Stalwart Advisors

Exit Note

We suggest exiting M&M Financial Services at current price of Rs 501.

We entered it three years ago at Rs 265 and are exiting with a 90% return, which is attractive considering its a well-discovered and widely followed large-cap stock.

It was one of our contrarian bets where a lot of things that could go wrong with the company had gone wrong be it stress in agricultural economy due to back to back monsoon failure, weak infra activity affecting rural cash flows and tighter regulatory norms. While things started improving in 2016, they again got derailed due to Demonetisation.

With good monsoon, rebound in infra activity and very good automotive sales, things have improved dramatically in last few quarters. The company has raised money at very attractive levels and well poised for growth. All this has led to strong re-rating and current valuation is pricing in a lot of these positives already, from here on at best this seems like a compounder with significant dependence on external risks like monsoon etc.

We would like to take money off the table and suggest to keep proceeds in cash as we look for opportunities with better risk-reward.


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Exact weightage will depend on each subscriber’s risk appetite & comfort. However, as a thumb rule, any position size under 3% is little insignificant to move returns at portfolio level whereas beyond 10% it gets riskier from a concentration standpoint. Accordingly, low could indicate 3-4% weightage, medium 5-7% and high 8-10%.
Structural are those portfolio businesses where earnings are relatively stable (less volatility) and further are expected to rise in a steady fashion. Cyclicals are businesses which experience periods of upcycle followed by downcycle and have large variation in their reported earnings based on industry demand and supply. The mix between the two depends on available opportunities and respective valuation of the two pockets.