Latest portfolio of Valuequest India Moat Fund
Prof Sanjay Bakshi, the authority on value investing, is known to be a stickler when it comes to buying stocks. He has a no-compromise approach and buys only those stocks which have high quality in terms of management, corporate governance, moat, brand image, market dominance etc.
This is reflected in the latest portfolio of the Valuequest India Moat Fund which is as follows:
|Company||No of Shares (in Lakhs)||Rs Crore||YoY Gain|
|CCL Products India||18.79||65||78|
|Accelya Kale Solutions||3.69||56||59|
|Ambika Cotton Mills||2.21||30||54|
|Net Worth (AUM)||303|
As one can see, Prof Sanjay Bakshi is a believer in the merits of a concentrated portfolio. He has invested in only a handful of stocks and has large exposure to each of them.
CCL Products is the flagship of the portfolio. The stock was first recommended by Rahul Arora of Nirmal Bang in 2014 when it was available at the throwaway valuation of Rs. 80 and he has been periodically egging investors to buy the stock.
At the CMP of Rs. 347, gains of 300% are on the table. Even on a YoY basis, the stock has delivered a hefty gain of 78%.
Kitex Garments is a favourite of Sanjoy Bhattacharyya, the doyen amongst value investors. He has described Kitex as a “hidden gem” quoting at “compelling valuations”.
Unfortunately, the stock has not performed as well as its’ peers owing to concerns regarding accounting issues.
However, the stock has come back into favour after announcing a bonus issue and does have supporters.
Kitex Garments up 20%. Monstrous move. Bonus shares to be considered. Stock out of favour since long.
— Kaustubh Kale (@KaustubhKale) April 20, 2017
Kitex garments,expect good organic & inorganic growth in coming time, Iam quite optimistic,available cheaper value even after massive rally
— EquityGuru® ?? (@dhiren2k7) April 20, 2017
Ambika Cotton is a favourite of Billionaire Narayana Murthy. His Catamaran Advisors LLP holds 240,305 shares as of 31st March 2017. The stock has done well with a 54% YoY gain.
Re Wonderla Holidays (update)
It was earlier believed that Prof Sanjay Bakshi had sold off Wonderla Holidays because it no longer appeared as a holding of the Valuequest India Moat Fund as per the BSE. However, a close study reveals that this may be an error on the part of the BSE. As per the shareholding pattern filed by Wonderla Holidays with the NSE, the Valuequest India Moat Fund continues to hold 11,30,186 shares as of 31st March 2017.
The stock appears to be a high conviction bet for Prof Sanjay Bakshi given that ValueQuest increased the holding of 9,29,039 shares as of 30th September 2016 to 11,30,186 shares as of 31st December 2016, which continues as of 31st March 2017.
However, for reasons that are not known, Narayana Murthy’s Catamaran, which held 5,65,304 shares in Wonderla as of 30th September 2016 appears to have sold off the stake as of 31st December 2016.
TVS Srichakra: Prof Sanjay Bakshi’s latest stock pick
TVS Srichakra, the blue-chip small-cap company, is the latest stock to be given pride of place in the Valuequest India Moat Fund portfolio.
Lets’ take a quick look at the fundamentals of TVS Srichakra.
|TVS SRICHAKRA LTD – KEY FUNDAMENTALS|
|MARKET CAP||(Rs CR)||2,919|
|EPS – TTM||(Rs)||[*S]||227.99|
|LATEST DIVIDEND DATE||18 MAR 2016|
|BOOK VALUE / SHARE||(Rs)||[*S]||672.04|
[*C] Consolidated [*S] Standalone
|TVS SRICHAKRA LTD – FINANCIAL RESULTS|
|PARTICULARS (Rs CR)||DEC 2016||DEC 2015||% CHG|
(Source: Business Standard)
|Annual Ratios (%)|
|Return on Networth||54.89||43.05||36.35|
|Return on Investment||55.30||36.26||31.02|
As one can see, TVS Srichakra has all the virtues that one looks for in a stock.
It has a high RoE and RoNW, high operating and net margins, low debt – equity (0.28x).
The stock is presently quoting at a P/E of 16x. This is reasonable given that most tyre companies quote at that range given that they are quasi-commodity stocks (owing to the sensitivity to rubber prices).
The stock offers a dividend yield of 1.57, which provides some downside protection.
(Image Credit: Bloomberg)
Fall in rubber prices has sent all tyre stocks soaring
According to the ET, rubber prices have touched their lowest level of 2017. Since 1st February 2017, rubber prices have tumbled over 10 per cent and are presently quoting about Rs 139 a kg.
This has sent all tyre stocks soaring because rubber is the primary raw material.
However, Jayesh Khilani of Bloomberg cautioned that the party may be over soon for tyre stocks because rubber prices are showing signs of firming up.
Specialist in two wheelers
TVS Srichakra’s USP is that it is focused on two and three wheelers and does not have a presence in four wheelers.
The logic for this was explained in cogent terms by P Vijayaraghavan, director, TVS Srichakra:
“While competitors such as MRF and CEAT have a presence across segments, our bread and butter comes from the two-wheeler and three-wheeler markets. We have made a conscious decision to stay in this segment, as it gives us the opportunity to work closely with manufacturers on the technology and development process. We are able to offer them specifically designed tyres for every new model of theirs. It is a collaborative effort between us and the vehicle manufacturers”.
Phillip Capital on Tyre Stocks pic.twitter.com/1DcUKvZl9S
— Darshan Mehta (@darshanetnow) March 15, 2017
Anti-dumping duty to be levied on tyres?
The Automotive Tyre Manufacturers’ Association (ATMA) has filed an application on behalf of the domestic producers — Apollo Tyres, J K Tyre Industries and Ceat Ltd for the investigations in dumping of the tyres.
The Directorate General of Anti dumping and Allied Duties (DGAD), in its investigation, has found sufficient prima facie evidence of dumping of the tyres by Chinese companies.
If anti-dumping duty is levied, it will be a big boost for all tyre companies because the dumping by the Chinese at predatory prices will be stopped.
Tyre stocks will be re-rated?
According to CLSA, the global brokerage, tyres could potentially be the next segment within the auto ecosystem to see a re-rating in valuation multiples.
The key reason why tyres stocks are ascribed with lower multiples is that they are perceived to be commodity stocks with less pricing power. Interestingly, the current PEs of tyre stocks is lower than several commodity stocks.
TVS Srichakra is a 10-bagger?
According to Mubina Kapasi, the charming journalist with ET Now, Ambit Capital has short-listed TVS Srichakra as a potential 10-bagger.
#Ambit potential 10 baggers list is here:
— Mubina Kapasi (@MubinaKapasi) January 6, 2017
Prima facie, Prof Sanjay Bakshi’s faith in TVS Srichakra appears to be well founded. The stock does have the optimum balance between growth and safety and is likely to bring cheer to the portfolio of the Valuequest India Moat Fund in the near future!