Health Check

Over the last 24 hours, quite a few emotional tides, and finally today's post on SN helps me settle down.

I was getting excited about finding these small caps trading so cheap, and added to watchlist, and was even thinking of adding small positions in the following counters:

HALDYN GLASS
NAVIN FLOURINE
PUNEET RESINS

Most likely, all three of above are out of the list already, a big relief :-)

Also thinking about reshuffling betweek SRF and MAZDA.

But before I do anything, I'll step back and analyze my existing positions. Let's start:

Healthy Ones:
BHEL, MOIL, INFY, CROMPGREAV

These are debt free companies, very good ROE of 30%+ over past 5 years, consistent and stable growth and decent valuations, adjusting for market reputation. My purchase prices too are all right, maybe a little expensive, but still quite good compared to historical levels. I'll be very comfortable to hold them and not be worried due to transient down quarters and slowdown in growth.

Cautious One:
BHARTIARTL, OPTOCIRCUIT

Good, promising businesses, but concerns of declining margins for Bharti, while cash flow concerns for Opto Circuits. Since I believe in long term prospects of the businesses, and the fact that they're available at deep discounts, I'll still hold them, but yes, I understand the risk is higher in these investments, but then rewards are equally good.

Comfortable, but exit on rise:
PNB is one stock where I believe its decent, but not a stock I'll hold for long term. Its more of a positional stock - buy when it crashes below Rs 680, and sell when it goes above Rs. 900. But never increase beyond 7% of portfolio.

Confused:
SRF, MAZDA and IGL.

For IGL, I believe in story, but then, concerns that its a little more expensive, and risk of further margin contraction due to PNGRB decisions. Right now, have invested 3% of portfolio in IGL, but given the discovery of new potentially better opportunities, will need to re-think before making further purchase.

For SRF, the new concern about "small caps being value trap" is on my mind, and if I do conservative analysis, I find cyclical profit margin contraction (is it really cyclical?), increasing debt, and some other concerns I've posted today. I'll analyze more and see if I should take some profits off, if not a complete exit.

MAZDA, looks good, but need to do a critical analysis and make sure chances of this turning as a value trap are minimal, and only then I'll add more positions. In any case, I'm not comfortable having more than 15% of my portfolio in small caps, so i I have to add positions, it'll only be when I'm convinced it is better than SRF.

Excited!!!
Piramal Enterprises. Every time I look at it, I'm more convinced its a great opportunity. Yes, it might not rebound fast, but given Mr. Piramal's skills, I consider this as a stock to hold for long term. I've added about 1.4% of my portfolio in PEL stock, and will add below Rs 470.

Finally, there're few more stocks in my watchlist which I need to analyze. I'll probably wait for while, let excitement stabilize and then take a decision - whether to freeze my portfolio (except only exiting stocks on rise where I'm not very comfortable or want to exit at a certain price) and spend time studying and reading long pending list of items, or to continue this churn. Certainly, considering short term financial obligations coming my way, the former choice looks better. Not that I'm underinvested, even if I clean up and freeze, I'll still have 50%+ of my investments in equity, so not a bad figure and not a risk of missing the next boom, if it has started :-)

Let's sleep and relax, its a great way to control irrational exuberance.