ValuePickr Forum

Yogesh's blue chip 10 Portfolio

Thanks for being candid with your positions. Are you still tracking companies including Nitin Spinners and NESCO? These have also corrected significantly during the recent carnage but the recent quarter numbers were positive and looks like they are giving reasonable valuation comfort.

Disclosure: Invested in both NESCO and Nitin Spinners.

@Yogesh_s sir skipped to ask you about SME cos. Are you still holding them (worth, Beta, Shanti.Rkec). would like to note about your SME holdings & views over them

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Great Chart … If you plot the same for countries – US is large cap , China will be mid cap and India will small cap … EU will be declining side and Africa will be before Investor Chasm .

Also another way to look is at sector wise market cap vs growth potential . Also compare with global market and see which sector has maximum possibility of growing in size in terms of market cap … ( and don’t compare it with US as it’s economy is dominated by brands / patent owners which India does not have )

From 2008 - 2016 market had many obstacles that skewed long term Gr across sectors which may not be real indicator for future …

Happy Charting


Hi Yogesh,
I have been following some of your posts. Lots to learn.
Please let us know if this is a model portfolio that you have created or a real portfolio that you are invested in? I read in another post, your investments in PSP, Salasar, Beekay Steel, Caplin, ICICI Securities. What is your latest portfolio?

Yogesh, this is off beat question not directly related to thread here. I am trying to backtesting few model portfolios. I have derived few model portfolios based on certain rules and criteria. Now I would like to test their performance. Is there any way to track the performance of hypothetical portfolios ? If you are using any particular method, could you please inform me?

My current small caps are PSP Project, Salasar Techno, Beekay Steel and Caplin Point. Mid caps are ICICI Securities. Along with these I have also invested in Yes Bank and Indiabulls Housing. Approximately 10-15% in each of these names. This year I have reduced large caps and increased small caps and also reduced number of stocks to 7.

@sachetanbhat to test performance of hypothetical portfolios, you have to value these portfolios at regular intervals like monthly or yearly depending on how granular you want to get and how frequently you transact. Additionally you have to value your portfolios on every cashflow dates if you are actively managing cash position of the portfolio. For valuation, you need historical transactions, historical prices and any corporate actions (bonus, splits, dividends etc).

Using transactions and corporate actions,you can reconstruct your portfolio as on any historical date and then using historical prices you can value it. I had previously made a small presentation on portfolio performance but that is not exactly related to what you are trying to do but something similar.

Link to the post.


What about Can fin homes @Yogesh_s ji?

It’s that time of the year again!

End of the year is a good time to reflect on the year and take stock of what worked, what didn’t and focus areas for next year. I do this exercise annually and occasionally it has brought some profound changes to how I look at investing. 2018 could very well be one such year.

So what worked and what didn’t in 2018? this year its the same items that worked and didn’t work. Exactly a year ago, just after a big year for small & mid caps, I decided to adopt a strategy to preserve those gains rather than going after even more gains. Did that work? Partially. That means I managed to keep some gains but managed to give up some others. So the next question is, why? In retrospect, preserving gains is turning out to be much harder than earning those gains. This isn’t the first time I have given up gains after a huge year and after every such year I plan on focusing on preserving those gains only to forget it by the time next bull run is about to end. At least by end of 2017 I didn’t forget this rule but implementation of it in 2018 is only partially successful. So why is it so difficult? After some soul searching, I realized that I need to work on 3 qualities:

  1. Discipline to sell when price is high
  2. Patience to wait until price begins to correct
  3. Courage to buy when price has fallen

If these 3 rules are so logical why is it so difficult to implement them? I guess towards the end of a bull run, making money looks easy and who wants to give up those easy gains? Finding winners is hard and when we do find one, it looks foolish to give it up too early. If you did sell something and sit on cash, market can keep going up and fear of missing out will test your patience. Lack of alternatives will also make you hold on to expensive investments. In the past I even invented new reasons to hold to to expensive stocks only to laugh at those reasons when price fell. If you don’t sell at the top, you wont have funds to deploy at the bottom. Moreover, when you feel like having made mistake in selling (or not selling) or not being patient enough, you will not have courage to buy when price has fallen because you will feel like making another mistake. You will have courage when price has recovered but that will come at the cost of returns.

One thing that is common in all these qualities is that a strong sense of intrinsic value is required for implementation . No one can accurately calculate intrinsic value but you can have a confidence interval around it so that you will know when price is too high or too low and that will automatically lead to discipline in selling and courage in buying. It will also help in being patient until price drifts outside of the confidence interval. 2018 has turned out to one such year when decisions driven by valuation calls turned out to be correct and those driven by sentiments turned out be wrong including decisions to do nothing. That leads to focus area for 2019, to strengthen valuation models and drive decisions based on it.

Another common factor in discipline to sell at the top and courage to buy at the bottom is that these actions are decidedly contrarian. It is the exact opposite of what crowd is doing (or appears to be doing because that’s what produces those high and low prices) which leads to another profound question of the year:

Am I a contrarian investor or just a trend follower?

Thinking about investing strategies, I came to a conclusion that broadly investors can be classified as either trend followers or contrarians. Most investors (including me) start as trend followers because it is intuitive and it is a low risk strategy. Its like driving on the right side of the road, follow the conventional wisdom and do what everyone else is doing because that’s what we learn growing up. Trend followers don’t need to do a lot of analysis because they benefit from the wisdom of the masses. If something is going up it must be good and if something is going down it must be bad. Often, this is true, but not always. That distinction makes all the difference between trend followers and contrarians. While trend followers benefit when it is true, contrarians benefit when it is not (provided they spot the distinction correctly). Occasionally trend followers are subject to madness of the crowd but it is less painful because everyone is in pain too. Moreover, we know that the whole market is not going to zero so sooner or later it will bottom out. There is always a light at the end of the tunnel. There is nothing wrong in being a trend follower as long as you realize that it is low risk - low return strategy with some chances of wild rides.

Contrarians are those that drive in the opposite direction because they know that market has overshoot its trajectory and they need to reverse the gear to get back on track. They feel comfortable in doing what makes trend followers uncomfortable. Conventional wisdom sounds like an oxymoron to contrarians. When contrarians are right, they become the trend setters, when they are wrong, they go broke. That’s what make this a risky strategy as going in the opposite direction can take you further away from your destination unless you are confident that doing so would put you back on track. To a trend follower, contrarians appear to be heading deeper in to a tunnel with a dead end whereas a contrarians looks at trend followers like lemmings heading towards a cliff. Contrarians need to do a lot of fundamental analysis to determine intrinsic value because a strong notion of intrinsic value is needed to confidently determine if market value is too high or too low.

Contrarians can get an edge by mastering fundamental analysis as it can spot gaps in intrinsic value and market value while trend followers can get and edge using technical analysis as it can spot trend reversals much better than fundamental analysis. My observation is, too many trend followers analyze fundamentals either to confirm a trend or to spot a reversal. To me that’s a flawed strategy (which I also followed for years) because by the time trend reversals appear in fundamentals, price has already reflected that. Only an expert in the industry or an investor with an edge in an industry can spot a trend earlier than others. However such investors will benefit much more by being a contrarian and wait for market to given them an opportunity to profit from the edge they have.

Ten years ago when the world was in the middle of the worst crisis since great depression and my portfolio had lost 2/3rd of its value, I asked myself a similarly profound question. Am I an investor or just a gambler? The reason that question must have flashed my mind because at least some of my actions leading up to the crisis must have fallen in the realm of gambling rather than investing. Today that question does not cross my mind because I know I am not a gambler. So why am I asking myself if I am a trend follower or a contrarian? It’s because some of my recent actions look like that of a trend follower while I am focusing on fundamental analysis like a contrarian. Which means I am still in a transition stage from a trend follower to a contrarian. When the push comes to shove, my subconscious mind is listening to my trend following instincts even though the push itself comes from the contrarian side.

Focus area for 2019 is to take this further and analyze if a decision (including decision to do nothing) is coming from my trend follower side or contrarian side and take more and more contrarian decisions to execution. I think 2019 should provide plenty of opportunity for contrarians.


I think it is a natural human tendency to second guess the process after difficult results. But as Poker World Champion Annie Duke lays out in her book, Thinking in Bets, we must separate the process from the outcomes. Invariably we judge our decision quality/success based on good/bad outcomes rather than good/bad processes. If your process hasn’t deteriorated (beyond what may naturally happen after a few strong years) there is no reason to second guess your approach based on the outcome of one difficult year.


Sorry I must have missed this. Canfin is a good company and there are green shoots of growth showing up in terms of branch expansion. However, there are few risks as well.

Leverage is high. They were suppose to come up with right issue or fresh capital infusion after stake sell to address that. It can still happen but until that happens, high leverage will limit growth to 12-15%.

Margins can squeeze. After IL&FS default, cost of borrowing has gone up. HFCs in general operate on lower NIMs than banks and other NBFCs so even a small increase in costs can have big impact on profits.

Valuation can shrink - Canfin is not as expensive as it was a year ago but at 2.5 times book its not cheap either. Its funny how a 2.5 times book value appear fairly valued today whereas just a year ago 3.5 times value was considered a steal. That shows how market psychology changes in such a short period of time.

Other HFCs are even cheaper - Investors have more choice now in NBFCs compared to a year ago. That can keep valuations of canfin in check.

@Marathondreams good point. Being a contrarian is risky. that’s probably what keeps many people from being a contrarian for their own good. In fact by definition, there cannot be many contrarians as they would be called trend followers. Following the crowd has its own pitfalls though. they don’t face a sudden death like a contrarian but a slow poisoning of below average returns.

@BreakingBad01 I agree with your point. there is no point in judging the process by single year’s outcome. However, in my case this has become a recurring phenomenon hence the need to evaluate the strategy. Moreover, a process is only as good as the outcome it produces. When we take lot of efforts to earn high returns, we should take equally high efforts to preserve those. I feel like I am taking lot of efforts to earn high returns but not enough efforts to preserve those. Mathematically, even a small loss on a high base has a big drag on big gains on a small base. That’s what makes preserving gains so important.


Simple and powerful points. I think the present situation is somewhere between 1 and 2 for large caps and 2 and 3 for small/mid caps.

But it is very interesting times. Any gains of oil price correction might be outdone by farm loan waivers and pre-election soaps. And earnings growth is still no where near a point to justify valuations.

Hi @Yogesh_s do you track GIC Housing finance ? Its trading near the book value and looks attractive.

It is a good company selling at attractive valuation. It also faces the same risks as Canfin with slightly higher NPA ratios. However, relative to Canfin, it is selling at a deep discount.

I am skeptical of their ability to pass on cost increases to their customers quickly. They are likely to report subdued results for next 2-3 quarters until higher costs flow through to customers. Q2 results reflected the same concern. However, valuations more than compensate for this risk. In the long run they will report average growth rates.


How you decide that price is high?
For example if you holding indiabulls housing finance, at what P/B value(or any other parameter) you will find it costly?

Thought provoking post …

I have faced these three issue multiple times and have kicked myself . but reality for me is

1. Discipline to sell when price is high : When stock which you bought increases in price faster than value - say earning power increases by 3X and prices goes up by 20 X when you will sell … When price is 5X , 10X , 15X … … I had lot of problem when I sold stock like Nilkamal , Graphite, Cosmos , Venkys and many others which I sold when they went 5/ 10X only to see they kept going higher … I sold 40% of HPCL stock when price when 10X but now it has fallen to 5X of my CP … Should I feel sad or happy about it … It is tough

2. Patience to wait until price begins to correct … I have bought stocks when they have corrected min 50% from high or are @ 3 year low … But invariably in last 10 years of investing cycle many have fallen more than 20% - 70% post that … So I keep sip fo next 3 / 12 months … Sometime it recovers very fast … sometime you get time to build positions … But Reality is you feel stupid - both when it recovers very fast or when it falls by lot from your buy prices – This has no relation to change in fundamentals … Again it is tough –

3.Courage to buy when price has fallen : True but it is often better to keep position limits … ie it will never exceed more than x% of Pf. Things can turn really ugly when market knows more than you … and it might pretty late when you realise you are wrong … These stocks becomes dud … I have tried to stick to Sector PF approach when in doubt … buy key stocks in sector in equal % or 50/30/20 … I have done this with IT / Metals / Auto Ancillaries /Pharma in past – for me this worked better than putting too much money behind one stock …


It is based on the valuation model. I use a valuation model to determine intrinsic value and expected return from a stock. the model is also used to determine confidence interval around base case valuation. Higher bound of this interval is determined using optimistic set of projections and lower bound is determined by using pessimistic set of projections while calculating value. When stock price crosses higher bound, it is too expensive and when it falls below the lower bound it is too cheap. What’s optimistic and what’s pessimistic can vary from investor to investor so this exercise can be very subjective.

Intrinsic value is is revised every quarter however one quarter does not make a huge difference even if results are bad (or good) as intrinsic value is based on medium to long term projections. If company performs well, intrinsic value should rise over time so even if stock price goes up, it may not cross upper bound.

Intrinsic value is also impacted by general risk premium for equities as an asset class and riskiness of the company relative to market. Both these parameters are cyclical. Stocks can go from risky to safe (or vice versa) in less than a year. Risk premium is determined by subtracting risk free rate from expected return on the whole market while riskiness of a company relative to market is determined by calculating beta. Details are here.


Curious about whether your investing style is agnostic to thematic opportunities @Yogesh_s , the reason i ask is the improved earnings momentum from a temporary industry disruption is unlikely to lead to a profound change in targets derived off longer term projections, given the inordinate weightage the terminal growth and discounting assumptions will logically play.
Admittedly, this boils down to being able to be astute where timing of entry and exit is concerned but the payoff seems worthwhile if discipline is maintained.
A specific opportunity i’d like to get your opinion on is with respect to the API production disruption in China and more specifically the potential for a company like Hikal to benefit from this. My DCF based valuation yields a roughly 10% upside but the possibility of heightened profitability over the next couple of quarters makes me keen to set up a small position despite minimal margin of safety

If a company is going through earning momentum, I incorporate that in future cashflow expectations and discount that to arrive at present value. Depending on how long the momentum continues, I adjust the cashflows accordingly. If the momentum is expected to be short term and unlikely to have any structural impact on profitability of the company then DCF will not show any material impact on the fair value.

To me it looks like your DCF valuation shows only a 10% upside but you think in the short term stock could trade at higher valuation due to earnings momentum and near term returns could be higher than 10%. It’s possible if others think the earnings momentum could last longer than what you expect and price the stock accordingly. But this rationale banks on greater fool theory. If you think the momentum is only temporary (and that’s why your valuation shows only a 10% upside) why do you think others will think it will last longer and price the stock higher?

In some cases, when a company reports good numbers, investors get excited and extrapolate that to 10 years and price the stock accordingly. If you see evidence of that happening, you can take a position. However, when the company reports bad numbers, investors extrapolate that also to 10 years and send the stock crashing.

Specifically for Hikal, I don’t like the company due to its poor ROE/ROA, poor working capital management and high debt. I don’t think investors will get excited if it posts good numbers for a quarter or two. It is already trading at a PE of 21 and even that is trending down.


Very much appreciate your well thought out and articulated response Yogesh!

To answer your query about why i believe others will think growth will last longer than it actually might:

a) i’m a believer in semi-efficient markets vs perfectly efficient ones, so bouts of euphoria from spurts of growth could result in a dislocation from sound valuation principles amongst investors as you suggested

b) in markets like today where there is considerable herding amongst investors (given that regulatory or valuation hurdles have resulted in a very limited quantity of investable companies),people tend to overpay for ephemeral growth believing its a better alternative to alpha generation vs similarly valued companies who havent experienced a sudden spurt because of the outside chance this growth will be sustained

c) Growth and its longevity are the parameters with arguably the least predictability ergo the biggest dispersion in models in my opinion

I do appreciate your views on Hikal as well! If i may pose another question: In your past experience trading Indian markets, which companies have proven to be most resilient during downturns outside of the large cap / blue chip names ?

Hi Yogesh,

From Beekay AR, I see below growth triggers

  • The company intends to monetize its large land bank in Howrah (off Kolkata) and use the proceeds to invest in its core business.
  • The company intends to enhance the utilization of its TMT bar capacity and embark on doubling the capacity through another plant of a similar size across the next couple of years.
  • The company intends to extend its business into a new product segment (flats) through a jobwork engagement with a large Indian steel manufacturer.
  1. Any idea how these will help the topline?
  2. How do see the steel demand for next few quarters?
  3. Any other growth triggers for the company apart from the above?


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