ValuePickr Forum

YourRaj's Portfolio

New addition portfolio 4%
TATA ELXSI LIMITED
Background : TELX was set up to manufacture super computer systems and components in India but later the project became commercially unviable later they evolve in to evolved into System Integration and Support and structured its operations under two business segments, namely Software Development & Services (SDS) and Systems Integration & Support (SI).
as compare to KPIT Technologies ,Persistent Systems ,Mindtree & Hexaware Technologies It has better ROCE
Other better part of story is that it is debt free and good working capital efficiency,
Dividend Payout : Avg. 15-20% of Net profits over last 5 yrs .

Walked out from Maruti ,Britannia and Parag Milk
i am working to formulate strategy to build portfolio based on following break up and will shortly finalise candidates for each below sector . i am learning Thanks VP’s for guiding

Can u share reason to walk out of Britannia? Thanks

These are mature business They offer lots of Comfort it offer you security to your investment .But the going trends of les sugar and fitness mania ( Longevity of life with fitness matters ) among millenniums generation lead me to think what will be the senerio after ten years . The growing Population with more load on agriculture and they will better spend on quality food habbit .Recently coke has changed it’s strategy they are going for other beverages ( health benefits of coffee ) The incredible story of TUK TUK chai in UK made me think that people will change the perception of their discretionary buying habits… and i replace all the above with TATA Elxi … a better sustainable business for next decade and it is mid cap not so matured industry
The Britannia is all-time favorited… I personally has visited their plant and installed one wrapping machine at Delhi in 2005… Nothing against the company as such BUT ONLY BETTER OPPERTUNITY

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@yourraj

I think you have looking at the company like Britannia from the wrong angle. And extrapolating some existing fads into the future. Human nature and consumption habits do not change over night or over a few years and especially in terms of food habits. This healthy food debate has been going on for years now and still things remain the same.

To test the hypothesis, just go to a local dmart or big bazaar store and find out how many new products have been launched recently and how has been the customer response. Plus britannia is not only about biscuits. There are other dairy kind of products etc.

I have nothing against you buying tata elxsi but when you buy such companies you need to answer a few basic questions.

What do I know about this company? And what kind of products/services it has? Who are its customers?
Specifically in case of tata elxsi, the question to ask is why are numbers turning out to be so poor that stock price is creating fresh new lows consistently?
Is my perception different from market perception (which seems extremely negative looking at price reaction post results) and am I going to be correct in my viewpoint as against that of market’s?

Against that try to ask few questions about britannia. And figure out how much you know about the business and how easy/difficult it is to predict the business for you for next few quarters/years.

I think you use the term sustainable business for the next decade in case of tata elxsi too casually. It is one company which is likely to be at the cutting edge of technology and disruption and can face big competition from other players.

I dont want you to be too specific to either of these two companies but want you to develop a line of thinking about how to look at a business esp if you are thinking to buy it for longer term. If its for a few months/quarters anything goes. But there too you have to have your triggers clear in your mind.

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Even Dr. Atkins could not change people. The low carb revolution has been there for many many decades. The name has changed but the concept is same. Common man will find it difficult to live a life of low sugar or carbohydrates. We already saw Nestle replace sugar with it’s refining of cocoa. Sugar may be replaced by something else but food industry and biscuits/ snacks will always be there. Sometimes it may take the appearance of being healthy and we have seen that with nutrichoice zero sugar raagi biscuits. When Coke was asked to stop using cocaine in 1903, they switched to something else. Companies will always find a way. You may want to dig more on human psychology to understand that.

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Thanks @hitesh2710 Hitesh BHAI @Uservijay VIJAY JI for finding time to visit about the pointers in BRITANIA I had share my views in that thread .
Admid of the meltdown i want to analyse my portfolio and effect of the severe fall and found that THE CAPITAL ALLOCATION has protected me a big way .Thanks to thread one must pay sufficient time in studying the thread


Everyday is a learning i want to share snippet from my portfolio
stocks are gone down from 15% to even 60% FROM MY PURCHASE VALUE …
image
WHAT I ascertain from this the MAGIC of WAITING and patience However the great learning
The stock may or may not come to low hanging bu the QUALITY AND @what price you pay MATTERS A LOT … i want to share a couplet recently heard from my friend
AGAR KAM KA AYE TARICA to SAMJHO india MIAn AMERICA–
each passing day i feel i know nothing
HOW TO CHECK THE effect one equity on one’s portfolio = %in Portfolio X DOWN or UP % in equity
Regards

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Sir, have you ever tried portfolio advisory services?

I think u should give a try, not to just copy them but you would get to know how they manage portfolio.

It is cRegarding debt of DBL it around 3000 crores of net debt . Now we can’t compare the construction business dynamics with other industry . Second we need to the components of debt and inflow of money to offset the debt . Half of the debt company took is for the machinery which in long term a big asset and will offset the debt taken on this account . In 2017 company had sold some of its 24 HAM projects to Shrem Group and and a part of payment he is about to receive. Debt to equity ratio is well placed if you you compare with the rest of individual industry. For further improvements on this ratio Company has to increase the denominator i.e Equity .The HAM projects handling is not a cakewalk That is the real differentiation which make this company among good player in this field . For HAM project one need to invest 60% cost and in case of pure road project 100% cost borne by govt and company do the construction .

What I observed that DBL is well placed with in it’s sector and changing gears to move from HAM to pure model meaning while acquiring the assets which she will use in future.
Overall this industry is Capital intensive and some time to recover own money takes time like BOT roads company is selling its HAM projects.the proceeds from sale it might use to pay off debts and part of it may be used in contesting Bid for new projects as government has floated around Rs 1 lakh crore worth of road projects currently. However the order book is more than

Double than last year . The interesting angle is that it is an established player in irrigation, urban development and mining space this area is yet to Tap to full potential.Over the years DBL has DBL has developed core strengths like fleet/equipment management, bulk material handling, high volume excavation & earthwork, supply chain management etc. in its infrastructure and construction business. The DBL expertise enjoys close synergy with the mining business.
Regards

"Bull market are born on pessimism , grow on skepticism , mature on optimism and die on euphoria.Th time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell " -; Sir John Templeton 1994

We purchase a company at discount with proper analysis and on top of that we put Margin of safety as additional cushion to address the unforeseen circumstances and buy 100 Rs note by paying 50 Rs . But when that stock falls further 50 % we feared a lot we fail to recognise the this time you can pay only Rs 25 for 100 Rs note . We look for exit and results s that a frightened investor are willing to accept a negative real rate of return in exchange for the safety of principal.It is not easy to make such decision of buying when your stock hits the floor and bleeding like hell .Only condition that you should not buy more is if you allocated that I am going to make 25% to that sector and you already reached your limit of investment in that sector to better to say BIG No other wise you can never get the chance to buy . This kind of investment is not for averaging the price but you are buying because you being invested in that particular security you know more than new investor provide you had sufficient study the company along with variable and the factor of growth and how it will play out based on company’s Capex or strategy.

A fearful market often leads to inefficient markets . Unfortunately when investor rush for exit at the time the humps and bumps of market when they can pay only Rs 25 for the 100 Rs note and in past they had paid Rs 50 but mostly they wait for positive news to hit the market floor in that senario they are happy to pay even Rs 65 or some time Rs 125 for 100 Rs note.
There are bigger Danger are associated when buying TOO big to to heavy stocks `PNG

They fail to recognise the Snow ball effect that when the ball roll down it gather more momentum and mass but addition of more snow so it make lots of damage
`

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i come across an old report by credit Suisse that is worth reading . i share a example fro it .

Mental Mistake : Hyperbolic Discounting

Here’s a quiz for you: Which would you prefer, $10 today or $11 tomorrow? How about a choice between $10 one year from now and $11 in one year and a day? When researchers ask these questions, subjects generally prefer the lower amount now (“I’ll take the $10 today”) and the higher amount in the future (“I’ll pick the $11 in a year and a day”). Exhibit 2 shows this reversal in preference

you can found the document below
https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&source_id=em&document_id=806809970&serialid=att3lj%2BbiskxOz%2BIkMeKGLkAY70DQIr2sWJ7cEP4KSc%3D&utm_content=buffer62978&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

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i am leaning about the economics cycles . i come across a good source of historical data of business cycles one can locate it at . https://www.nber.org/cycles/cyclesmain.html

Investors need to have a good understanding of the business cycle and interest rates since both can have a significant impact on the financial performance of banks. There are several factors drive rates including monetary policy set by the government or RBI .

Since 1945 average uptrends or expansion is 58 months and average down trends or contraction is 11 Months .however since 1990 uptrends 95 months but still the and average down trends or contraction is 11 Months ( As per US DATA ).At the time of begging of expansion cycle buy cyclic stock such as commodity& technology stocks they are tend to outperform during the expansion .in time overheated market one can opt to buy health care consumer staple and utilities because of stable cash flow and dividends .Most economists considers that its natural part of economic activity but views are multiple some economist argue that if central bank RBI does not manipulate the interest rates and money supply the impact of the cycles would be less severe on the contrary there are others who believe that central banks indirectly control the cycle by intervening with monetary policy.

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Growth, ROIC, and cash flow are mathematically linked.

To see how, consider two companies, comp1 and comp2 ., whose projected earnings, Both companies earned $100 million in year 1 and increased their revenues and earnings at 5 percent per year, so their projected earnings are identical. If the popular view that value depends only on earnings were true, the two companies’ values also would be the same. But this simple example illustrate show wrong that view can be.

Comp 1 has invested $25 million (out of $100 million earned) in year 1 to increase its profits by $5 million in second year . Its return on new capital is 20 percent ($5 million of additional profits divided by $25 million of investment). In contrast, Comp2’s return on invested capital is 10 percent ($5 million in additional profits in year 2 divided by an investment of $50 million).
Growth, ROIC, and cash flow (as represented by the investment rate) are tied together mathematically in the following relationship : Growth = ROIC× Investment Rate
Applying the formula to comp1 :5%=20%×25%
Applying it to comp2 : 5%=10%×50%
As you can see,comp2 needs a higher investment rate to achieve the same growth.

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What is undiscipline ( from the book How the mighty fall )

  • Discontinuous leaps into arenas for which you have no burning passion is undisciplined.
  • Taking action inconsistent with your core values is undisciplined.
  • Investing heavily in new arenas where you cannot attain distinctive capability, better than your competitors, is undisciplined.
  • Launching headlong into activities that do not fit with your economic or resource engine is undisciplined.
  • Addiction to scale is undisciplined.
  • To neglect your core business while you leap after exciting new adventures is undisciplined.
  • To use the organization primarily as a vehicle to increase your own personal success-more wealth, more fame, more power at the expense of its long-term success is undisciplined.
  • To compromise your values or lose sight of your core purpose in pursuit of growth and expansion is undisciplined.
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Cash return is a good measure
I come across this during reading of Pat Dorsey Little book that build wealth and worth sharing . It shows how one can calculate it
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regards

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It is a wise approach followed by investors who want to play it safe. Especially for those who feel a large part of their networth is in the stock markets, they buy stocks that give a virtual guarantee of returns in form of Dividends or periodic Buybacks at premium, coupled with a moderate growth in stock price. They then use the profits from these safe investments and make aggressive bets.

In this way, one can have a perpetual cash generating machine.

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Very simply explained. It’s a basic know how for any new investor. Great.

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How much investor is Paying more than the cash generation by The company and how to calculate it
It is learning for me and I want to share among the VP Most of the Seniors already knows about it yet I am brushing some fundamentals
Suppose a company is having
Three prices CMP is 54 or 120 or 580
Sales :51,103,000 O/s Shares = 512,662
Sales/ O/s Shares = 99.68
price of share =54
Price to sales ratio =0.54 which means investors are paying less than the company making sales so this must be a buy 1 Rs note you are getting in 50 paisa

If CMP is 120 Price to sales ratio = 1.21 it means investors are ready to 1.21 Rs for every 1Rs sale made by the company

if CMP is 580 Price to sales ratio =5.82 it means investors are Paying 5.82 times than the company is generating sales But most of the investors stay heavily invested in the companies even where the Sale is less but the Price is Inflated .
Lesson learnt

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One addition
i had visited my list of old investments and found that Hikal is start performing .The company is agro chemical i had made profit but exited as it touched my target .
It always good to visit your previous and existing stocks before moving to any new stock story . I don’t know will it going to add some wealth or not but when i visited my old rational i found the valuations now is more promising . I had Pi-industry in my portfolio in past but had exited on profit booking as the target achieved .

[i am learning **stocks are not your spouses that you should stick with them life long** . i am not saying that is bad practice but the reason is wealth protection and i am happy if one stock give me 30 to 35 % in one year ]

one may visit the thread to know more about Hikal

Disc: I am not Sebi approved analyst .this is not any buy sell or hold recommendation

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while reading on the website of the The veteran small cap and cyclic industry investor Chuck Royce of Royas funds i came across beautiful lines that is worth

As bottom-up investors, how much time do you spend looking at sectors and industries or examining business cycles?

The starting and ending point for us is the individual company. We’re looking for businesses that exhibit a certain set of characteristics, those that our experience strongly suggests will generate consistent and superior returns on capital over the long term.

We don’t think we can add much to the medium- to long-term investment returns for our investors by attempting to analyze the business cycles of sectors or industries. So while our bottom-up strategy naturally tends to lead us to certain sectors and industries (and also finds us de-emphasizing others), those preferences are not determined by our perception of the business cycle.

Although we try to avoid deep-cyclical companies and look to invest in robust compounders, it’s fair to say that just about every company has some degree of cyclicality in its business. Which is fine. If a portfolio holding or another company held in our database experiences a rough patch in its operational performance due to a temporary change in the business cycle, and the stock price reacts negatively, that’s another example of the opportunity created by volatility.

Our view is quite simple: stay invested. Buy more of a good thing. Don’t try to time investments according to one’s analysis of the business cycle. In our opinion, very few people do business cycle analysis with consistent accuracy.

his philosophy about the cyclical and small caps selection is based on following tripod,
Small-cap performance to be driven by three factors: a preference for profitability, relatively lower valuations for both cyclicals and value stocks, and burgeoning economic strength both domestic and abroad.

one more learning i took from him is, Companies that help others do business faster, cheaper, and more effectively has been a sort of picks and shovels approach that has frequently led me to industrial and technology companies with very interesting—and in many cases ultimately profitable—businesses. That much hasn’t changed.
Over the last few years, there’s been a lot of innovation in areas such as process automation, robotics, lasers, cloud storage, etc.—all of which need equipment, components, and related technology, which has led to a lot of investments in companies that have successfully helped other businesses to innovate and/or increase productivity.
In fact, companies involved in process automation, robotics, and other areas look very promising to us over the long term as the recent global technology build-out rolls on.

their advice is
Our advice? Ignore the daily noise, stay focused on earnings, and invest for the long run. After all, the market may run on psychology in the short term, but in the long term it runs on earnings.

source: https://www.roycefunds.com/insights/2018/03/pm-rayner-stay-invested

Another pioneer in the small caps selector and Master practitioner is John Neff.His investment style is as i found in the book by Glen Arnold Lesson on investing from Master Investors


It is not the number of books you study which matters but it matter how to implement the learning that you use to develop the art of investing . so keep learning and share your learning . So for that i am sharing a source which is open anyway most of the books are available online in pdf format

PDF Drive is a free search engine which allows you to search, preview and download millions of PDF files into your devices.

for the list of good books on investing one can refer to My Top 5 Investment Basics Books, & why? and Multi-Disciplinary Reading - Book Reviews

Regards

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Hello yourraj bhai.many ace investors are investing in companies when price to sales is 0.20 or 0.25.your views bhai.