Commodities can be the next big thing to look out for: Deven Choksey

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“We are comfortable with some of the auto names and auto ancillary names, we are also comfortable buying into some of the IT and mid-cap IT names into the portfolio,” says Deven Choksey, MD, KRChoksey Holdings Pvt. Ltd.

What is keeping you busy, markets have been quite dull?
Overall looking at the opportunities in the markets, we are seeing many of the good quality stocks are now being neglected despite of both fundamental performance and the promises to have relatively better performance going forward. They have been neglected and that is what is asking us to review the portfolios again and try and increase the weight where we are more comfortable. We are comfortable with some of the auto names and auto ancillary names, we are also comfortable buying into some of the IT and mid-cap IT names into the portfolio. We are also closely looking at how the commodities are behaving. Maybe I think at this point of time not taking exposure into commodity but certainly want to keep an eye on it. If it gives signs of stability then probably I think this will be the next thing to look out for eventually.

Added any Adani Group of stocks in this decline in last seven days?
Not really, I think we have been holding onto ports and transmission and I think we continue to hold both these companies looking at the fundamental strength of both of them. Honestly, I think not added any other stocks at this point of time in the portfolio so some of them have started becoming attractive one could possibly allow the situation to calm down and probably try and take some position into those companies.

What is the outlook when it comes to Cipla given the fact that we did see that delay of G Advair and then there was the inspection by the USFDA on the Indore facility? Has it now been priced in, given that the stock was a big loser in trade yesterday?
I am not too sure about the amount of negative sentiment it can continue with because what one has learned is that in pharmaceutical business, the moment you are exporting to America USFDA, it gets more active and that is where probably most of the companies have suffered at one point or time or another.

I guess I think this is a situation which every pharma company has to live with and probably, I think one will have to look at the business. In case of Cipla and Sun Pharma in particular, I find that the portfolio of products that they have, they are relatively more stable. Probably, despite all these inspections well I think hopefully they come around with clarity on these inspections. I would rather like to believe that the product portfolio remains absolutely strong and there exactly the margins are also relatively stronger compared to many other generic players because they are basically into the complex generic specialty generic products.

So from that perspective, I like both these companies for investment and would like to believe that yes, I think they would have probably the ability to answer those USFDA inspection queries. And probably, I think they will turn around. So yes currently the stock price has corrected maybe I think the fall continues because of negative sentiments. Maybe one can add the stock into the portfolio in subsequent form. Across the board one stock you bought in 2010 and have every reason to believe that you will not sell it before 2035.
Yes, I think that includes Cipla which we have been holding from 90s. But the more important part of 2010 onwards or maybe a little earlier to 2010 I think companies like Bajaj Finserv and Bajaj Finance, we continue to like this particular business and the way in which they are growing this business.

The subvention pricing mechanism has probably yielded maximum amount of returns to the company from the capital employed and at the same time to investors as well. And given the kind of technology strengths that they are adding into the front end for adding different products and distribution of those products in the financial basket, I would like to believe that Bajaj Finance particularly would remain very strong proposition in the portfolio and any corrective fall the one which we saw recently, I think are the opportunities that one could add into.
Similarly, the situation in Finserv where the insurance portfolio is gaining much more strength and they are basically writing profitable insurance business that is what is more important and that separates them from many other insurance companies.

So they are relatively slow because they write profitable business. I would think that this is a good strategy eventually for the longer term because insurance is a business which you write for many years. So that is where I believe both these companies could remain in my portfolio given the kind of strategy that they implemented.

Given the some of these stocks have been in the news and have been perking up in an otherwise dull market, which are your favourites?
Well given the fact that I think there is a market which is opening up for about Rs 8 lakh crores worth of revenue in the defence space, some of the established players would probably have the lion’s share out of this market and that is where probably I continue to like solar industries and their subsidiary economic explosives.

I think it is basically the one which is catering to defence. What I have understood in the defence business over the last many years that I think this business has a long gestation period before it gets acceptance or the product gets acceptance and once it got accepted I think that you have a sustained revenue to the profitable business.

Solar industry in particular we like because of the wide range of product portfolio that they have created for a period of time. At the same time they are strategically investing into newer technologies like drones for the purpose of launching missiles and rockets. I would think that this is one company where one could possibly keep an eye on.
Of course, I think valuation wise it is not cheap but this company remains relatively stronger bet into the defence portfolio as far as we are concerned.