Let’s start the ball rolling!
Who better to start with than Hitesh’s presentation on his Journey/Investment Learnings/Tenets
Sorry for the delay in uploading the series of presentations. Was caught up in many things 
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INVESTMENT JOURNEY - HItesh Patel - VP CHINTAN BAITHAK - GOA 2015.pdf (347.5 KB)
Some others have also come in. Will start uploading later at night.
Meanwhile, dailogs can start - open ended - need not be structured
After going through all presentations - we will abstract key learnings/patterns for the VP Process Red Book
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Donald - thanks a lot for this; I am sure this thread will prove to be of great learning for beginners like me.
Hitesh - thanks for the presentation; I hope to meet you sometime soon
A couple of things on which I wanted to get a little more perspective:
- You’ve mentioned spin-offs as a great source of potential winners (ala Klarman and Greenblatt). You’ve added two ideas - KTIL and Marico Kaya. I have one more to add, Gulf Oil Lubricants. My query:
- For KTIL, how did you go about analyzing the company, what was your thought process? When I looked at the company, I was very uncomfortable with the levels of debt which they wanted to take on for the MP project. What were your thoughts around that?
- Marico Kaya, from what I understood was a loss making company (to start off with). How did you go about analyzing this company?
While I’ve asked you to elaborate on these two companies as case studies, I would love to extrapolate your thoughts towards a greater understanding of complex situations like Spinoffs. One such special situation has been analyzed in this forum by @dubyrex (Mastek + Majesco)
- My other query, how do you track such spinoffs and other special situations?
Would love to pick your brains along with that of other esteemed posters on this forum.
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Since the baithak is named after me 
, I hope I have the liberty to suggest the following:
Would be great if each participant of the baithak could start a separate thread for his own presentation/journey/style/learnings if feasible considering time and other constraints (Donald mentioned professional constraints) of the participants.
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Thats a great suggestion. Else, there’ll soon be multiple conversations going on…
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Would be great if hitesh can share how he filters down the idea to a promising few ? for every kaveri or MPS , he may have looked at 10 other stocks. What made him reject others and not this one ? gut feel or something else ?
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Thank You @Donald for sharing and special thanks to @hitesh2710 bhai for preparing this !!
Thanks @Donald sir for this initiative…
Hitesh Ji,
Thanks for the PPT.
You have been a ‘Go To’ man for any newcomer for any query on investing/ stock fundamental/ technicals. And a result your portfolio section has max pages both in TED & here at Valuepickr
Thanks for all your help & off-course multibagger initiations.
I have two questions-
-
You have said Early Exits as your mistake. So, w hat framework are you using now to avoid this? When do you sell?
-
In Ignorable you have put Shilpa quarterly results & in Non-Ignorable you have put Financial performance.
So, after how many poor quarters of Shilpa & similar other stocks will it become a poor financial performance & hence Non-ignorable?
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Thanks Donald & Hitesh for sharing your insights
I loved the way you have put Ignorables and UnIgnorables, This clearly helps to reduce noise while making investing decision
However the biggest surprise for me was “IPO are often fertile grounds for finding big winners” would like to know why do you recon that ? As popular belief is that IPO short change investors as they come during bull markets at heady prices
Regards
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Donald - thanks a lot for sharing,It helps a lot of VP silent members like me.
Hitesh - thanks for sharing your experience.
@Karan Maroo,
Regarding Spinoffs, most of the times these spinoffs tend to generate excitement only after the demerger has happened. Before Marico Kaya demerger, stock price did not seem to be going anywhere and even after the announcement the stock price was range bound if I remember correctly. The Marico Kaya business was a sort of drain on the main FMCG business. So effectively if anyone had bought Marico post the demerger announcement then he would have got nearly free shares of Marico Kaya and made good money.
Regarding KTIL, it was an observation in hindsight. But at that time too a lot of guys were pretty excited about the demerger situation and I got some info from fellow investors but with concentrated portfolios one cannot churn portfolios quickly.
Even with Mastek -Majesco thing, initially when management talked about the de merger there was not much excitement. So the early entrants had a good price to enter and participate.
But the main aim of the message and the part of presentation was to narrow down fertile areas to look for winners in comparision of looking for a needle in the haystack.
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Rohit,
Most of the times the idea was so obvious that it appealed immediately. e.g Ajanta had grown its revenues at 22% and profits at 35% cagr prior to 2011 and still was languishing at 5-6 PE. The concern there was the co was quite small and some guys had reservations about the company making it big in regulated markets. But what mattered was the existing business was generating consistent growth and US markets was a distant step in the co’s journey. But to most guys who go after pharma stocks the US business has a glamour element to it and hence dont give too much attention to companies deficient in US presence.
Same with Kaveri Seeds. I used to track its results and they were fairly consistent with hardly a year of less than 25% revenue and profit growth in past 5 years. And co was gaining market share from its more established competitors. There people were worried about it being a hyderabad based company and it not paying income taxes. These were worries which could have been solved by a little more indepth look.
About rejecting other ideas, I think either there was no consistency in earnings, or no predictability or no big visible future opportunity. The attractive ideas have always been quick to meet investment criteria.
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vivek,
About IPOs being fertile grounds what I meant was not to go for the idea immediately at the time of IPO but keep a watch and monitor things. Many a times if the company is from an unfancied sector even post IPO it would not go anywhere for some time post listing. Then if we feel it is a good company with attractive financials and good management we can latch on to it and load up.
e.g repco home finance post its listing also was available near to its ipo price and it had a stellar track record over past few years. Another such example was Sharda crop chem which has a good asset light business model and which remained range bound between 235-255 for a long time post the listing euphoria was over. And valuation wise also it was not too expensive as compared to peers.
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@jatin kalra,
Early exits were mainly due to early entries. When u buy a stock at 5-7 PE and see it quoting at 20 PE u become jittery. Thats what happened with many early picks. Now I tend to follow its financials more closely and till the time the company keeps churning out decent results I keep remaining invested. The only exception is when stock runs up far ahead of its fundamentals and at the same time I have a better alternative idea. (But there is no formula for these exits, its more of a calcluated take on the stock at that point of time)
In case of Shilpa because of efforts of VP team and management q&a we know that the story will start after a few quarters down the line and hence the current quarterly results dont make much sense in terms of taking a decision. The downside to it is that for quite some time the stock price may not go anywhere before making the big move. That is the time for earnings to catch up to price levels. In other companies where I dont have too much idea about what things are in store for next 2-3 years down the line, and the results dont match up to expectations I decide on an exit.
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thanks hitesh for the reply. So to summarize, you are saying that the performance was good, opportunity appeared to be large and the valuations seemed to be reasonable.
Just wanted to get your thoughts on one more point - The 2011-2014 was also a bit of unique period when mid and small caps went through a severe bear market and hence quality was fairly undervalued. This seems no longer the case …
how are you thinking about it now ? wait and watch or relax your threshold for valuations ?
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Thanks - That’s an interesting perspective
rohit,
As you point out, 2011-14 was a great time to pick up great companies cheap. Now the valuation comfort is not there. But still sometimes we do come across some situations where markets do exaggerate their reactions to a quarter or a couple of quarters of bad results in a great company. That sometimes offers good chance to enter.
In current markets where valuations are not so alluring one has to relax the valuation threshold. Sitting on cash for prolonged periods is something which I have to learn to adjust with.
Another concept me and some friends have is what we call “Parking space” where in absence of a better idea we tend to buy stalwart stocks with limited downsides even though upsides might be limited. This has worked to our advantage in case of Page Inds nearer to 7000, hdfc bank nearer to 800-850 levels and so on. And whenever a favorable switch is on offer one can think about it.
There will be different stalwarts available at different time periods which fulfill the parking space criteria.
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“Parking space”. Good one. I have also done the same recently. Thanks.
Thanks Hitesh @hitesh2710 for sharing your wisdom document.
Like your mental model/thoughts, the document is also very simple, crisp and thought provoking, full of one liners, each being very powerful and full of wisdom. Its good idea that you have given very relevant examples for each hypothesis, which helps a lot in quick learning. Others can also give examples for faster learning.
Request others who all attended to also chip in with their ppts the Chintan Baithak. This kind of sharing and learning is more powerful, effective and permanent than advice on a stock etc, This make VP really very special place for all of us.
Thanks
Santosh
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