Portfolio Composition and changes in August 2014



Here is the list of stocks which constitute 1% or more of my portfolio:

Stock Latest Price Inv. Price Overall Gain % % of Portfolio
Oberoi Realty (52) 255.15 239.2 6.68 9.59%
IDFC (77) 142.35 130.0 9.52 8.14%
eClerx Services (17) 1,345.00 1026.5 31.02 3.23%
ILandFS (31) 20.35 15.0 35.95 2.65%
Selan Explore (28) 562 317.7 76.88 2.45%
Cummins (4) 699.3 411.2 70.05 2.39%
IRB Infra (15) 257.3 81.3 216.29 2.09%
Larsen (16) 1,581.85 1024.8 54.36 2.04%
NMDC (27) 177.85 133.0 33.75 1.99%
Bharat Forge (9) 856.75 272.3 214.69 1.97%
Mayur Uniquoter (11) 434.25 111.0 291.1 1.95%
Kaveri Seed (13) 930 296.6 213.51 1.89%
MPS (14) 545.1 128.7 323.66 1.88%
Balkrishna Ind (11) 752.6 232.3 223.92 1.86%
Shilpa (11) 517 375.1 37.84 1.74%
Sesa Sterlite (3) 279 151.0 84.78 1.67%
RS Software (14) 539.6 206.5 161.29 1.56%
EID Parry (13) 220.6 141.5 55.93 1.52%
Sun Pharma Adv (18) 197.85 121.9 62.27 1.48%
PTC India Fin (6) 44.15 15.0 194.98 1.41%
Hind Zinc (18) 165.1 122.0 35.34 1.36%
Indian Hotels (13) 96.55 59.9 61.06 1.35%
PI Industries (10) 437.6 159.0 175.23 1.35%
Ajanta Pharma (14) 1,604.10 1007.7 59.18 1.30%
Grindwell Norto (7) 490 256.5 91.02 1.25%
Munjal Auto Ind (11) 84.7 34.0 149.17 1.20%
Tata Inv Corp (13) 561.45 405.0 38.63 1.19%
Oriental Carbon (9) 290 113.2 156.17 1.17%
ITC (21) 349.95 307.0 13.99 1.11%
NTPC (6) 141.3 130.2 8.51 1.07%
ICICI Bank (9) 1,548.75 933.8 65.85 1.05%
Sobha Developer (12) 465.5 288.6 61.28 1.03%
Banco Products (2) 142.1 56.2 153.02 1.00%

The stocks representing more than 1% of my portfolio now constitute 68% of my portfolio, and the number of stocks are 33. 32% of the portfolio is represented by the top 8 stocks. I fully intend to concentrate further, so that the top 8 stocks represent 50% of the portfolio.

However, the concentration of scripts has hurt me, since my top stocks, Oberoi Realty, IDFC, Selan Exploration, and IL&FS Investment Managers have significantly underperformed the market in the last couple of months. The only one amongst the top 5 which saw outperformance was eClerx Services. Other top stocks which underperformed included Mayur Uniquoter, IRB Infra, BKT and Sterlite and Shilpa.

The three stocks which saw major outperformance was my old favorite MPS Ltd., and Kaveri Seeds. NMDC and Larsen, while not majorly outperforming in the month, gave me the benefit of buying these stocks on dips in July.Old favorite Cummins continued to do well. Another stock that did well in August was SPARC. PTC India Financial Services and RS Software did remarkably well in August.

What new stocks did I buy? I bought some Exide and some Amara Raja, since both constitute a nice duopoly, I bought HPCL, because there is tremendous value embedded in the company, with or without GOI policy issues, I bought Kitex Garments on a ValuePickr recommendation, Mazda Ltd and Linc Pens on my own reading of the balance sheets and potential. I added to Indian Hotels on a dip after the result. I bought HIL on an India Nivesh Recommendation. Finally, I continued to buy IDFC on dips.

Portfolio Composition and Changes in July, 2014

Portfolio Composition, July 2014

 

Here is the list of stocks which comprise more than 1% of my portfolio at the end of July 2014.

Stock Latest Price Overall Gain % Percentage of Portfolio
Oberoi Realty (49) 251.9 5.34 10.23%
IDFC (71) 149 15.87 8.57%
eClerx Services (17) 1,284.95 25.17 3.40%
ILandFS (25) 24.85 75.91 3.16%
Selan Explore (28) 585 84.12 2.80%
IRB Infra (15) 249.1 206.21 2.23%
Mayur Uniquoter (11) 430 287.27 2.13%
Balkrishna Ind (11) 769.9 231.37 2.10%
NMDC (26) 169.8 28.28 2.06%
Larsen (14) 1,469.15 45.25 2.03%
Cummins (4) 606.9 49.22 1.93%
Shilpa (11) 514 37.04 1.91%
Sesa Sterlite (3) 282.5 87.09 1.86%
Bharat Forge (9) 722.25 165.29 1.83%
Kaveri Seed (13) 700.15 136.03 1.57%
Ajanta Pharma (14) 1,664.60 65.18 1.49%
EID Parry (13) 190.65 34.76 1.45%
Hind Zinc (17) 162 33.88 1.43%
Sun Pharma Adv (18) 168.2 37.95 1.39%
MPS (14) 348.05 170.51 1.32%
PI Industries (10) 383 140.88 1.30%
RS Software (14) 407 97.08 1.30%
Tata Inv Corp (13) 539.4 33.19 1.26%
Grindwell Norto (7) 420 63.73 1.18%
Indian Hotels (8) 94 75.65 1.18%
Munjal Auto Ind (11) 75.75 122.84 1.18%
NTPC (6) 140.45 7.86 1.17%
Oriental Carbon (9) 264 133.2 1.17%
PTC India Fin (6) 33.15 121.49 1.17%
ILandFS Trans (15) 228.7 70.18 1.17%
ITC (20) 349.6 14.84 1.16%
ICICI Bank (9) 1,474.00 57.85 1.10%
Muthoot Cap (10) 170 80.81 1.07%
Tata Steel (4) 549.9 100.66 1.07%
Sobha Developer (12) 438.8 52.03 1.07%
TCS (7) 2,515.10 42 1.03%
Banco Products (2) 129.5 130.58 1.01%
Reliance (6) 975.4 29 1.01%

What has changed? For one, I have spent all of July 2014, increasing my stake in Oberoi Realty and IDFC. This was as per my earlier stated intention. Now, both stocks comprise around 10% of my portfolio. This is essentially in keeping with my objective to concentrate my portfolio. Sometime this month, I will write about my investment rationale for both stocks.

I sold all of my Clariant Chemicals, simply because it had risen out of sync with possible valuations, and invested the proceeds in eClerx services. Increasing my exposure to eClerx was also my stated intention in earlier posts.

I also increased my exposure to NMDC and Tata Global Beverages, on a dip in prices of both. I increased my holding in Shilpa Medicare and PI Industries (PI following nice results). Finally, poor Larsen and Toubro results for the quarter resulted in sharp dip in prices, which I bought into.

I sold out of Morganite Crucible, more for the sake of not investing in stories without any technological or brand edge. Instead, I dipped my toes into Bayer CropScience, and on the MNC theme, increased my exposure to Grindwell Norton. Finally, there was some buying of PTC Indian Financial Services and IL&FS Investment Managers, both on a relative dip in market prices.

Concentration continues apace. The stocks which comprise at least 1% of my portfolio are now down to 38, and the total percentage of these in my portfolio is now more than 75%.

My eventual aim is to increase the concentration even further, with 25 scrips comprising around 90% of my portfolio.

What stocks gave the best performance in July, 2014 within my portfolio?

IDFC for sure, following the RBI announcement on CRR and SLR requirements on infrastructure loans. IRB Infra, following a decent result, and positive government announcements for the roads sector. IL&FS investment managers, despite becoming ex-dividend.

From the ValuePickr basket, Ajanta, PI, Mayur and Shilpa, all gave great returns in July.

Another great stock last month was Bharat Forge.

Investment Performance in July 2014

After a relatively muted performance in June, July was again more of the same. Part of this was the overall relative poor performance of the markets. As far as my portfolio was concerned, there was outperformance vis a vis the Nifty, and I finally managed to outperform the small cap index too, but compared the SBI Magnum Midcap fund, the performance was not better.

Nevertheless, there was reason enough for satisfaction. My performance might have been even better, had I not lost some money in speculation based short term trading. I am still not able to do this well, and maybe I should just stop doing it. That, or I need to control my psychology better.

Here is the familiar graph of overall fund performance. As you can see, the total assets undermanagement are increasing very rapidly. This is because I am deploying fresh cash, and also because the portfolio is doing well.

 

I have tried to improve upon the graph a bit. I hope this is more intelligible than the earlier version.

Also, as always, a table of rolling returns:

Returns My Portfolio Kotak Classic SBI Midcap Nifty
Last Month 5% 1% 5% 2%
Last 3 Months 42% 14% 24% 15%
Since Nov, 2013 75% 28% 56% 26%

As you can see, since Nov 2013, my portfolio, in terms of the NAV, has increased by 75%. The Nifty, meantime, has increased only by 26%, and the SBI Magnum Midcap fund, by 56%. In a blended sense, between the Kotak Classic Fund and the SBI Midcap Fund (Blended in a ratio of 1:2. similar to the ratio of large caps to small caps in my portfolio), the outperformance in 3 quarters is around 30%.

As always, to understand how the NAV for my portfolio has been arrived at, I would refer you to the following post: Understanding the NAV Calculation

Investment Performance in June 2014

After the blowout outperformance in May 2014, my portfolio performance in June 2014 was somewhat muted, relatively speaking.

Here is a graph of my portfolio performance:

 

Here is a table of returns:

Returns My Portfolio Kotak Classic SBI Midcap Nifty
Last Month 7% 5% 7% 3%
Last 3 Months 35% 17% 20% 18%
Since Nov, 2013 66% 27% 48% 23%

As you can see in the table above, my portfolio outperformed the Nifty by 4% last month. Over the last 8 months, this outperformance has been a whopping 43%. However, it has been the time for Small Caps and Midcaps. And my porfolio consists largely of such small caps and midcaps. Compared to the SBI Midcap Fund, my porfolio performance is not as phenomenal. In the last month, the performance has been in line.  And the BSE Small Cap Index has actually eclipsed my portfolio, though not by more than 0.5% over 8 months.

What went up? Ajanta Pharma and R.S. Software, both stocks accumulated in the last 3 months. Clariant, another favorite of mine. Muthoot Capital Services, Balkrishna Tyres, Bharat Forge, IRB Infra and Mayur Uniquoters. In short, a bunch of Midcap and Small Cap stocks.

Portfolio Changes in May

In May, my largest purchase was Ajanta Pharma. Ajanta Pharma has been a favourite of the www.ValuePickr.com forum, because this was one stock which has had remarkable operational performance. I could never purchase Ajanta earlier, even though everyone at ValuePickr has it as one of their top picks. I used to think of it as expensive, so I gave it a miss, in favour of stocks like Avanti Feeds, Kaveri Seeds, PolyMedicure, Mayur Uniquoters, and VST Tillers, also from the ValuePickr stable. But the recent Pharma underperformance in the stock market, and Ajanta’s continued operational outperformance, meant that Ajanta again looked cheap, after its results in May, around a level of 1050. So now, this has the some decent weight in my portfolio. I expect gains to be muted, till Pharma becomes a market darling again. But it is in stocks which are not market darlings where bargains are to be found.

I also added more of RS Software, simply because there is great value in the stock. Currently, again, in line with the IT trend, it is not going anywhere. But I am patient. I also added some EClerx, because of a price drop. This is a company which I like very much, and I will keep adding, as the price keeps falling as the dollar keeps falling. I don’t think the market has even understood that EClerx performance this year will be unaffected by the dollar-rupee equation, since the entire revenue is hedged at higher dollar rates. It is next year, that performance will be adversely affected.

I also added some quantity of Akzo Nobel. I wish I had a chance to invest more, but the price ran up. Makers of Dulux paints, it will be a key beneficiary if the Auto and Housing sectors revive. I think this is a great company, and along with Clariant and Cummins, it will remain the core of my MNC portfolio.

I added some Munjal Showa, Muthoot Capital, Poddar Pigments and Kesar Terminals, all with dramatic gains after I purchased the stocks. All of them represent great value, and as the market runs out of value, I expect that all of them will see a dramatic PE rerating.
What about sells? I finally sold out of MCX, at a small profit. I still think it could potentially give a great return, but the uncertainties in terms of stake divestment and regulatory overhang are simply too high. Not worth it for a relatively risk averse investor, especially when the markets have some many other stocks going up.

I also sold out of Igarashi Motors, with a nearly 100% return. I still think this is a great company, but it is too export dependent, and performance will suffer with the dollar falling. I will return to it some other time.

I also sold some NTPC (bad call, it rose sharply after I sold), and BKT and Cummins. I sold small portions of my total holdings in all 3. NTPC, because in this market, it is not worth holding on to an annuity stock. I intend to get rid of it completely. BKT, because of dollar rupee concerns for a pure exporter, and Cummins-well, selling Cummins was a mistake. The only saving grace is that I sold a small portion of my portfolio holding.

I also sold JB Chemicals (invested in Ajanta instead) and Alkyl Amines Chemicals. Alkyl Amines Chemicals will suffer due to alcohol prices going up in this year. I also sold Balaji Amines because of the same reason. I also sold GMM Pfaudler, because I did not like certain related party transactions they carried out. Maybe it was a mistake to sell.

Investment Performance in May 2014

Here is a graph showing my investment performance in May 2014. This investment performance should be seen in the context of the hedging that I had carried out, to protect myself on the downside in the case that the election results would be unfavourable to the markets. This is despite my being reasonably certain of the results. However, sometimes one believes what one wants to believe, and I think it was prudent to, when faced with an event that could cause a catastrophe in the markets, protect one self on the downside. What I did is that I purchased Mayend out of the money put options, with strike prices 5% to 10% lower than the Nifty and the Bank Nifty on the date of purchase. Why the Bank Nifty? Well, I have mostly small and midcaps in my portfolio, and in the case of an unfavourable result, the likelihood that my stocks would perform worse than the Nifty was a given. On the other hand, the Bank Nifty moves more closely to my portfolio, so I preferred to hedge with the Bank Nifty. I wish it was possible to trade in Midcap Nifty options, but those options are not enabled.

The portfolio performance below includes the cost of the options, which of course, given the sharp market upmove, expired without any value.

Portfolio performance cannot be assessed without understanding the risk the portfolio carries. This was one key takeaway for me from the book by Howard Marks, The Most Important Thing. In this case, the risk that I carried on May 16, 2014 (Election Results Day) was much lower than most other investors, who were not similarly hedged. Hence, if I had a lower performance than my benchmarks, I would not (or should not) have been unhappy.

With the caveat above, I present the graph below with my performance for the month.

As you can see, I had a blowout month. I far outperformed the Nifty, and the Kotak Classic Fund. I did much better than the SBI Magnum Midcap Fund.

This is also understood in the table below:

Returns My Portfolio Kotak Classic SBI Midcap Nifty
Last Month 21% 9% 11% 10%
Last 3 Months 38% 17% 17% 18%
Since Nov, 2013 55% 21% 39% 20%

Since November 2013, I have returned 55% on my portfolio. The SBI Midcap Fund returned 39%, while the Nifty returned 20%. In May alone, I outperformed all 3 of my benchmarks by at least 10%, inspite of my portfolio being hedged.

Reasons to be proud. Whether this result is due to luck in the timing or particular choice of stocks, or some small ability, we will see in the long run.

Investment Performance in April 2014

From this month, I also want to present this graph in a tabular form, to make it easier to understand. This is available below.

April was not such a great month. I only marginally outperformed the NIFTY, and probably underperformed the SBI Midcap fund, but not by much. This also brings the annualized portfolio performance into poor light, down from the over 100% run rate from the previous month.

Some of my top holdings underperformed severely last month. Cummins, Selan, IDFC, Larsen, Oberoi, Mayur, MPS, Sesa Sterlite and NTPC all fell last month, and these constitute 7 of my top holdings. I also exited Just Dial (at a loss), and MCX, though my holdings were rather small. Stocks which performed well last month included PTC India Financial Services (PFS), Clariant and Jaypee Infra.

All in all, a disappointing month. Depending on election results, we will see how the future plays out.

Returns My Portfolio Kotak Classic SBI Midcap Nifty
Last Month 1% 1% 1% 0%
Last 3 Months 23% 9% 13% 12%
Since Nov, 2013 29% 12% 26% 9%

Portfolio Composition, May 2014

As promised, the top stocks in my portfolio, at the beginning of the month. I have already published this for two prior months, and here is the portfolio as on May 02, 2014.

Notable additions during the month have been an increased exposure to IDFC. After a fairly stellar run in the middle of April due to the announcement of the new bank license, IDFC has been weak. I have taken advantage of this weakness to buy more. For me, IDFC represents an investment for 5 years, at least. Hopefully, over that period, it will become a multibagger. Right now, it is weak because a) It lends mostly to Infrastructure, and infrastructure has been a dog. People are afraid of NPA’s and rightfully so. But IDFC seems to have managed its NPA situation really well, even in a difficult environment. b) There is fear that the short term costs of IDFC transiting to a bank (increased SLR, CRR requirements, and increased expenses on opening branches) may put a lid on profitability and c) Uncertainty over the path to convert to a bank, and the likely FII dilution as a result.

For me, all of these are short term things, and ignores a) the phenomenal performance of IDFC NBFC relative to PSU banks in terms of NPA’s  b) the excellent performance of IDFC PE Fund, IDFC AMC and other subsidiaries. and c) the increased long term profitability resulting from an ability to get CASA deposits.

My largest purchase is the month has been another AMC, IL & FS Investment Managers. I really like the Fund Management business. Once you get a fund going, you have a fixed income for several years, and in addition, you might just get additional income from Carry. IL & FS has a great track record, gives excellent dividends, and I think this will continue, especially if the Indian Investment Climate improves.

Another stock which has underperformed in the last month in Oberoi Realty. While all realty stocks have done poorly, Oberoi has done badly too. I expect the May 10 results to be poor (probably the last set of poor results), and if so, I will buy into the price dip.

This month, I also bought Clariant Chemicals, adding to my earlier position. I think that my initial purchase of Clariant was sound (around 580 levels). I am not sure my current purchases are sound. I will put up a detailed note on Clariant once the March results are out. However, I am holding on, since I expect a dividend of 350 to 400 Rs., and I could use the tax free income, and subsequent stripping loss.

This month, I added to RS Software and Munjal Showa, though the positions are still too modest to show up here. I will keep adding to these positions.

Stock Latest Price Inv. Price Overall Gain % % of Portfolio
Selan Explore 497.6 315.5 57.71 3.9
Cummins 524.45 404.1 29.78 3.7
IDFC 110.55 107.3 2.99 3.6
Balkrishna Ind 528.3 231.2 128.48 3.0
Larsen 1,263.55 949.9 33.01 2.5
ILandFS 13.7 13.6 0.64 2.5
Kaveri Seed 656.35 296.6 121.26 2.4
Oberoi Realty 208.05 177.6 17.14 2.4
Mayur Uniquoter 288.6 111.0 159.92 2.3
Sun Pharma Adv 170.45 121.9 39.8 2.3
Clariant 705 615.9 14.47 2.3
NMDC 152.2 121.7 25.11 2.3
MPS 363.75 123.4 194.85 2.2
NTPC 114.45 131.6 -13.02 2.1
Sesa Sterlite 180.55 151.0 19.57 2.0
Hind Zinc 126.1 121.0 4.21 1.8
Tata Inv Corp 477.1 405.0 17.81 1.8
Jaypee Infra 24.85 18.6 33.48 1.7
EID Parry 152.35 139.7 9.09 1.7
ITC 340.25 301.0 13.05 1.7
IRB Infra 115.8 81.3 42.35 1.7
Bharat Forge 406 272.3 49.13 1.7
eClerx Services 1,239.80 757.3 63.71 1.6
Reliance 928.1 756.1 22.74 1.6
ICICI Bank 1,252.40 933.8 34.12 1.5
Sobha Developer 377.3 288.6 30.72 1.5
TCS 2,208.45 1771.2 24.69 1.5
Indian Hotels 70.95 53.3 33.2 1.4
Poly Medicure 481.25 278.4 72.89 1.4
Bajaj Electric 287.75 209.8 37.13 1.4
Munjal Auto Ind 52.95 34.0 55.77 1.4
PI Industries 249.65 144.6 72.61 1.3

Portfolio Composition, April 2014

As is usual, I intend to post a partial snapshot of my portfolio every month. Below is a list of my top portfolio stocks as on April 9, 2014.

My top holdings continue to be Selan Exploration and Cummins. I added a small quantity of Selan during a market drop in the month. IDFC, which was a loser till last month, has now become positive, and because I bought a small quantity last month, and because of the capital appreciation (finally, it has a bank license), it has jumped up the ranking of overall holdings to third place.

I have shown around 67% of my portfolio this month, as opposed to last month. This is because several of my top holdings have appreciated. New companies which have made it into the list include IRB Infra, Jaypee Infra (where I made fresh purchases), Sobha Developer, Bajaj Electric and Munjal Auto and Tata Steel, all of which have come into the list because of capital appreciation.

I had excellent performance this month in PSU Banks, IDFC, IRB Infra, Mayur Uniquoters, EID Parry, Selan, Cummins, Balkrishna Industries, and lots of other cyclicals. Disappointing was mostly the defensives, IT (MPS, Eclerx, TCS), Pharma (Unichem, Ajanta), NTPC (which I intend to sell of soon), Clariant (which I intend to build on) and FMCG. Luckily my exposure to these sectors is limited.

 

Investment Performance for the March 2014 Settlement

This post is a little late. I had promised that I would put up my investment performance on the day after every settlement on the stock exchange. This time, I am posting it a little late. I was abroad, and my computer did not work.

However, late as it might be, I have got reasons to be pleased with my performance in March. In the previous month, my annualized return was nearly 40% in the previous analysis period. On March 27, 2014 my portfolio NAV rose to 1233 (from 1000 on November 8, 2013, and 1114 on 26th February, 2014). Hence the absolute return is 23.3% in a little under 5 months, and the annualized return is 56%, higher than the 40% earlier. And I have achieved this from a 100 stock portfolio, not a highly concentrated one. The last months return was 10.68%, which annualized is nearly 130%.

Of course, the NaMo effect was in full play in March, and most portfolio’s have done well. However, as the chart below indicates, the portfolio handsomely beat the sensex, nifty, midcap and small cap indices.

In the previous month analysis, I had suggested that I was disappointed that my return was behind the return obtained by SBI Magnum Midcap Fund, though I had beaten the Kotak Classic Fund, a diversified large cap fund. I am happy to report that this month, I have finally beaten the SBI Midcap fund too. In March alone, the SBI Midcap Fund returned only 4.6%, much below the 10.68% my portfolio achieved.

Here is a chart showing the comparative performance:

 

 

As you can see, the Assets under Management (AUM) has had the highest growth, since I have been investing fresh money. And my overall performance has now just crossed the overall performance of the SBI Midcap Fund.

All in all, a satisfactory performance.