I lost the count now, how many acquisitions Eris did after this post. I am not calling this as a bad capital allocation but I am not aligned with management’s thinking. Eris can very well be a multi bagger in future but it is very difficult for me to partner with management over cycles if I do not believe in management’s strategy. Some notes on – How I view capital allocation decisions

Threshold to past capital allocation mistakes – the evolving point of view

I categorise capital allocation mistakes in two buckets – 1) There is some opportunity to quantify the capital allocation mistake and 2) Where I perceive capital allocation is not the optimal one

Examples of first buckets are easy –

1. Material and frequent write offs on investments
2. Constantly losing market share
3. Business has to stress sale assets because of cashflow/debt issues

Examples of bucket 2 are my perceptions and hence these are more qualitative. Different investors can have different judgements. Some of the examples are as follows. In my investing journal, this is not the management thinking which I can associate with

1. Endurance Tech calling off Tyre capex because of stock market reaction
2. Minda corp investing in Pricol as a financial investment in the hope to do future hostile take over
3. Alembic pharma’s way of allocating capital
4. Tube investment foray in CDMO
5. Saregama announcing QIP for 10% equity for their expansion
6. Eris Life science way of growing branded pharmaceutical business

Each of the above points need separate nuanced discussion which also depends on one important point – time horizon around which investor makes this judgement

Till now I was very inflexible towards historic capital allocation mistakes by the managements. One of my core belief in equities is – I should drive car looking at ‘windshield’ but one eye on ‘rear’ mirror. Though past does not guarantee future but management decision across cycles is powerful way to analyse management’s thinking

Recently after listening to Pankaj Tibrewal interview, I am working in direction to change this rigid mindset to the one where I am more open towards past capital allocation mistakes and I do not outright reject ideas. Having said that, this change in point of view will reflect in my execution only in next bear markets.

Portfolio Update – Mar’24

Core – Added Bajaj FinServ and Havells
Satellite – Sold Fine Organics, Reduced BCL Ind. Added EID Parry
Mutual Fund – Stopped SIP in PPAFS Flexi Cap (achieved targeted corpus). Continuing SIP in Helios Flexi Cap, Started SIP in Old Bridge Focussed EQ and Edelweiss Greater China Fund

Core Portfolio

Satellite Portfolio

ETF

MF – Active SIP
Helios Flexi Cap
Old Bridge Focussed EQ
Edelweiss Greater China EQ

Have they done a concalls after Q3 results? Can’t find the transcript or recording anywhere

Portfolio update for month of March 2024. I couldn’t update this earlier in the month to some business travel.

This is how my current PF looks

Changes:
There are no major changes in the PF this time. The recent fall in market has impacted the PF. The fall was not worrisome. I’ve added ~2% of PF value (used cash to buy the dip).

Added some qty of Modltech technologies, Fino PB to the portfolio

Participated in buyback of KSCL which gave ~6-7 % returns in 1-2 months time. 67% was the acceptance and that amount to available as cash to buy other stocks.

Confusion: Most of the PF stocks have corrected significantly in this fall. But some of them held strong. Which means, some of the stocks have become better valued and some of them are showing strength (Kama holding, Laurus labs, Mayur Uniq). This makes it difficult to decide what to buy

My top picks to buy currently:

1. Krsnaa diagnostics
2. Moldtech tech
3. Sharda cropchem
4. PDSL
5. Ultra Marin pigments

These are based on 2-4 years view point.

Thanks for reading. Please feel free to quiz me on any of my Portfolio cos or suggest any improvements needed in PF or my thesis

Disc: No reco to buy or sell

Praveen

Thanks for the effort. I understood your POV.