PC Jeweller Position Size Update 9/24/2014
PC Jeweller’s share price fell 20% over the past two days. This fall combined with selling of 40% of my position over the same period decreased the overall position size to 11.63% of the portfolio. More importantly, the fall brought the company’s share price below the company’s estimated zero-growth mid-cycle margin target price.
For one of the most profitable companies in the Jewelry sector with a potential to double its store count over the next five years, potential for margin improvement from productivity gains and increased share of diamond jewellery sales, run by a good management team who are owner operators, and an attractive valuation (EBIT yield = 15% + potential growth = 15%) leads to stopping any more sales and a keeping the position at 11.64%.
Over the past two days, 2,383,874 shares were sold at a weighted average price of ₹247.86 compared to a VWAP over the two days of ₹249.83. The 2,383,874 shares represented 40% of the initial position in the company and generated a returned 109% to the weighted average sales price.
The current portfolio is illustrated below. There are three positions: PC Jeweller is 11.64% of the portfolio, Zensar Technologies is 5.03% and the remaining 83.33% is cash.