs in anti-diabetic and cardiac categories. Their MR productivity is also improving as they scale. Their international business was facing headwinds and regulatory compliance challenges with warning letters from US and UK. Many of these are now resolved (I think one from US is still pending which should also resolve soon hopefully). Plus most of the capex is now complete and so operating leverage should kick in. This is the main thesis for Indoco in my opinion.

Sorry that was a typo, I meant EBITDA is likely to double (450-500cr) by FY 24 as per the last concall.

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Hi @Gaurav_Bhandari

TBH I like the whole music label space, and given an option I’d like to own both Tips and Saregama. But at the present valuations for both, I think Tips offers a far superior risk-reward. Both trade at about 15 times sales, but Tips has double the margins due to their better capital allocation. And so Tips is trading at 22 times EV/EBITDA while Saregama is at 39.

I personally don’t like Saregama’s Caravaan and magazine business, and I don’t see a lot of potential in them to make decent gains on incremental capital employed.
Both have films businesses which I am not a fan of either, but Tips are demerging the films business so there is a special situation element too.

While Saregama has a four times larger catalogue than Tips, I think the quality of Tips catalogue is better. Tips revenue per song (total revenue divided by total catalogue) is much higher than Saregama’s, and their YouTube channel has almost twice the number of subscribers compared to Saregama. Both companies are guiding to use a majority of their profits into acquiring fresh content. IMO Mr Turani is very savvy when it comes to fresh content acquisition and capital allocation. And so I believe that the valuation gap of the companies should narrow, and maybe go away all together in the long run as the promotor perception improves and definitely after the films business demerges.

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@manoopatil @Madhu_BD SOIC posted a video on Indoco highlighting the thesis very well. Timely :slight_smile:

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Hi vineet…what is your views on Markans pharma? It is branded generic business with almost 100 percent revenue coming from US, UK and Australia market. Pain management followed by anti diabetic are core revenue generators followed by cardiovascular segment.

I have started studying Indico remedies and Marksans pharma both. It will better for us if you can also throw some light on the strength and weakness of both company’s.

Hi @thakurvi unfortunately I haven’t studied Marksans yet, though it is on my list of companies to read up on. Prima facie it looks interesting, both business and valuation. Seems to have taken a beating recently along with other international facing pharma companies on logistics concerns. I will post my notes once I have read up a bit more.

Marksons is not comparable to Indoco at all though, since Indoco is primarily a domestic branded pharma play. Indoco has very specific business triggers as I have mentioned in earlier posts, and the SOIC video captures them well too. So while Marksans and Indoco are both pharma companies, they are inherently different and not very corelated.

In my portfolio, if I was to add Marksans, it would probably be at the expense of a Strides, which is a generic generic play in regulated markets, where I anticipate better pricing coming through as things open up, and their acquisition of Endo’s portfolio adding to the top line. To be honest, this has not played out the way I had hoped yet, and holding on to this may be a mistake. Q2 will also likely not be great, but what has stopped me from selling it is that it has Stelis which will be demerged soon, and that is what I am really interested in. And at 1.5 times sales with the worst seemingly behind it and a special situation brewing, I am holding on for now, unless I am blown away by what I read on Marksans.

I am also going to study FDC on the domestic pharma side. Prima facie it seems like an FMCG kind of play to me, at non-FMCG valuations. Unfortunately there are no concalls so information available is limited.

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Added 10% and 5% of existing holdings to Mastek and Globus respectively, earlier today. Considering adding some to Jubilant Ingrevia as well. Globus still looks undervalued to me. Mastek and JI posted good results IMO, but the market is expecting the moon so gives long term investors an opportunity to add.

Looking to add more to Laurus as well, but I am expecting a sharper correction wiht their dependence on China for a large portion of their raw materials. Will add slowly following price action.

Also added a 1% tracking position in MaxCyte in my international portfolio at about $10.

Also sold out of IDFC First Bank yesterday and bought equal money worth of quantity of IDFC Ltd (so overall capital deployed in IDFC twins remains unchanged). I did this as I saw the price gap narrow to about 3 rupees which is the lowest it has been in quite a while. And with the recent shareholder activism in IDFC Ltd, my confidence has increased in the reverse merger fructifying sooner rather that later.

Not sure how long the present correction will last. I am hoping it lasts a couple of weeks as I’m expecting my bonus to hit the account by October end, which will give me liquidity to add to positions. However I am not opposed to trimming down my positions in Reliance at present valuations to buy something else that seems to offer better value and growth potential.

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My bonus arrived earlier this week. Seems timely :slight_smile:

I have added a bit to my positions in Sequent (at 185) and Indoco (at 450). Both are now slightly over 2% of the PF. I want to take Sequent to 5-6% and Indoco to 3-4% if there are more falls.

Have also added 1% to Syngene. Have always wanted to own Syngene but never had the courage to open a position with the valuations. While it is stil not cheap, at levels below 550 I am happy to start an allocation and will add on dips over the next couple of years before the operating leverage with commercial molcules starts kicking in in FY 24.

Sold out of RPSG ventures. I don’t understand the IPL team buying.

Still have liquidity (almost 10% of PF as cash) and will get more as I am moving jobs next month and will get a joining bonus. It is important to be disciplined in allocating this surplus cash though. While I am always stock specific, at these elevated market (and global liquidity) levels, and with all the noise around inflation and interest rate tapering over the next year, I will set a higher internal bar for return expectation as the risk of volatility seems higher. And so I will likely be a lot more careful in allocation incremental capital, by prioritizing valuation comfort in all additions. Don’t think I am averaging up any stock in a meaningful way in the forseeable future, except for maybe ITC which I use as cash - am happy to sell it to buy something that may be on sale.

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I am positively surprised by the magnitude of all non-pharma background investors who develop strong convictions in pharma…

No matter how much I try, I chicken out at any large falls and never convinced with pharma stories. I have missed many good companies in this sector…This time yet again I was in and out of sequent in a very short time. (It is the only pharma I was willing to buy because of High PE and PE ownership)…I replaced it by adding on to another high PE Asian Paints…looks like Pharma was, is and will never be my cup of Tea!

Syngene is also another company I may buy if at all pharma was only sector available to invest…because of Biocon ownership and a relatively long history of Biocon…although ever really able to decipher which could be better in Biocon vs Syngene over long term…

@Vineetjain111 Any take on Granules India and Marksans Pharma in pharma industry. Both of them seem undervalued. Granules could be a value addition play on formulations, Marksans could build a niche space in itself on softgel, higher % of OTC products and hence build some insulation to cyclic price erosions

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I feel one has to keep expanding one’s circle of competence. I am a firm believer that one needs to understand 80% of the important stuff and not obsess over the last 20% which is tougher to decipher. This is most applicable to most pharma businesses - it is rather complex if you get down to every last detail, but taking a call at a macro level is much easier based on the industry dynamis for each player. I am cognizant of the limitations of this approach, and so the entry price is an important determinant for me, as it brings in the required margin of safety.

Pharma as a sector is a bit of a misnomer anyway. As Aditya Khemka says, there are over 4000 molecus in “pharma”, ranging from everything between commodity to mission critical products, and every company operates in a small fraction of the space in very different industry structures. Chosing what structures I like and then placing price and allocation appropriate bets on leaders in those structures works for me conviction-wise.

You will have opportinities to add to it if you want :slight_smile: Expect some price consolidation for sometime and there should be time to accumulate if you want. Do check out the concall when the transcript is posted. Margins should come back to FY 21 levels from Q4 onwards and theya re guiding for growth on FY 21 base in FY 23.

I do expect it to correct more as the PE is optically north of 60 again and pharma is not in favour at the moment for growth investors, who are chasing recovery trades. At 180 off I am happy with 2% allocation. If it goes to 150 or so, I will take it up to 5%.

These are extremely different. Syngene is a one of a kind integrated CRAMS player. So you should look at Syngene if you subscribe to the growth story of Indian biologics CRAMS.

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Hi @DVS_Capitals I have only recently started studying Marksans and prima facie I do find it interesting. Branded generics in regulated markets, plus softgel seems like a promising business structure. I am trying to assess the extent of pricing power and growth estimations, and will decide on whether to allocate to it (and in place of what) over the next few weeks.
At the moment, my focus is on optimizing my position size in Sequent and Laurus over the next few months. Both are low single digit at the moment and I am looking to take them to 5-6% each if valuations become more attractive.

Granules I haven’t studied yet and don;t think I will have the bandwidth to study it for a month at last - I am starting a new job in a new industry next week and expect to be tied up for a while.