Simple Investing

Dissecting some of my picks for Learning – Feel free to share thoughts to make us better

Consumer Discretionary

Last 2-3 years have been intentional effort to have a decent percentage of portfolio into Consumer Discretionary. Overall I am not happy with my stock & sector selection. Trying to jot down some points here and would be great to get inputs from senior members like @hitesh2710 @richdreamz @jamit05 as we have talked on this sector in few other threads as well. Also, views from all other members invited

• First mistake – Mixing Consumer discretionary with Consumer durables. Although both are non-frequent purchases but durables follow a distinct trajectory of their own because of different dynamics of raw material handling, impact of inflation, competition & pricing power. Current view – Real discretionary picks seem to have superior brand power and business dynamics over long term and across cycles.
• Quasi Discretionary – I considered United Spirits & United Breweries as part of discretionary – Although this segment again has its own dynamics, these are best companies of India in respective sub segments and well managed MNCs. I am ok to wait for the business dynamics to turn better and more towards a FMCG type landscape.
• Durables Mistake – Followed basket approach of Voltas (Tata ecosystem, AC leader, adjacencies opportunity etc.), Johnson- Hitachi AC (Premium AC/Fridge, Make in India – one of most indigenously manufactured ACs, relatively small cap & positive surprise element if India becomes their export hub), Whirlpool (Big potential from US experience, used to have better business metrics, again make in India export hub possibility – overall feel this one has been a mistake as losing conviction)
• Sour grapes – One of rare few who has been tracking Page Industries (although passively) since 500 odd levels and have not purchased a single share inspite of understanding its potential when it was at 500 levels. Reason – It runs in India as a license like QSR. What if Page loses that license/contract? This What if cost me lot of Ifs…
• Make up for above not done well – Tried to make up for the license miss and took position in QSRs as basket – Restaurants brands (largest in basket. I would consider this as a thoughtful good pick until Indonesia happened out of the blue), Devyani (Probably will exit it eventually) & Jubilant Foods (This one I am comfortable riding the business turnaround cycle at the moment)
• Savings grace in stock selection – Apart from United Spirits & United Breweries above, two retails picks – Trent & Dmart have been savings grace in otherwise wayward stock selection. Inspite of doing good in retail, had that uncanny urge to put 1-2% in two duds so far – Nykaa & Spencer Retail.
• Good Money going over bad – Another fear, with stock correction this happened somewhat but then I stopped. I dont mind buy on dips and averaging but not if I start to question my stock selection.

Summary –

• Ok with selection of Trent, Dmart, United Spirits & United Breweries ONLY
• Not Ok with Voltas, Hitachi AC, Whirlpool, Restaurants Brands, Devyani,
  Jubilant Food, Nykaa, Spencer
• Not Ok does not mean I will immediately or eventually sell, it means I am in need of revisiting conviction, business details and hence views invited

View invited on how best to rebalance considering opportune time to rebalance. For example fully or partly exiting durables at this stage, specifically at onset of summers as most are AC/Refrigerator plays , may not be prudent decision…etc…

New Opportunities

• At opportune time, intend to correct this mistake and move funds partly or completely from some Not Ok ones to Sour grapes like Page or similar such plays.

• In this context, while the time to rebalance arrives, I was evaluation Page, Bata, Manyavar, Metro Brands, Campus. This is where @richdreamz @hitesh2710 @jamit05 we had meaningful discussions in other thread.

• I have ruled out Campus (did not like quality of product), Metro brands (too many brands, too complex to track IMO), Manyavar (did not like the way they were stacked in MBOs, felt brand diluting)

• That leaves to the most sour grape – Page and its nearest competitor for me in this space IMO – Bata India. @hitesh2710 ji I have seen you mentioning Bata several times in various threads…Would be great to know your, @richdreamz @jamit05 views on Bata Vs Page to understand both better. Both are MNCs (albeit Page operates as a license owner). Page is king of undergarments, swimwear (not sure how big can this piece become) while Bata – No matter what said and done remains king of footwear. They are evolving sneakers and their kids range of bubblegummers seem promising and of decent quality. I have seen them & their products evolve positively with time. Seem they intend to move to clothing as well. They have interesting partnerships with North Star & their hush puppies offer unique products. Soon around 2000 stores and granular ones across all tier cities in India with most seem self owned so whatever upfront cost must have already been absorbed? Overall I see this as a decent pick in discretionary.

• In ideal world and portfolio, I would see my portfolio to have none of Not OK ones and they replaced by these two picked at decent valuations. Apart from these two maybe one QSR pick…thats all from discretionary.

But not sure if there is anything like Ideal world or …Portfolio

Disc: Invested in all stoks mentioned hence biased & critical. This is not a buy/sell recommendation. Not eligible for any advice, views only for academic purposes & Learning. I can be completely wrong in all my assessments.