October 26, 2008

Portfolio details

I have received a lot of emails and comments asking me about the composition of my portfolio. I have discussed most of the stocks, which form my holdings on the blog. It would be strange if I said a stock was attractive and went and bought something else. However there still seems to be quite a bit of curiosity.

I have decided to disclose my portfolio after multiple requests for the sake of transparency. I am uncomfortable discussing my portfolio and its performance on the blog as the key purpose of this blog is to share my learnings and not to provide tips or boast about my performance.
So here goes –

Some disclaimers
1. I am not recomending any stocks in this list. Please read the disclaimer at the end of my blog ..blah blah blah. You get the point
2. My portfolio is usually stable. But considering the way the market is dropping, it has become volatile not only in terms of value but in terms of holdings too. The problem now is not of finding undervalued stocks, but of picking the best among the undervalued ones. On top of that, with every crash, new ideas keep popping up. So this list will definitely change in the next few months
3. I am not obliged to disclose any stocks I add or drop in the future. I may or may not disclose what I buy or sell. So please do not buy based on this list below.
4. I am fine with a 70% success rate, i.e 7 out of 10 of my ideas working out. I typically don’t lose much as I keep a margin of safety in my purchases. So although some of the picks may not work out as planned, I have been able to do quite well on a complete portfolio basis.

Core portfolio (all stocks are planned to be equal wieghted even if they are not now)

Balmer lawrie
Gujarat gas
Novartis
Lakshmi machine works
Bharat electronics
Ashok leyland
Asian paints
Merck
NIIT tech + Patni (in combination will be a single position)
Honda siel
Concor
Grindwell norton
GSK consumer (on watch list)

Graham style portfolio (smaller positions, cheap stocks)
VST
Ultramarine pigments
India nippon
Manugraph (on watch list)
Cheviot company
HTMT global
Denso india

I may be building positions in some of these ideas in the subsequent months. I may also decide to drop some if I find more attractive ideas.

Added point: I am very particular about valuation (after everything else checks out) . I will rarely create a meaningful position unless the price is right. So please keep in mind that the analysis date is not the date on which i created a full position. It is only the date when I finished analysis. The average price in each case varies depending on when I started building the position.

I will not be disclosing anything more on my portfolio beyond what I have done already and I hope all of you would understand that.

38 comments:

Anonymous said...

Wonderful portfolio, Rohit

Thanks for publishing.

Ani

Anonymous said...

Hi Rohit,
Regarding Honda Siel, will you please throw some light on why it's in your portfolio?
It's 5 yrs avg RONW is 8, apart from Zero debt company, Cash in hand looks good. what else you found?

regards
Ani

PD said...

Hi Rohit, Surprised not to see Bluestar in your core portifolio.

Regards
Prashant

Vic said...

Thanks Rohit, appreciate the listing.

Vikas

Anonymous said...

Hi Rohit,

A solid, unexciting (take this as a compliment) and no-nightmares type of portfolio.
I know you will be showered with mails after this disclosure. But I hope you could find a few seconds to let me know your opinion (as always, well respected by me) on the following ones:
HBL Power system
Bank Of India
Micro Inks
Essel Propack
Manaksia Ltd
GE Shipping

Thanks in advance.
Regards,
Prashanth

Rohit Chauhan said...

Hi ani
you have to calculate honda siel ROE excluding the cash. the cash is only generating interest income

pd - i moved out of blue start in early jan 2007 ..maybe too soon.

regards
rohit

Rohit Chauhan said...

Hi prasanth

I had checked GE shipping quite some time back and thought it was undervalued then. It seems to be a best among the shipping companies.

I had seen micro inks too and i am quoting from memory. I was not sure how their expansion into foriegn markets would play out. subsequently the company did not do well in the foriegn markets and the stock got punished. have not checked the company since then

i have checked the other companies and will provide my view once i am able to do that

regards
rohit

Venkat said...

Hi Rohit,

Thanks for sharing your portfolio list.

regards
venkat

Mahesh said...

Hi Rohit, I discovered that Gujrat Gas management has awarded themself 740,000 shares recently. Although amount is trivial compared to their profit figures (1.4 core vs 272 core). Are they shareholder friendly?
Mahesh

Mahesh said...

Oops! I missed a zero. The share value is 14.8 core. Now that is significant. And I think I got their profit figures wrong too!

Anonymous said...

I came across some -ve news on Merk , thought of sharing with you . Pl discard if you already know and factored this news
------------------------------
Merck India share price is losing ground. Mainly on account of:

1. It has 100% subsidiary Merck Specialities where all new products in Cardio Vascular, Gastro Intenstinal, Anti-Hypertensive, Diabetology & other life style ailment products are introduced. Several new research molecules are routed through this 100% subsidiary which doesn't come under listed entity.

2. The product range of the Listed Merck is outdated to such an extent that, every Indian pharma company is making such Vitamins & Nutrition products in India. Its basically quiet messy market for vitamins.

Its better Merck, Germany comes out with delisting open offer for its listed entity rather making listed Merck India to die on slow poison.
------------------------------
source
http://www.moneycontrol.com/india/messageboardblog/11/29/message_thread/2189805/2921500

Nag

Rohit Chauhan said...

Hi mahesh

a 1% dilution is not very worrying. however i hope the management is not planning to do this annually

nag - a few points. the product range is definitely limited to vitamins and the company's corporate governance is not great. however the poster is missing the point - the business is very profitable and has high market share in its product range. lack of new products has resulted in lower growth ..but that does not mean the company is dying off or something. the poster has mixed facts with opinions.

merck india has 300+ crs cash and generates almost 70 crs in profit on a capital of 100 crs.

karthik said...

Hi Rohit,

I have a basic question.How do we determine the % of portfolio. Should it be based on the cost price or should it be based on the market price (in which case it will fluctuate day to day). For ex, lets say 10% of your pf is LMW, tommorow if the price drops , it will be only 8 %. Will you add more of LMW . Please note that I took LMW just as an example.

Anonymous said...

Wish all the fellow Lovers & readers & Rohit Chauhan
A Happy Diwali and Prosperous new year ahead.

-- Ani

VISHNU said...

Rohit,

Have you ever tried converting 50 cent Dollar into 20 or 30 cent dollar ?

I have not done it before. But my hands are itching as I am seeing bargains everywhere..

At the moment all securities are down , Hence I need to convert Notional Loss into Actuall loss then do the conversion..Is it sensible to do it ?

Regards
Vishnu

Rohit Chauhan said...

hi karthik

i have written several posts on portfolio sizing. check under the label portfolio management - http://valueinvestorindia.blogspot.com/search/label/Portfolio%20management

regards
rohit

Rohit Chauhan said...

Hi ani and others
wish all of you a very happy diwali too

regards
rohit

Vic said...

Dear Rohit and other Readers of this Blog,

Wish you all a very happy Diwali too.

Vikas

Rohit Chauhan said...

Hi vishnu
if you are short of funds and confident of the new idea, then you should go for the better idea.
moving out of a 50% discount idea to 70-80% idea will payoff eventually.
personally i dont look at notional losses ..notional losses are recovered ..so if you have better idea then makes sense to move to it. however the key is to know the difference between a notional and real loss

regards
rohit

Vic said...

Rohit,

Regarding Core Portfolio, I assume that many of the stocks been there for a while.

The market landscape has changed significantly (some offer better value than others).

If you were to build a portfolio from scratch at current values/business conditions, which 5-6 companies you're more bullish on?

Hope you don't take this question as Stock Tips..:-)

Thanks,

Vikas

Rohit Chauhan said...

vikas
i am equally bulllish on all which is why i am equal wieghted on all stocks in the core portfolio

regard
rohit

Anonymous said...

I assume this guy Vic doesnt do any research on his own... goes scouting around the web looking for opinion... finds a few and pillion rides on it.

Vic... I have been following your questions... and I have nothing against you... but had I been in Rohits shoes... I would stop replying to some of your questions.. I guess Rohit is already doing a great job sharing so much with others.. and you ought to appreciate it... and not turn him into your portfolio manager!!!

Stop being a pillion rider!!!
Do some research of your own... come up with intelligent questions.. you are not a beginner to ask these kind of questions.
(these kind of questions are okay if you were a novice starting today in the market)

Regards,
Ravi

Anonymous said...

Hi Ravi,
I am fully agree with you. When i started reading Rohit's blog, i had same questions, Vikas is having in his mind right now. First thing i did was choosing the parameters for stock screening. Mine are same like rohit's. (So here i am in line with Rohit :) ) then understanding the cash flows and learning DCF method to do rough valuation. Couple of times i asked rohit about his valuation of particular stock to check my valuation is correct or in sync with his.

I am following Vikas on TED also, the only problem with him is he is jumping on any idea coming from Vivek Sukhani or ROhit, once he is able to evaluate that idea on his own then most of his work is done. And i am sure here (on Rohit's blog) he will learn that.

rgds
Ani

Vic said...

Ravi,

Thanks much for sharing your thoughts..:-)

You can definitely bank on me for asking some intelligent questions sometimes in future. Is it few weeks or months away? I highly doubt it. Though I can spend time researching and ask some (so called valid questions) but won't have much depth to them.

I come from a totally different background, therefore don't have much to offer on this blog at this point. I'm a big believer in Indexing and read extensively on the subject and still have most of my investments using the same approach.
But I do help many of my friends in their financial planning. Investing is only small part of the game. I need to study on this matter which I haven't found the time yet. I've read Pabrai's book and want to read few on Warren b4 I get into research mode (Only if finish reading current book: The World is Curved..just started). I still believe in Indexing and only became Buffet fan since this year, not because of his investing skills, more because of his lifestyle, his outlook on life, money, charity, consumerism etc.

In the meantime, I want use the opportunities currently available in the market. Therefore asking the useless questions.

So bear with me in this slow transition. But I do appreciate you pushing me.

Thanks again.

Vikas

Vic said...

Hi Rohit,

Thanks for your patience again. Ravi's comments remind of a request that I had made earlier.

I understand you're a busy person and already contribute a lot for others. But pls do list some of the basic steps (based on your experience) for Value Investing..whenever you can. I know you have had an investment journey of 8-10 years which is similar to mine till you became a Value Investor (I assume mainly over last few yrs)..for the most part .

Thanks,

Vikas

Rohit Chauhan said...

hi vikas
you can find more details on the process of value investing via the labels investment process, investment philosophy etc. i almost have 350 odd posts on this blog ..but it is not arranged in a very user friendly way

long term (dont have a date yet) i plan to compile all the posts with additional stuff in e-book. but i dont have date for that yet .

to your other comment- i have a 10 year history on investing ..but i got hooked to value investing right from the begining, although like you i think it would have better if i had done indexing to begin with. atleast i would have done fewer dumb things

rohit

Rana said...

Hi

Your last comment is pretty interesting, You did badly when the markets were bad, starting out early, then you did well when the markets were strong, now where is the skill, if your boat rises and falls along with the sensex, that is not a great thing, is it?

And about the alpha bit, where is it, is it skill, or is it just luck, now indexing would have done better during this period for almost any conservative investor, but the picks you have put up and the analysis that you have shared, hasn't really convinced me that it is enough skill so as to make a big difference

Your analysis needs to be a lot more rigorous, now it is fun when one guy writes something and 10 guys sing his praises, and then everybody gets all puffed up and invest in the same thing all together, and then realize that the position does not do well, and then all of them blame Mr Market, maybe it is human nature, but the when I see the above process repeated again and again and again it seems pretty evident to me that somebody is wrong - either Mr Market or this group of guys, and looking at the analysis I have reached the conclusion that Mr Market is right

Rana

Vic said...

Do we have another Rana here? :-)

I'm confused..never seen a post from Rana b4..

Rohit: What a coincidence!! I was thinking of the Value Investing subject matter and thought of browsing through your older posts. I made half way through one (was quiet lengthy) of your first posts written in 2004.

Yes, I'll take the initiative to do some work in this area.

Thanks,

Vikas

Rohit Chauhan said...

hi rana
i have never claimed that one should follow my picks or that each of my picks will beat the market.

i have also never claimed i have superior or alpha skills.acutally i have never shared my returns on the blog till date.

the entire purpose of the blog is to share my learnings and analysis and open it for other's criticism and analysis. It is upto you and others to accept it or reject it and do what is right for you or makes sense for you.

i tracked my own performance for the last 8-9 years and i have beaten the market over all by a decent margin. ofcourse my performance has dropped when the market drops, but it dropped less than the market during bear markets and risen more than the market during bull runs.

this performance is satifactory for me ..is it good enough for others ..maybe not ..but it does not matter to me as i am not investing for others ..i am investing for myself based on my risk return requirements.

At the same time I have done indexing also to provide a benchmark against which to measure my performance and also because it provides acceptable returns with minimal effort. I have said so on the blog.

regarding my picks not working out. it is not hypothetical issue ..they have not worked out several times and i have listed them on the blog. i am pretty certain some will not work out in the future and i have been wrong. however till date the hit v/s failure ratio has been good and i have had decent returns. I noted on this post – if you go by the date when I published the analysis and try to compute the returns, you will get an incorrect picture. What is missing is the average price and the portfolio wieghtage.

I will however not be disclosing that. You have to look at the analysis objectively (not because I am able to beat the market or not) and see if you agree with it or can provide counter points to it.

8-10 years is not enough to know whether the returns are due to luck or skill. i am myself aware of it and hopefully it is skill and learnings ..only time will tell

finally, i am concerned whether others gree with me or not. it does not help my picks. the more dis-agreement the better. i prefer to be corrected than being popular. in the end one's analysis is what makes you correct and not what 10 other people think about it.

can you be more specific on the rigour and analysis part ? you mention it without providing specifics.i would appreciate inputs on that

regards
rohit

Kannan said...

Rohit,
Did you check the recent numbers from LMW are you going to revise your opinion?
Kannan

Rohit Chauhan said...

Hi kannan

my own valuation for LMW assumes a 55% drop in net profit and 10 year profit growth of 5% per annum. even with these conservative assumptions the valuation is around 3000+. so in a way LMW is doing slightly better than my assumptions

regards
rohit

Ganapati said...

Rohit,
Thanks for disclosing.
one question regarding gujarat gas.
Have you considered gujarat government's take of state psu should spend 30% of profit on csr?
GSPL is seeking sharholders nod for spending 64.4 cr towards charity in 08-09. Their net profit for 07-08 is 100cr.

Regards,
Shakti ganapati

Rohit Chauhan said...

hi ganapati
i am not aware of the above. i hope this is limited to govt psu and not private companies. forced charity would be bad for business

Anonymous said...

Hi Rohit,

http://www.business-standard.com/india/storypage.php?autono=338945

LMW / Merck / VST Inds /Denso India / Honda Siel Power

5 of your picks are in the article. Excellent stuff Rohit.

Thanks
Nitin Pillai

PD said...

Hi Rohit,

Where do you keep your spare cash, which you have not invested in stocks - bonds, FD, other?

Apprecite your reply.

Thanks
Prashant

Rohit Chauhan said...

Hi prashant
under the matteress :) ..just joking

mostly in bank FD, debt funds and liquid cash

regards
rohit

arunsg said...

Looks a "solid" portfolio! thanks for putting this out.
I had a question on Balmer Lawrie, though. Not considering the price at which you boought it - what really is the company's core strength? its into ticketing/travel, leather chemicals, manufacure of MS drums - khichdi really! Its a dumbed down version of L&T and I suspect you'll get rid of this one, too, though of course at a profit!

Rohit Chauhan said...

Hi arun
the core strenght of the co. is logisitics. the management is sensible and has been allocating capital to high return businesses and exiting the poor ones ..so it is a collection of business a lot them legacy.
i dont plan to sell this stock as long as the fundamentals are good and the stock is not overpriced


a lot of people may be horified by this statement - i held l&t for 5 years in the last 90s and early 2000. The current l&t is a new phenonmenon and is riding the infra wave. the management has performed badly in the past and wasted a lot of capital in all kinds of foolish expansions. so the difference between l&t is not as black and white as it appears now

rgds
rohit