Think this is a good time for a general update.
- There was money to be made through the volatility seen in March-July, almost any good purchase looks to have made 20-30% from those lows. Even Hindustan Unilever is up around 30% since!
Actions in my portfolio:
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Sold SJS at 520. I was up over 45% on my purchase with no change in earnings. Incremental risk-reward at these levels is unfavourable to me, and I took the decision to go into cash. I have no problems with the company at all, and continue to wish them well.
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Sold Deepak Fertiliser at around 900 levels. Given the energy situation in the EU right now, looks likely that the cycle will remain until the capex comes in, but gas supply is a top priority for most governments right now. As TAN prices are unsustainable at these levels, I’m happy to sell at these levels. Deepak Fertiliser was 10% of my portfolio and gave me 15% returns on a portfolio level.
- As a result of this, I’ve been in a lot of cash, and have decided to allocate into defensives at present. I’ve bought:
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NMDC (3%) – At book value, I don’t see tremendous downside even though Q2’s results will be horrible. When the cycle eventually turns, I expect it to be rated around 1.3-1.5 times book. Additionally, the demerger of the new steel plant should also add to the upside. I’m being paid a nice dividend while waiting.
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Punjab Chemicals (3%) – Looks like a well differentiated company in the agrichemicals space, can possibly grow at a comfortable 20-25% with the added optionality of margin expansion.
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HG Infra (3%) – The infra basket has been beaten down, earnings have not been impacted. At 6.5 EV/EBITDA, I’m very happy holding for the short term.
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Zydus Wellness (3%) – This too has felt pain with the FMCG pack, earnings will look very good on paper in the next two quarters. I don’t think valuations are too demanding for the market share they command in their product basket.
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Equitas Small Finance Bank (3%) – While the financials space is showing better asset quality, higher disbursals, this is a candidate that can grow earnings at 20%, and is at 1.3 times book. It doesn’t need to be the best underwriter, I think there’s a mispricing at present.
Outside of Punjab, I’ll probably churn out these positions into longer term holdings of better quality as and when I find companies that fall into my valuation zone. However, I’m optimistic of generating atleast 20-25% returns from these 5.
Top Holdings at present:
- Ugro Capital
- Krsnaa Diagnostics
- Shivalik Bimetals
- PDSL
- Arvind Fashions
PS: This is not investment advice. I can be very very wrong in my assessment of value.
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