Changu Mangu The Bear - Portfolio


(Changu Mangu) #21

Hi @kartiks. Yes, I use some of their recommendations. I like how they invest.

I have lots of other advise and I simply allocate to their research and opinion. So the infra and de-mon is a impact of the research I do not do, but can use. I have no skill in stock picking and frankly it is the skill of very few. My skill if at all used to be timing entry and building a position, as of today it does not work. So net net, I have no useful skill left that can be used in stocks.

Yes, smart link is looking good, fell like crazy after the last results and seems to be finding a base.


(Bheeshma Sanghani, PhD) #23

Hi @valuestudent

You could try some of the portfolio methods suggested by Mr Pabrai. He blogs on chaiwithpabrai.com. He along with a quant friend of his have been devising screens to help investors beat the market. Some of his screens are novel and interesting and can be found on the blog mentioned

Best
Bheeshma


(Changu Mangu) #24

Thanks for the heads up @bheeshma. I will check it out. I do visit his website, did not see the screens :slight_smile:


(Devaki Nandan Tripathy) #25

Thanks for the link. The concepts are quite interesting there.


(Sarvesh Gupta) #26

Interesting post for sure.

I think it was this or probably the last AGM of Berkshire Hathway when replying to a question by audience, Charlie Munger had said that the secret of their success is that they have always been ‘rational’. It is very difficult to apply rationality in a market which is oversexed currerntly not just in India but world over. But this is a phenomenon repeated not just in India but world over and many times. In India, the reason for the rally is quite simple, a gush of domestic liquidity - I think last 3 months itself the domestic mutual funds got in INR 54k cr.

So, yes, probably not the best strategy to be completely out of the market but one can still work with a lot of mitigants. I am sure a lot of smart Portfolio managers are going to deploy them to generate and save returns for their clients. Some of these strategies can be a strong stop loss mechanism, higher allocation to strategies where the equity like returns are generated without taking market like risk (low beta high alpha), reducing allocation to equity as a % to total networth and moving towards stocks which are yet to be discovered/valued correctly.

In the end, markets are unpredictable, we all know it has a lot of potential to come down but when is the question whose answer nobody knows. However the way I think is that currently there are a lot of participants which are still sitting sideways or are non-believers, so we might still be away from the peak of the bull market. But remember that the last phase of the bull market is the most volatile where the most money is made and lost in the quickest of the time. Not sure again if we have reached that stage.

A good learning exercise nevertheless however since the total allocation is just 25% of your equity portfolio which may be <25% of one’s overall networth, this is nothing more than a academic study such studies unfortunately, may not have the potential to leave imprint of a learning which will last lifetime), as up or down movement is not going to move the needle. So you are still very much a bear - and being a bear during bull market lacks comfort - such comfort is only found when is bang in the middle of a herd and invests in stocks like Edelweiss, Motilal Oswal, Avenue Supermarkets, Rain Industries, Dileep Buildcon, Titan, Reliance and the likes. Unfortunately the timing of this discomfort is indefinite and comfort will only be realized if there is market crash to less than 8500 levels.

And yes, as they say investing is ‘simple’ but not ‘easy’. Since so many of us were stumped by the simplicity of Munger’s statement, your present dilemma works to reinforce why investing is simple but not easy and more importantly why like Charlie Munger and unlike others only a few among us will make extremely fat returns in the market over the long term.


(Changu Mangu) #27

Thank you @8sarveshg

That is a wonderful articulation. I am at a loss for words to fully appreciate your thought process.

It was worth it posting my portfolio here to be able to get such a thoughtful answer.

Thanks Again.

Best.


(1.5cr) #29

I’d like to point out that Beta is a flawed measure of risk as it relates to market movements and not investing in a business or the business itself. The only risk permanent loss of a % of ones capital. Proffessional courses teach beta as a measure of risk. But in reality beta is nothing but volatility in the price of a stock. Not volatility in an underlying business. The market is expensive but one can still find opportunities. Focus on earnings growth and quality businesses and you will be fine even during a strong bear market. All these fancy ways of calcualting market risk is all flawed because nobody can predict the market anyway. If I buy a very strong, secular business but for some reason the stock is highly volatile but in the long run I make 25% CAGR vs an investor who buys a low beta stock with a volatile underlying business and makes 30% CAGR ask yourself who took the bigger risk? Betting on a strong business and a volatile stock or the other way around? Betting on a volatile business and low beta stock?
This is why people like kedia and buffet are top investors, they dont look at non sense like analaysts. You are buying a company, the market is a place where you get to buy the company at a certain price thats it! everything is volatile in the short run…


(Gagan) #30

Very interesting topic @valuestudent !
its funny that i also have the almost same portfolio as your’s, I guess we both are following the same advisor’s and blogs :smiley: , the only difference is, that I am still allocated 70% of my equity allocation , i also have been going through same struggle that you mentioned(Exit or stay invested), and the conclusion is almost same that neither can I predict nor can I time, but I can prepare.

Options for Preparation:
Option 1) Reduce the equity allocation
Option 2) Move from Richly valued stocks to a bit low quality and relatively cheap stocks

Action Taken:

  1. Reduced 30% of my equity pf.
  2. Moved another 40% from richly valued(MicroFinance stocks bought during Demonetization) into stocks which are relatively cheap stocks with improving fundamentals. [Like Tata Motors DVR and a Basket of mid cap IT stocks], hence out of 70%, currently 30% of equity pf is same as yours.

Rationale for option2:

I heard from exp investor that in Bull Markets
1st) Quality runs up and gets priced for perfection and then
2nd) Low quality with improving balance sheet runs.
3rd) Junk also starts running and the third leg is the end phase of bull markets.

and once all segments of investments are priced up markets again value things relatively with other asset classes(FD, Real Estate, Gold) and if any asset class offer better risk-adjusted returns then shift of allocation start happening(such shifts are usually soft started and then feedback loops start working and gets to the point of intense buying/selling)

and I experienced the 2nd case is happening, as my basket of Mid cap IT ran up 10-15% in last month or so.

We really can’t say at which stage of Bull market we are currently in, since India’s growth story seems to be just started and results of reforms are still awaited and markets already ran up.

I relate such a state of the market with the term Reflexivity used by G.Soros, which basically means markets price in expectation a bit early then reality kicks in, since markets are discounting machines for futures.

hence i don’t have any bear case in my mind, but I want reality/results to show up and till then i would be taking caution with the mentioned steps.

Disc/Profile: I am young novice investor, in markets since last 2 years only, and my equity allocation is 30% of overall networth.


(Changu Mangu) #31

Hi @gagandeep

Then we are both in good hands as far as our portfolios are concerned.

Just a little note and why I am cautious…

There is no arguing we are in a long term secular bull market; but even that will have corrections, only good thing is as Mr. J says, they will be swift, sharp and severe. So, even in a such a market there will be opportunities to build a stronger portfolio according to me.

The reverse also happens in a bear market, there are sharp swift and severe rallies but they do not a bull market make. Luckily, from all signs, there is no need to think about a bear market as such till the trend visible is a clear secular bull market. India is on a growth path.

So a buy and hold also does work in such a long trend market (provided in extremely good quality stocks) and thus many long range investors do not move out of many positions as they have hundreds or thousands of crores of portfolio’s which we do not. So when the signs of opportunity have presented (these elevated states usually do not sustain, it will be the first time in history if they do), so why not try and build a stronger portfolio. That is also part of my thinking in being a bear.

I am only bearish for the short term, not for the long term.

-This is just me sharing my thinking and not advise.


(rskothari) #32

Interesting Post. Your writing style is very good.


(Devaki Nandan Tripathy) #33

How is your portfolio performing? Any additions and/or deletions of late?


(Samir P H) #34

@valuestudent any updates with your experiment?


(Changu Mangu) #35

Hi Samir / Devaki,

Apologies. I have decided to retreat into a shell and not discuss investments with anyone and thus would not be able to answer any follow up questions from the friendly forum members. This is purely to keep my sanity while making decisions.

Having said that, since I had posted my “punting” portfolio I should also close it with the answer.

I sold everything on 9th and 10th January and in hindsight, it was a great call. I am now fully in cash.

The small and mid caps have gone to the sky but I am sure they will also come to the ground. The current bounce back to me seems to only be a dead cat bouncing and small and mid caps are not the place to be at current valuations for a prudent investor.

I am very lucky that I have had liquidity on my side for the last 1.5 years, and that has made me a 60% return (just like everyone else). The one thing I am sure of is, it was not skill. The only skill that was needed to make money over the last couple of years was computer skils, to be able to login to the demat and press the buy button. I have cashed in my blessings and grateful to have learnt the market movements with profit.

I have been working on a blue chip portfolio for the last 3-4 months. The list is ready but entry prices are not favorable for most except for one which is close to target and one more which will be a good buy if it gets some correction. It might take me 1-2 years to find entry points into most of these companies and will take a call based on opportunity. I am happy to stay in cash and wait for the opportunity to come to me. I have no urge to go to it. I will simply wait patiently.

Best regards.


(phreak) #36

Is this to avoid commitment bias?


(Changu Mangu) #37

Among other reasons… yes that too.


(kartiks) #38

Hamm . . finally I could see someone thinking like me at the same time publicly accepting to be in Cash !


(Changu Mangu) #39

Been learning a lot over the last one year. Time to update my thinking.

I do the below with real fear. Fear of making a mistake on posting stock specific on this forum after having seen what happened in Lasa. But I must have the courage to come out with my learning from last one year and put it up to scrutiny from those who have helped my shape my thinking. All the contributors of VP.

I have been trying since last year to build a collection of wishlist of businesses that can pass a few tests.

  1. Do I think the management is clean?
  2. Do I think the management team past and present is able?
  3. Do I think the business is great?
  4. Do I think the business has continuity? Will this business be around in 20 years?
  5. Will I only press “buy” in the demat and no sell button of this business for next 20 years? Even if there is some adverse event in the business will I still keep holding?
  6. Is the debt zero or very easily serviceable? (with max one year’s cash flow except banks)
  7. It is in a secular industry?

So with this in mind and with the help of so many from VP mainly that I managed to build this list. Many came in, went out, came in again, then went out, and some new got added, but net net, I think I managed to finalize the list of businesses at least. I have bought some tracking type and just in a few a little higher then tracking but none is a full position (not even close).

So this is then actually my wishlist (most are too expensive). But it seems like the time to be ready with the wishlist as the buying opportunities may come suddenly in next 1 day to 12 months. I may keep adding a little bit of some of these in the interim with some interest income etc… I have put up prices on my personal sheet at which I am willing to escalate positions but that is personal. I also don’t know whether I will be able to build a decent position in only 10 of these or more. So much will depend on prices quoted in the times to come, but I wanted to cast a wide net and then be ready to catch what comes in.

I hope you like the wishlist, and if you see something that I may have missed, I would love to hear an opinion. If you are hunting for good businesses then I hope that something from this list stands out to you.

Best regards.


#40

PEG values seem to be incorrect


#42

Changu & Mangu are like bull and bear. You have completely transformed from momentum to quality. Jokes apart, very nice list…worth referring to.

Would be great if you can create a similar watch list of Quality Midcaps.


([email protected]) #43

Nice idea and a very interesting list, thanks for sharing! Any reason why you skipped HDFC, HDFC Bank, HDFC asset Managment?