Ace Investor Ashish Kacholia Trims Stake in Smallcap Plastic Firm, Exits Smallcap Engineering Stock.

Buying a stock is easy, but buying the right stock without a time-tested strategy is incredibly hard. The presence of economic uncertainty adds to the challenge, casting a looming shadow.

However, there is a way to distinguish excellent opportunities from mediocre ones: by emulating the approaches of renowned stock pickers.

These highly successful investors have employed diverse tactics and ideologies. Some have embraced innovative methods to analyze their assets, while others have relied on their intuition when selecting securities.

Nevertheless, what unifies them is their unwavering capacity to consistently outperform the market.

One of them being Ashish Kacholia.

The seasoned investor was busy reshuffling his portfolio recently as he trimmed his stake in two stocks.

Who is Ashish Kacholia?

When we talk about successful investors in India, it's impossible not to mention Ashish Kacholia.

Kacholia is known for identifying the best multibagger stocks. He is known as the 'Big Whale' of the Indian stock market.

Over the years, he has picked the best multibagger stocks by looking at the fastest-growing companies from the midcap and smallcap space.

He started his career with Prime Securities in 1993. In 2003, he started Hungama Digital Entertainment Company along with Rakesh Jhunjhunwala. He is also the proprietor of Lucky Securities.

To dwell deep into his portfolio, check out Ashish Kacholia portfolio: top 5 stocks

Which stocks did Ashish Kacholia cut down on and why?

#1 Shaily Engineering

According to the data available on exchanges, the latest shareholding pattern of Shaily Engineering shows that Ashish Kacholia trimmed a 1% stake in the smallcap plastic firm during the June 2023 quarter.

The ace investor sold 91,000 shares or a 1% stake in the company, dragging his holding down to 5.55% from 6.54% in March 2023 quarter.

Initially, Kacholia bought 295,000 shares of Shaily Engineering Plastics in February 2018 for Rs 963.51.

From June 2018 to September 2022, his shareholding in the company has remained intact.

One of the reasons for this could be the lower demand in the international market.

Further, on the segment front, the home furnishing segment has seen a demand slowdown in customers, impacting volumes.

The toy segment of the company is facing pressure on the margin front. The first few products that the company manufactured were on the higher end of the spectrum of toys and were seeing increasing pricing pressure.

Due to this, the company has stopped making further investments in the toys portfolio until it sees consistent buys from customers.

This has adversely affected the financial performance of the company in recent quarters.

The revenue decreased from Rs 1.7 bn in June 2022 to Rs 1.6 bn in September 2022 to 1.4 bn in December 2022 and further declined to Rs 1.3 bn in March 2023. The decline was due to a decrease in net sales.

On the other hand, the net profit and net profit margin have shown improvement as input prices have begun to stabilize, although they remain elevated compared to previous periods.

Quarterly Results od Shaily Engineering (June 2022- March-2023)

Particulars	Jun-22	Sep-22	Dec-22	Mar-23
Revenue (Rs in bn)	1.7	1.6	1.4	1.3
Net profit (Rs in m)	95	101	57	99
Net profit margin (%)	5.4	6.2	4.2	7.4

Data source: Equitymaster

In the earnings call, the management said that it anticipates this slower growth in the toys sector to continue in the upcoming quarter.

Another reason could be mutual fund selling. Mutual fund holding stood at 11.8% in March 2023. It now stands at 11.1%.

For more details, see the Shaily Eng company fact sheet and quarterly results.

#2 United Drilling

As of June 2023, Kacholia's name did not appear among United Drilling Tools shareholders (with over 1% stake) for the quarter. He held 570,817 shares or 2.81% in four quarters to March 2023 quarter. It is difficult to ascertain whether he completely exited the company.

Before this, on 8 June 2023, Ashish Kacholia, through a bulk deal, offloaded a 0.78% equity stake from the oilfield equipment manufacturer at an average price of Rs 190.49 per share.

The first reason could be the company's underperformance, which has put a big question mark on its growth prospects.

For the March 2023 quarter, the company reported a 45% YoY drop in revenue to Rs 224.2 m. While the net profit for the quarter dropped by 60% YoY to Rs 28.5 m.

For the full year too, the company's net profit fell to Rs 100 m from Rs 500 m reported in the financial year 2022.

Another factor that may have worried Kacholia is the company's dependence on tender-based orders, particularly from ONGC, one of its major customers. The company's revenue visibility can be uncertain when it fails to secure orders from ONGC.

Moreover, the company faces the challenge of complying with new regulations in the upcoming year. The rules, implemented in October 2022, require mobile offshore drilling units certified under the 1979 MODU code to upgrade to the 1989 or 2009 code by October 2024.

This regulation was prompted by the occurrence of 86 casualties in ONGC's Mumbai High oilfields during Cyclone Tauktae in 2021.

Industry insiders in the drilling sector have noted that none of the drilling rig owners have yet upgraded their rigs to the 1989 MODU code due to the considerable cost involved, which amounts to several million dollars. This situation has harmed the overall sentiment of the oil drilling industry.

With limited capital expenditure plans, the company's medium-term growth prospects appear bleak.

For more details, see the United Drilling Tools company fact sheet and quarterly results.

To conclude

While it may be tempting to follow the investment strategies of successful investors, there are important factors to consider.

Replicating their moves without careful consideration may lead to buying stocks at higher prices, as they may have made purchases when the stocks were undervalued.

Additionally, the risk tolerance, investment size, and time horizon of successful investors often differ from those of retail investors.

Blindly following their actions without assessing one's own risk profile and investment goals can be risky.

Therefore, it is important for investors to conduct thorough research and analysis before making investment decisions. Rather than blindly following gurus, it is advisable to focus on investing in fundamentally strong companies that align with individual goals and risk tolerance levels.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...