Dear @8sarveshg. That needs a serious conversation. We must haggle over that line of thought with a fine bottle of wine soon 
. You can have Coca Cola if you prefer. I am sure you will win on the logic side, I will win on your sharing wisdom with me.
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Dear @valuestudent, Wine clouds the brain, try a carb rich diet, like momos for instance which is an excellent resource for the brain
So from this list, âwhatâ is known, âwhenâ is sometime within next 12 months, and the next question is âhow muchâ - do you have any thematic allocation in mind?
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I am a big fan of your writing style and your content, always produces a chuckle in me !! keep it upâŚcoming to the list, great list and I am sure, lot of thought has gone into it. would have loved to take a peak into the buying ranges but you have called it âpersonalââŚI think, almost all can produce the wish-list but the biggest hazzle is to buy it right so that you donât have to walk over egg shells all the time. I am hoping that you will reveal the method atleast, you went by in arriving at the buying ranges.
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Changu bhai it look watchlist of already a rich guy and looking to preserve his capital than an investor looking to grow his protofolio.
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Dear @arunsg I am feeling the sometime is within the next 12 months but even if it takes 24 months, I am not going to overpay so I will wait.
Dear @KS16 Thank you. Happy to have bought a few chuckles to you 
Buying right is a real challenge and I think an impossibility. Even 3 skilled guys come up with different values. I am a total novice so I donât think I can do the buying right. I do have a strategy that has worked sometimes. I am not really looking only at prices. After I feel the prices are right, I am looking at the âmoodâ. When I think the mood is pessimistic enough, a few brokers have jumped out of buildings 
sorry (but itâs a fact), some famous TV PMS managers have not been seen on TV for 6 months et al, that will become a trigger to load up the truck. EDIT: To clarify, will buy some at the price point defined. But no loading up the truck till I feel the pessimism.
Dear @nirajiitkgp This is the portfolio of a emotionally content guy. Money is relative. I donât think I look at a quantum, but I know I am happy with whatever I have at whatever stage and feel blessed. Contentment to me is a state of mind and not a number in the bank. Because we need to be content not only with what we have, but also in other aspects of our life. I am generally chilled out. The only time I am pulling legs is here because I can let out the devil 
in me because I keep my name anonymous Jokes apart, everyone on VP is richer than me. I am a small ant on this planet.
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Pardon me for asking you againâŚ
Can you prepare a top quality mid & small cap wish- list, the way you made for the large cap one. I am trying, can share on this thread if you are OK and if it helps⌠But my selection criteria is not scientific. I generally look for popular, most active threads etc which is not wise for sure.
I am not much into mid caps neither very inclined but a good watch list of mid caps is paramount important because
- Growth can be way higher than large cap
- Current situation mid&small have corrected significantly.
Thanks
Dear @homemaker
Sure. Letâs chat about your question.
First question is: What is the definition of a mid and small cap?
Is is Market Cap? Is it Annual Sales? By a SEBI definition? How does one define them? If you see my watchlist, there are businesses with revenues from 325 Crore right up to 134,000 Crore. So are there small caps or mid caps on this list? The market caps range from 2900 Crore to 680,000 Crore.
I took a long time to learn to figure out that a business is not defined as small mid or large by sales or market cap, but by itâs texture. The type of management, the opportunity size for the business, the durability of that business, the accountability displayed by the management to minority shareholders, the prudence of the management in capital allocation, the stewardship of the business.
To add further, the public oversight of the business (coverage by the right type of institutions) or the type of shareholders a business attracts (get rich quick types or long term hold types). These are tell tale signs of a quality business. If for me the business is not under scrutiny all the time, then I consider it outside my scope of consideration. I have been a shareholder in some small caps (read: not tracked by the quality crowd) and they have the potential for gains sure, but they have the element of high risk because of lack of oversight of regulators and their opaqueness in handling shareholder rights or making decisions and many of them are outright frauds. I am done with them.
So, already there are small, mid and large caps in that list by at least some market definition. Mine is that most are great businesses.
And I want to be a shareholder with other good shareholders. If the signs say that the type of business partners I will attract here is not ideal, that speaks a lot about the company. So then with that lens, many a large caps will also look like small caps.
With quality I may go wrong on price, but with low quality I may have a permanent loss of capital.
I am not any more assessing a business with the returns I may get. That is I am being honest not even the last thing on my mind. I am just not thinking about returns. I am only thinking about risk. Focus on risk has saved me in January and given me the opportunity to rebuild my portfolio slowly with quality. I hope you learn that without paying a financial price. In the quest for returns, people lower their standards and then have no returns and no capital left. There are hidden gems out there, but they are best left to professional investors who can meet managements, who have at least a decade of experience in investing, they are not for me at least, I donât know about your background but I assume you too are learning just like I am.
Hope that helps.
Best regards.
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Well said. I second your thought. My view is market will take care of return in long term⌠Whether 15% or 25% is not the point. What we need to take care is Risk and avoiding permanent loss of capital, fraud management, extreme cyclicals etc.
Having said that, I was simply looking at a mid cap wishlist⌠I have made one in screener. Will share shortly⌠Some issues with taking screenshot in one frame 
thus not able to shareâŚ
And Yes! ofc, I am a learner in equity investing.
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Use SnagIt to capture scrolling screen-capture.
But why should this be left with professionals. Even if they can meet management so what? Do you think the management is going to tell them the problems inherent in the company?
By the way, simple way to find out good mid cap and small cap is to go to BSE 200, or Nifty Mid cap, etc indexes and look at those options,. Others could be to go to mutual funds based on small cap and go to their portfolio. You will easily get few good ones. The trick is to invest in a basket of stocks (for small or mid cap) so that if few of them work out, you get real good returns.
Posting my current portfolio and expecting 2019 to give buying opportunities. The portfolio represents around 13% Invested and waiting with 87% in cash. This year cash has outperformed (for me) and given me around 7% return. Thank goodness for the 2018 call to stay mostly in cash. Was expecting some buying opportunity to emerge but seems the wait might extend for another 6-8 months at least. I am happy to wait.
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Changu bhai you seem to be very bullish on rating companies. In India commodity exchange and stock exchange and depository companies so far not able to perform as expected though those are considered best business across the globe. What your rational for investing in rating companies and why you think they can give good return from current level.
Dear @nirajiitkgp
First off, the credit for asking me to study credit rating companies goes to a VP member who nudged me to look at them.
There are a few reasons that I found why they made sense to me.
-
Ratings business is a proxy to the bank credit off-take that will happen some time or another. Banks I do not trust because they have to first lay out their cash and then they find out if the money is coming back; but rating agencies are in my view a good way to play the pent up credit demand that will come around, when will the demand arrive is another matter, I do not know.
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I expect more and more corporates to shun bank borrowing and issue bonds etc to raise capital but again credit ratings are important to rate the debt. So whether they raise from banks or privately, ratings will be needed. So it is like a FMCG of financials
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Ratings agencies have no corporate governance issues (aka owners siphoning cash) and are managed by professional managements.
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Rating agencies do not have any currently visible existence risk and are not blamed when the rating they issue to a company goes wrong. They simply downgrade
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There is a law in the works which if passed will require a. For debt above a certain amount not one but two ratings will be required and b. One rating agency cannot continue to rate a company over 3 years. So a lot of CRISIL rating will be moving to CARE and ICRA (and vice versa) but net net the rating business revenues will increase as many large corporates will then require 2 ratings instead of 1.
-
Rating agencies have very good cash flows; also they pay out most of the earnings as dividend and thus provide me a cushion if stock prices fall and also put a floor on the stock price.
I feel rating agencies are a good way to play the financial story of India without the risk that comes with owning banks, so they are my proxy to play the Indian financial story.
Disc - I have very small positions and will build a full position very very slowly. I am not SEBI registered. I am a novice who is learning so I will in all probability be wrong in my thesis. So please consider these the opinions of an idiot who does not know anything about investing and is simply making up stories in his mind and putting his money on them, I will probably lose real money. Please do not act on my advise, I am a student.
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Considering the allocation %, any particular reason why you are more bullish on CARE vs the other two?
Dear @anirband87 On earning yield, currently the cheapest is CARE. When CRISIL and ICRA give an opportunity I will add to them as well to make an equal on initial investment basket. Then I donât have to worry about the winner or loser. The basket should reflect my returns.
I want to write some more but my wife is asking me to leave the computer 
. I will post more in the night or tomorrow.
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Thanks for sharing your allocation logic. I like your idea to play the sector and diversify company specific risk!
Another option that I had tried few years back while playing a particular sector was to bet on two stocks in the sector as the second stock adds the most amount of diversification benefit.
Hello Brother - I am seeing a lot of MNC companies in the above list which is generally rare (also, I havenât see so many foreign owned companies in oneâs portfolio, so far). As MNC stocks generally trade at expensive multiples and illiquid (generally) I just wanted to understand the thought process / rationale for your stock selection, if that is possible. Trying to see the full picture from your shoes and apologies if I am playing a devilâs advocate hereâŚ!!
Among all, I feel that BASF has the lowest ROCE / ROA metrics. Just wondering why are you so bullish in this space? Also, can you please explain the rationale for picking / adding both Monsato and Bayer? Are you trying to play the merger between the two companies which was announced a while back? Also, the reason for Merck as they have already sold off their business to PGGH?
I totally take your point on credit rating companies. Good bet for the future. And interesting to see that you have avoided all the high PE consumer / FMCG companies. Happy to see that sanity is prevails and there are a few people who are not running with the herd always chasing the expensive consumer facing companies. Happy investing.
Cheers,
Matt
Dear @Matt1985 I have a true MNC Bias
My reasons are below:
-
The least corporate governance issues are with MNC companies. Very very rare. That is part of the reason that they are generally always expensive.
-
MNC stocks are treated in India as buy and forget stocks. Thus over time their valuations keep getting expensive as the sellers are not willing to supply the entire demand (aka, Unilever, Nestle etcâŚ) Their float only gets lesser with time.
-
The MNC stocks can only be bought at some semblance of a decent valuation when any of them are going through a period of financial turbulence (when they have a bad quarter or year) and they can only be bought as falling knives. So keep scaling up as the prices drop or stabilize at lower levels since no one can say what will be the bottom. A good example currently is BASF and Ineos; In reality both are excellent and well aged businesses, so in a few years they should recover due to their high pedigree and longstanding business ability, and there to me is no other way to be able to buy MNC stocks at decent valuations. So I am happy catching falling knives in the MNC arena.
On Bayer and Monsanto, you are right, they are undergoing a merger and it should be complete by around 2020. So again, I have taken a basket approach and I will then end up finally owning Bayer but the business of Monsanto as well
Merck still has a valuable business after the sale and that hopefully is going to continue to grow and after deducting the one time cash we can expect from this sale, the rest of the business is actually at a very decent valuation for the buyer.
On the high PE consumer and FMCG I am salivating but waiting. If and when I can buy them at a fair price, I will be the first one in the queue
Disc - As I have said before, I am a novice and I just sit in my living room and develop a story, and then play with real money on some stupid logic that I invent. I am probably bound to be wrong; just trying to learn and using money and VP to see if I learn and flourish. These are risky bets.
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You are 87% in cash ! Thatâs like you expect a significant drawdown and keeping cash ready for deploymentâŚSo essentially you want the market to correct further and create super buying opportunities. But curious to know what if in next 6 months it doesnot correct and inches to say nifty 12kâŚ
Can you share some mental map of what % of equity and cash against some nifty benchmark and probability of that happening.
Thanks!
Dear @homemaker. So lets say I was 100% cash in January. Now I am 13% invested (approximately) so I laid out 6 percent from my core cash and around 7 percent from the interest income.
So in one year, I still have 94% of my core cash but have a portfolio that is 13%
So if over next year, no great chances appear and I deploy further my interest income I will be around 20 percent invested while still having my core cash to deploy if there is a great opportunity. If not, slowly over 3 years I will have a decent portfolio allocation but still keep holding to my core cash, which can come out only in some major crash.
See, I went into cash in January. Now stock markets donât give opportunity just because we have cash. Most of us simply invest whenever we get cash we miraculously find a way to invest it all within a few months. That is a terrible way to invest. First trait should be to bet rationally and not greedily, imho.
So really my bet takes me to a place where I may see a 50% drawdown on the portfolio but that would mean I got no interest income. Thatâs how I am betting. Heads I win and tails I simply do not lose and just get a slightly lower return.
I can invest fully only when I see carnage. There is no carnage at all.
The core thing one needs to realize is, has one come to the stock market to get rich or to slowly grow capital with the least risk?
I initially came to get rich and then when I saw what can happen I moved last year November to start building a list of good businesses. Only building that list took me one year. I donât understand these very smart people who can build an entire portfolio the moment they enter the stock market. Plus people enter the stock market when they are valued irrationally. So they keep losing.
I am very immature as an investor so I will build a portfolio over 4-5 years.
I have not come to the stock market to get rich and I have not come here for returns. Others need to find their own answer.
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