With
the calendar year coming to an end, it is time to take stock and look back at
the year and the developments in the portfolio.
For
the majority part of the year, I was bearish on the Indian economy. Even today,
I am not convinced that the country is in very good financial health. The
recent rally is more based on hope than substance. This rally has been fuelled
by the hope of a stable pro-reform BJP government at the centre in 2014. Purely
on fundamentals, there is no improvement on the ground. Inflation continues to
be high, specially food inflation. It is unlikely to come down any time in the
near future as long as the supply side structural issues are not addressed. The
Current Account Deficit, thankfully has come down with the prices and
consumption of gold falling during the year. Rupee scared everyone (atleast the
importers and of course cheered the exporters) by shying away from the Rs 68
mark and settling for some time around 60, up from the 45-50 range established
for a fair number of years.
I made some
changes to my portfolio. I booked profits on some of the stocks where I had
made good profits and where the business climate was looking sluggish for the
next few years like Balaji Amines, Titan, GRP, Shriram Transport Finance, Cravatex
and JK Lakshmi Cement. I booked losses in CEBBCO (lost 70% of my investment on
this), Sintex and Thangamayil Jewellery.
During the
year, I added some stocks, which are either more export focused and thus likely
to gain by the strength in the dollar or simply who businesses are faring well
in this recessionary environment. Shilpa Medicare, Poly Medicure, Alembic
Pharma, Ajanta Pharma and Finolex Cables. I
have added to my initial positions in PI industries and Kaveri Seeds over the
year in small quantities. I have reduced my positions in Cera as I think the
price has run much ahead of fundamentals. I have added Page Ind to
my portfolio as a dipstick investment more from a tracking perspective. I am
still not decided on the valuation comfort in the stock. I have not made any
changes to my top 3 holdings.
Over the
year, my portfolio has returned 25.14% versus 8.27% of the Sensex and 3.3% of the
HDFC Equity fund. I have chosen the HDFC Equity fund as it is one of the
largest and best-managed equity fund over a 15 year period. The point is, if I
am not beating a decent mutual fund, then I would rather put my money there and
go sit on a beach ;-)
Name of Company
|
% of Portfolio (Dec'12)
|
% of Portfolio (Dec'13)
|
Comments
|
Mayur Uniquoters
|
19.08%
|
19.79%
|
Hold / Buy on dips
|
Supreme Ind
|
16.37%
|
16.42%
|
Hold / Reduce
|
Astral Poly
|
8.02%
|
14.75%
|
Hold
|
Kaveri Seeds
|
2.02%
|
6.78%
|
Hold / Buy on dips
|
Amara Raja
|
5.06%
|
4.98%
|
Hold
|
Cera Sanitaryware
|
7.88%
|
4.72%
|
Hold / Reduce
|
Finolex Cables
|
0.00%
|
4.44%
|
Hold / Buy on dips
|
Yes Bank
|
6.03%
|
3.89%
|
Buy
|
Auto Auto
|
2.88%
|
3.85%
|
Hold
|
PI Industries
|
0.50%
|
3.77%
|
Accumulate
|
Balkrishna Industries
|
2.44%
|
2%
|
Hold / Reduce
|
Shilpa Medicare
|
0.00%
|
1.99%
|
Accumulate
|
Alembic Pharma
|
0.00%
|
1.97%
|
Hold
|
Ajanta Pharma
|
0.00%
|
1.88%
|
Hold
|
Poly Medicure
|
0.00%
|
1.75%
|
Accumulate
|
Page Industries
|
0.00%
|
0.66%
|
|
Cash
|
0.31%
|
6.35%
|
|
Balaji Amines
|
3.51%
|
0%
|
|
CEBBCO
|
2.20%
|
0%
|
Analyze mistake
|
Cravatex
|
0.84%
|
0%
|
|
Gujarat Reclaim
|
2.56%
|
0%
|
Wait for turnaround
|
JK Lakshmi Cement
|
3.51%
|
0%
|
Keep watch; Buying time may be soon
|
Shriram Transport Finance
|
8.22%
|
0%
|
Keep watch; Buying time may be soon
|
Sintex India
|
3.00%
|
0%
|
Keep watch; Buying time may be soon
|
Thangamayil Jewellery
|
1.22%
|
0%
|
Analyze mistake
|
Titan Industries
|
4.32%
|
0%
|
Keep watch
|
Hi Abhishek,
ReplyDeleteCongrats on another year of solid performance. CEEBCO had been a true hard lesson for the year, margin of safety and permanent loss of capital.
I would rather disagree with this notion of comparing against the broader benchmarks and resort to absolute targets like Klarman highlights. Given a broad based goal like - Mohnish Pabrai's 26% CAGR, how is the portfolio faring in CAGR terms - 1 year, 3 years, 5 years. Would be interesting to know.
Also with regards to meeting an absolute return goal isn't it necessary to add proportionate contribution to future growth. Why shouldn't some one shift the extreme high allocation to compounders like Mayur, Supreme, Astral to pockets of disproportionate growth like PI, Poly Med, Shilpa to name a view.
Regards,
Rudra
ps: These are not at all suggestions by any means. It would be highly interesting to know any contrary thoughts compared to one's own.
Last 3 years, it has been a compounded return of 26.6% with 2011 being a year of negative return.
ReplyDeleteI agree with an absolute return philosophy but have found that in markets if the overall market goes up / down, most individual stocks follow suit. The benchmark idea is more as a guidepost for myself. So that if on an ongoing basis I am underperforming the Sensex (or a HDFC Equity Fund) then I should not be doing this with all my money!! I would be better off putting my money in ETFs / Mutual Funds and follow the markets as an academic pursuit.
I know there has been a lot of talk of "disproportionate" growth these days, but I honestly speaking I don't know, who is set up for disproportionate growth. Why do you thing that Mayur cannot get disproportionate growth from here on? Can't it sign some large OEM deal with BMW / Merc etc?
And why do you assume that PI or Poly Med or Shilpa will have disproportionate growth? What in their past gives any indication of that?
I am always looking for companies that can grow for the next 5 years at 30%+ rates. To me that is the bottom line. disproportionate growth can come only in some areas like software products, technology, any patented products. I don't think there is a possibility of disproportionate growth anywhere else.
Hi Abhishek,
ReplyDeleteTwo questions-
1) You feel current rally is more on hope. So shouldn't you increase your cash positions to benefit from any drop?
2) Most of the stocks have run up a lot & are now near fair value. So do you still believe these can give 26% CAGR??
Regards,
Jatin
Hi Jatin,
Delete1) I am increasing my cash position, up from 0 to 6% now. Planning to move to some more cash before the election hype starts.
2) I don't think most of the stocks are fairly valued. I would argue that over the last 5 years of "recession" we are so used to low valuations and the fact that we have had a very fast rise in prices, gives an impression that they may be fairly valued. Some of the stocks have a very high probability of growing more than 26% - PI, Mayur, Finolex Cables, Poly Med, Shilpa, Atul Auto, Ajanta, Alembic. Supreme, Yes Bank should do between 20-25%. Some may be getting into the overvalued territory - Cera, Astral, maybe also Supreme...
But it's also a big mistake to cash in the chips very early. Lets wait and see how the Q3 results are and where the markets get to.
Hi Abhishek,
ReplyDeletebit surprised to see Titan in your list. do you see perception is getting changed on this counter? Also at CMP Alembic Pharma is still a better bet than Torrent (if you are tracking this one?)
Thanks
Hi Salil,
DeleteI booked profits in Titan during this year. Currently, I don't have any position in it. However, I am long term bullish on Titan, as I thing the company will be the forerunner in the eyewear market in India and there are no really large pan-India player in this segment. Also, their foray into accessories such as belts, wallets, helmets would also provide a reasonably good revenue stream. The issue is in the short term they are very much dependent on gold and that is going to hurt sentiment.
Pharma sector has a lot of good players. I don't track Torrent closely, but it is also a good bet.
Regards
Abhishek
Hi Abhishek,
ReplyDeleteI wanted to understand your comment on JK Lakshmi. What specific indicators are you looking out for? Do you buy only when the volumes start improving? Since you have played this successfully before, anything you share would be appreciated.
I have been buying it between 70 and 80 (deployed about 50% of my desired allocation). Also, reading the dispatch reports as you had suggested.
Hi HG
DeleteCement sector will be having a lot of capacity addition in 2014 and there is no build up in construction activity. For cement, cement dispatches is a key monitorable. Also,m there is significant differences region-wise variations, so keep an eye out for capacity & dispatches across regions.
Any link for tracking cement capacity & dispatches?
DeleteMost big brokerage houses come out with sector reports for cement. Sharekhan, Ambit, Kotak ... I usually read the Sharekhan report on cement.
DeleteInteresting year-end post on personal portfolio! I picked up Thangamayil (clued in from one of your earlier posts) and I continue to hold it. I understand the stock is a poor performer and the company is a high debt company but so are its peers in the industry. Perhaps, this is a common industry phenomenon?
ReplyDeleteTwo points are in favour of this company: 1. Gold & 2. God. It may sound funny but I have seen this company leveraging these 2 factors that are so dear to Indians. If the company's management has integrity and is business savvy, I think it is a stock to hold forever.
I agree. In India, Gold retailers will always have a good business in the long term. So, if you have a very long term horizon, then a good gold jeweler is literally their worth in gold :-)
DeleteBut the important point here is the time horizon. For gold retailers to do well, the CAD (Current account deficit) need to come down for India. When that will happen is anyone's guess. Till then you will see various policy measures from the government trying to dissuade people from buying gold.
Aside the cultural bond with gold, given the poor quality of government and governance in India, dissuading Indians from buying gold would be difficult. But Yes, your point on long term horizon must be considered. Time is the friend of the wonderful business, the enemy of the mediocre. Is Thangamayil mediocre or wonderful is what I'm wondering.
ReplyDeleteFor Shriram transport, you have written- Keep watch; Buying time may be soon.
ReplyDeleteWhat are you watching here?? Loan book? NPA? NIM?? ANd how?
If you can please elaborate more, that would be great.
Focus mainly on growth in advances. Plus management is very honest & straight forward, so they will inform when they see growth coming back. This quarter they have indicated pickup in rural loans, so give another quarter.
Delete