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.


(1.5cr) #22

Momentum is a waste. If youre serious about wealth creation buy companies not the market. Coming to Smartlink, they will break even only in 2020/21. They are a strong company because of the cash discount and the mgmt. So people playing the momentum in smartlink will not be backed by earnings growth, therefore its akin to gambling. Instead of playing momentum and making 5-50% in a few months. You would rather take your cash to goa and try and play the momentum there. You will double your bet in one hand. And if you go on a streak(momentum) you could get yourself returns that would probably thrash the market. Anyway it is likely that momentum wont win in the long run similar to gambling in a casino. I can give you countless names… investors who have made serious wealth in life. Compare that list with a similar list of momentum traders… If there is a list of wealthy momentum traders.


(Bheeshma Sanghani) #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.


(8sarveshg) #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…


(gagandeep) #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?