Portfolio of a novice investor

A few recent additions in the portfolio:

1. Andhra Papers – valuation looks pretty cheap to me. Though it’s a cyclical sector, I think next 2-3 years will be good for the growth for cheaper stocks like this. I have 2-3 years horizon for investment in this stock. Recent reduction in the prices for pulp will be beneficial for the sector. Few other characteristics which I normally assess in the stocks:
   • Positive and increasing FCFF and FCFE since last 3 years
   • Highest score under fragility scorecard
   • SSGR > sales growth
   • Last 3 years, CAGR under CROIC and FCF / Invested capital has been over 40%
   • FCFF yield higher than bond yield.
   • Most importantly, If we look from equity perspective, over 10 years, nearly 100% of reinvestment rate and company earning nearly 45% return on this incremental capital invested (ROIIC). This means value generation by company by these reinvestments are over 45% but CAGR in stock price is only 6% over 10 years. Furthermore, if we look from both debt and equity perspective, 52% of capital got reinvested and this reinvestment got the return of nearly 83%.
   • ROIC > WACC means company’s EVA (economic value added) is creating value for the company’s shareholders

2. Triveni Turbines – they are the market leader in turbines industry (nearly 60% market share in India) and has significant growth potential. Invested for long-term.
   • Nearly zero debt
   • No pledged holding
   • Positive FCFF and FCFE since last 6 years
   • Very high score under fragility scorecard
   • SSGR > sales growth
   • FCFF yield higher than bond yield.
   • From equity capital perspective, over 10 years, nearly 32% of reinvestment rate and company earning nearly 34% return on this incremental capital invested (ROIIC).
   • ROIC > WACC means company’s EVA (economic value added) is creating value for the company’s shareholders

3. GPIL – This is extremely attractive from valuation perspective even now with such a good bull run under this stock.
   • Nearly zero debt. Debt to equity ratio used to 2.1 in 2014 which is now 0.1 in 2023. This is highly appreciable.
   • No pledged holding
   • Positive FCFF and FCFE since last 6 years
   • Highest score under fragility scorecard
   • SSGR > sales growth
   • FCFF yield higher than bond yield.
   • From equity capital perspective, over 10 years, nearly 76% of reinvestment rate and company earning nearly 28% return on this incremental capital invested (ROIIC).
   • ROIC > WACC means company’s EVA (economic value added) is creating value for the company’s shareholders

4. Shivalik Bimetals (SBCL) – I think much has written on this on its separate thread so not adding anything.

5. HBL powers – same as SBCL.

Views are appreciated. This is not a post for recommending stocks. Please do your own analysis before investing.