Vineet Jain portfolio

Q&A: Questions & Answers Portfolio Q&A
22

After the IRCTC fiasco, I am not sure what to do with my holding in MSTC. I had bought it a couple of months back on an undervaluation theory at about 265 and it rallied up to almost 550. I patted myself on the back for spotting this amazing trade, and started imagining an IRCTC / IEX like continuous parabolic move up. Nothing had changed fundamentally about the company during my holding period, but we all get carried away in bull markets, don’t we?

And then the IRCTC issue happened and the stock has erased half my profit. Now I am not sure if this is investment worthy with all the fears around holding PSUs coming to the fore. I still feel it is undervalued and should do well on the business front with the marketing business closing down and scrappage policy coming in being the immediate triggers. But how do I assess whether the narrative will change permanently around platform PSUs, or is this a temporary blip.

This is a valuable lesson in psychology for me personally, and I still don’t know what to do with my holding. I have the option of switching it for another undervalued special situation opportunity - Indiabulls Real Estate. Will decide over the next couple of days. Any insights will be appreciated :slight_smile:

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23

Hi Vineet,
Do you follow Balaji Amines? Given its in a duopoly market and currently trading at a cheaper valuation than Alkyl Amines would it be a good fresh buy? Raw materials price did hurt this quarters result, still they generated more revenue QoQ.

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Hi @Akashdeep

Missing out on Balaji Amines remains my biggest regret to date. I clearly remember the day in June last year when I finished researching it and decided to buy it the next day in the mid 400s - it opened 10% up and went on to hit the 20% circult in a few minutes to mid 500s. Call it anchoring bias or inexperience, or plain bad luck, but I thought of waiting for it to cool off and buy the retracement, which never came. Over time I justified to myself that margins are probably not sustainable and that there has been capital misallocation in the past with them buying hotels. But yes, the wounds are still sore :slight_smile:

That said, even after the present pull back, I am not comfortable buying at present valuations as I think margins will revert to mean (a bit of anchoring bias still). While I haven’t tracked it closely for a few months, looking at the recent numbers, it seems like acetonitrile production may have come back and this will lead to margin pressures for Balaji and Alkyl. I expect Balaji to have sustainable margins closer to 20% over the long term.

That said, the industry structure is great and there is no guessing what mutiples the market may award to companies in a duopoly. I personally don’t see margin of safety presently in both Balaji and Alkyl.

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25

Hi Vineet,
You should also take a look at BirlaSoft, a growing IT company trading at a decent valuation with high institutional (39%) and promoter holding (40%)

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Hi @Vineetjain111, Are you still holding Strides ?
Do you have any clue on results and demerger related info ?

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Hi @AJain
BirlaSoft is a good comppany and is fairly valued too. I had to choose one between it and Mastek and went with Mastek a few months back coz it seems to have a clearer growth strategy with the British government business and the new CEO in the US. Plus they hav already demonstrated their eye for acquiring great businesses at great prices, and there will likely be more inorganic growth in the future.

I am attempting to bring my stock portfolio down to 20 or lower over the next year if possible, and so not sure if I can closely track more than one fast growing digital transformation focused IT company in the portfolio as I’m not very good at analysing IT businesses yet. Thats why I sold off Expleo too.
BirlaSoft is on my core watchlist though, and if some short term uncertainty leads to a sharp correction, I may be a buyer. The SOIC video is great, btw!

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29

Hi @navvod

Yes I am still holding Strides. It was probably a mistake not to sell it off after the last quarter results, but at under 5k crore mcap, the Endo portfolio getting added, a potential cyclical uptun in generics pricing in the US over the next year, and optionalities like entering China and demerging Stelis, I don;t see good risk-reward selling now. In fact after the upcoming results, if I feel from the management commentary that the business is close to bottoming out, I may even buy more. Remember that the result will be muted though as they had guided in the last concall. They may even post another loss.

On the Stelis demerger there is no fresh news yet. In the last concall the management had satd that they will keep all options open, including an IPO. The more I think about it, the more I am convinced that they will do an IPO and will hopefully use most of the cash to deleverage. Remember they’ve taken on more leverage to complete the Endo acquisition.

I hope I’m wrong here and that they positively surprise us with a demerger.

One of three trigers may play out soon: 1) The price erosion may stop and the core business will turn around, 2) Thre will be some update on the vaccine and cash flows will hit the P&L, 3) Details of the Stelis demerger / IPO will be released. Any of these can trigger massive short covering.

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30

Thanks for the info, highly appreciated.
I will also keep a close tab on upcoming results and will make a decision soon.

31

Added about 15% to my present holding of Laurus today at 465. Laurus is now about 3% of the PF. Not sure how long and till where this correction will continue. Hopefully it goes to 350-375 range where it consolidated for long before the previous move. If it does, I will load up to 10% of the PF. Till then, I will keep adding slowly as it falls. If it reverses, I am happy with a low single digit allocation.

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32

Hi Vineet,

I see that you have Ark-G added in your portfolio. Wanted to know your views about choosing this and also did you explore any other etf in this biotech space like franklin genomic etf, ishares genomic etf and invesco dynamic biotech & genome etf.
Also, which app are you using to invest in these etf’s.

Thanks,
Gaurav

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Hi @Gaurav_Bhandari

I did not compare ARK-G with any other biotech/genomic ETFs. One reason only - I am a Cathy Wood fan. I have been following ARK invest for a while now, and have also read most of their big ideas document. I feel Cathy Wood’s understanding of all forms of technology and its adoption curve is top notch - she is an economist first, a tech enthusiast next and an investor last. There are way too many companies doing awesome work in the genomics space which I can’t possibly track, and so the ARK-G ETF is a straight forward option. It is a tracking position for now, but I will add to it slowly.

I use HDFC Securities global investing. When I started investing internationally, Groww and some of the other apps had not started offering international investment options. HDFC Securities is not the most economical - I pay about 3500 per year to have the account, and 0.01 cent per trade (irrespective of value of the trade). So it makes sense for someone who makes large and infrequent transactions. It does come with the safety and security of HDFC Sec though.

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34

I have been adding to select positions (Indoco, Globus, Sunteck, Jubilant, Sequent) through the volatility over the past few weeks. Lucky that the correction came when my yearly bonus arrived, and was still on when my joining bonus arrived :slight_smile:
Managed to bottom-fish quite a but and still sitting on 8% cash which I will deploy over the next few months in Indian, international and crypto markets.

Fresh position
Added 2% of PF to Indiabulls RE. Fairly simple special situation thesis, looking to exit post merger. Will add to the position of there are dips.
Have recently traded Ugro Capital purely on momentum, and then studied it partially and found it interesting. Excellent VP thread on this one btw. Did some checks with friends in fintech enabled NBFC space - they spoke well of the founder. And so I have added a small position (little under 2% of PF), but strictly as a swing trade with a stop slightly below 20 dma, until I finish studying it well enough to have independent conviction to add to this.

Potential swap
Still unsure what to do with MSTC. And now that some stocks on my watchlist have corrected significantly, I may swap it for one or more of them, or sell it and add the proceeds to existing positions. Top contenders for fresh positions are Vaibhav Global, HCG and Angel Broking.

International markets
I used a part of the bonus to buy the dip in ARK G (present average $72) and also open a fresh position in ARK K ($98). Also added a bit to KWEB (present average $46) which is at 2016 levels now! Looking to add the Roundhill Ball Metaverse ETF (META) too, and will continue to add to these four positions, and MaxCyte, on larger dips. International stocks are about 5% of the PF now, hoping to take them to 10 to 15% by mid next year (3-4% KWEB, 2-3% each ARK K, ARK G and META, 1-2% MaxCyte) - about the time when the tapering would be complete and rates would start rising. Hoping to get some bargains.

Understanding Cryptos
I have been trying to learn more about the crypto space, and I must say it is quite fascinating. Even outside of the traditional coins, some of the new projects seem quite exciting. One thing I have understood is that anyone who says cryptos have no fundamentals does has made no effort whatsoever to try and understand the space and the applications of the different projects. I know this may be unpopular on Valuepickr, but I am convinced that cryptos are an important hedge to ones portfolio.

I have decided to take cryptos to up to 5% of my PF by mid next year. Will try and use the volatility to make the additions. At present I am up to slightly over 2% of PF. About 40% of this is Bitcoin and Etherium. Small positions in Polygon and Mana have grown 4x each, making them 30% of the remaining crypto PF. The balance 30% is divided between Polkadot, Binance, Cardano, Sandbox, Compound, SushiSwap, Solana and ChainLink). Each of these are unique in their functionality and fascinating to read about.

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35

It is always good to go through your updates Vineet. Maybe because I see a lot of similarities with my portfolio. I also added Indiabulls RE with the same thesis, took position in HCG and Vaibhav Global. Traded in Ugro sometime back based on VP forum only.

In International markets also, took position in ARK G and yesterday only started in ARK K. Also, has a small position in ARK X as I’m exploring Space sector now. And to add to this, I soo want to take a position in Roundhill Ball META ETF but INDMoney app doesn’t have this added yet. Wanted to know does your broker has this ETF listed?

Thanks,
Gaurav.

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36

That’s pretty uncanny! We sure do seem to have a similar approach to investing :slight_smile:
Maybe we should catch up offline and learn from each other. I will DM you.

Unfortunately no, HDFC Securities Global Investing doesn’t have it yet. I wrote to them about it last week and they said they will try and get it added soon. I’ll update here when I do manage to add META.

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37

Birthday portfolio update :slight_smile:

From my birthday last year, the nifty is up about 25%, and my portfolio is up about 2.5x. I have put in about 0.7x worth of money into the markets as fresh capital over the period, a large part of which went in in the last two months. Haven’t calculated the specific IRR over the period as that is honestly a lot of work, but it should be north of 50%. Not sure if its my skill, or if its just that bull markets are amazing :slight_smile:

A lot of stocks are doing quite well and are at or close to ATHs/52WHs. Sunteck, Globus, Tips, Apollo Finvest are easily the best performers. The pharma/API/Healthcare pack has been silent, but I am betting on them to be the big winners for 2022.

Since the last update in December, I did sell off MSTC after some dilly dallying, at about 345, at a 30% profit. Saw the position double to 530 and then the draw down. Moved most of the proceeds into my US account.

Important lessons learnt on two fronts, PSUs and story/narrative stocks. When they run up (re-rate) significantly before the tangible change in actual business fundamentals / cash flows actually come through, it is best to sell out. Why take the execution risk? You bought primarily for the market to recognize the story and rerate the stock. If the rerating has come through before the numbers come through, it is prudent to lock the rerating gains and then see if the numbers do indeed flow.

Portfolio details as of today

Sector Company / Asset % of PF
Commodities Rain Industries 4.0%
Real Estate Sunteck Realty 6.5%
Real Estate Indiabulls Real Estate 2.4%
FMCG ITC 5.4%
FMCG Globus Spirits 6.4%
Pharma/Healthcare Strides Pharma 3.8%
Pharma/Healthcare Neuland Labs 4.3%
Pharma/Healthcare Caplin Point Labs 3.8%
Pharma/Healthcare Laurus Labs 2.9%
Pharma/Healthcare Indoco Remedies 2.1%
Pharma/Healthcare Sequent Scientific 2.5%
Pharma/Healthcare Kilpest India 3.8%
Financials Apollo Finvest 4.9%
Financials Equitas Holdings 3.2%
Financials IDFC 4.8%
Financials Ugro Capital 1.9%
Financials Edelweiss 2.6%
IT/Digital Mastek 4.6%
IT/Digital Intellect Design Arena 2.4%
Chemicals Jubilant Ingrevia 3.4%
Chemicals Black Rose Industries 2.0%
Music streaming Tips Industries 4.5%
Nifty Nifty ETF 0.3%
China internet KWEB (China Internet ETF $) 1.7%
Innovation ARK K ($) 1.5%
Metaverse Roundhill Ball Metaverse ETF 0.6%
Genomics ARK-G ($) 1.2%
Genomics MaxCyte ($) 0.7%
Gold Gold BEES 1.4%
Gold Soverign Gold Bond 0.7%
Crypto BTC, ETH, MATIC, MANA 2.8%
Cash Cash 6.9%
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38

Closely tracking Solara. Took a sub 1%PF position yesterday to track it better. I’m not sure if the bottom is in place or not, but I like the direction in which the business will move over the next few years and the large drawdown has turned the risk-reward very favorable in my opinion. Recent developments like the Aurore merger, ambitious expansion plans and target topline of $750 million over the next few years are very exciting. Aditya Puri and Arun Kumar can be a seriously good combination.

If I do allocate a larger amount to Solara, it will further increase the Pharma/APIs weight in my portfolio. May have to trim some other positions or even exit some completely to make room for it. I don;t want to allocate too much of my excess cash here as I am keen to moving that money to the US account to buy more of Ark K, Ark G, Roundhill Ball Metaverse and KWEB in a staggered manner over the next few months.

Not investment advice. Not SEBI registered.

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39

Question for fellow VPs

The Solar industry is booming the world over, and especially in India. Reliance yesterday made an announcement of investing a ridiculous 6lakh crore in Gujarat over the coming decade, a large part of which is for solar energy.

Most of the players in the space are well discovered and are trading at obscene valuations, case in point Adani Green. Plays like Borosil Renewables are also hard to value and have had steep moves already. One space that has yet not been spotted as clearly is Solar EPC - not too many listed pure Solar EPC companies out there. I am trying to understand the economics of the business, and whether it is investable.

My initial sense is that this is a super competitive space and margins will always under pressure due to the bidding nature of the business, plus inflationary pressures arising from commodity price increases. That said, it can be extremely capital light and ROCE can be extremely high for efficient players. But with margin volatility, there will likely always be fluctuations in cash flows and I am not sure if these can make for good long term bets.

One listed company in the space is Sterling and Wilson Renewable Energy (previously Sterling and Wilson Solar). Now SWSL has been an industry leader for a while, one of the largest solar EPC companies in the world. The stock had been marred by the inter-company deposit issues, and margin compression over the past two years. Their order book has been robust but delivery has been patchy in the period. The ICDs also resulted in them facing bank guarantee challenges.

However, Reliance recently took over as the promotor of Sterling and Wilson Solar (now Sterling and Wilson Renewable Energy Ltd). I think this is a major development and expands the opportunity size multifold (read the second line of this post). They have also announced their intention of entering EPC for energy storage and waste to energy. There is now an ambitious, cash rich promotor replacing a debt ridden inefficient promotor, and so it is a bit of a special situation play as well.

So in summary, even if a small fraction of this massive investment from Reliance comes through to SWSL which is now a group company, it could do wonderful things for the company’s investors. That said, the industry remains very competitive and susceptible to volatility in margins, and I am not being able to gauge how the unit economics work.

Does anyone have a view on this?

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40

Tried some techno-fundamental trading and it worked out well.

The market had gone up with no real fundamental trigger for two weeks and was pretty close to the previous highs. US tech kept collapsing and clamors of rate hikes were increasing. I figured that something had to give, and so early last week I sold about 20% each of top 10 positions which had risen the most - Sunteck, Globus, Tips, IDFC, Mastek, Intellect, Apollo Finvest, Blackrose, Jubilant Ingrevia and IBullReal.

Covered all of them yesterday and made a trading profit of about 2% of the portfolio in a week. Now that I think about it, was this worth it? I sold as for risk management, but I did land up buying back the moment prices fell 10-15% or so (about 25% in Tips which was sweet). Now for this 2% additional PF returns, I will land up paying 0.3% of PF worth of tax and some charges, brokerage etc. But what if I would be wrong and the market would not collapse the way it did? And did I really have conviction that the market would fall so much, because if I did, why didn’t I sell more?

Some questions to think about the next time I decide to sell for “risk management” based on macros.

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41

Reading above I feel the selling was not really for risk management but rather for trading or being in cash in case of a fall…with 80% of all the sold picks still in same stocks and must be more than 80% of portfolio invested…the risk was and is very much intact…albeit some comfort available in the increase in buying power in case of dips/falls…as yet again in couple week, your risk has again reached the same where you had started when you began this exercise :slight_smile:
I maybe wrong in my assessment and views only personal!

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