Omkar’s Portfolio Analysis and Discussion

Hi
I must admit Abbott India is the weakest link in my portfolio. No other investment idea in the portfolio, I want to restrict allocation below 3-4% – that itself explains the dilemma. Therefore my argument/reasons are not solid. Please take note of that

Following are the reasons

1. Generally I think branded generics have do better in high inflationary environments compared to FMCG companies
2. In my view, there is no further scope for Nestle in improving working capital further. CFO increased from 2052 cr to 2737 cr only from 2018 to 2022. Abbott has room to crush WC further in my view. CFO for abbott improved from 150-200 Cr to 948 cr from 2018 to 2022. Next 5 years, I dont think this will improve at same rate but in my view has some room for improvement
3. Earnings profile will be similar I feel, having said that Nestle’s volume growth in recent quarter has been very strong
4. In both cased I believe, starting valuations are rich and therefore in best case returns will mirror earnings growth.

I am sitting on the fence and looking for options. Following are current options

1. Bump up Ajanta’s allocation to 15% by selling Abbott – priority 1
2. Replace Abbott India with something else – Priority 2. Current candidate – Narayana Hrudayalaya
3. Maintain 3-4% allocation in abbott – Priority 3