Devarajan's Portfolio


(devarajank) #1

Hi All,

My Investing Journey so far:

I have started investing in Stocks in 2008, (luckily after the big crash) during my first job after finishing Engineering. The first stock I invested was SBI with which I had my first savings account. Second was Indian Hotels which I bought after the 26/11 attack and subsequent crash in the stock price. Liquidated 90% of my stock holdings before my MBA, started investing again in 2013. Used the interim time to read further, also explored sites like ValueResearchOnline, Moneycontrol, research reports etc.

Have been a quiet reader of various threads in VP for the last one year. Also follow MarketsMojo to track investments. Increased my allocation to stocks in the last 2-3 years.

Portfolios and Asset Allocation:

  1. Retirement Portfolio: Includes EPF and NPS.

  2. Debt (Conservative and Aggressive): Liquid Funds, Peer to Peer Lending. Recently started moving from Liquid Funds to Bank FDs looking at the IL&FS story.

  3. Equity Mutual Funds - Only ELSS, with rotation after 3 years. Need to rethink as LTCG has been introduced recently.

  4. Stock Portfolio - Objective is to create long term wealth, with occasional restructuring based on performance.

Stocks Portfolio:

Providing my stock portfolio below. Requesting constructive feedback from fellow investors.

Company Industry % Average Price

  1. HDFC Bank BFSI 12 2000
  2. Piramal Enterprises BFSI 11 2350
  3. Bajaj Finance BFSI 11 1870
  4. Edelweiss BFSI 5 170
  5. DMART Retail 11 430
  6. HUL FMCG 7 1670
  7. Britannia FMCG 3 5530
  8. Asian Paints Paints 9 1300
  9. Reliance Diversified 7 1150
    10 Avanti Feeds Aquaculture 9 450
    11 Godrej Properties Real Estate 10 620
    12 PSP Projects Real Estate 5 430

Rationale:

  1. HDFC Bank - Steady compounder
  2. Piramal Enterprises - Good Prospects, Performance and People. Bought recently below 2000.
  3. Bajaj Finance - Best managed NBFC. Good Prospects, Performance and People. Bought recently below 2000.
  4. Edelweiss - Diversified financial services.Good Prospects (ARC, Insurance etc.), Performance and People. Expecting to add more in the coming months.
  5. DMART - Best bet in retail story. Holding from IPO and added further.
  6. HUL - Steady compounder
  7. Britannia - Steady compounder
  8. Asian Paints - 50% market share. Steady compounder
  9. Reliance - Steady compounder. Retail, Digital Content & Telecom emerging as growth engines.
  10. Avanti Feeds - Steady compounder. Looking to add more.
  11. Godrej Properties - Best brand and promoters in Real Estate. Bet on consolidation in the industry, which I feel is bottoming out.
  12. PSP Projects - Good execution and Growth. Debt Free. High Promoter Holding. Looking to add more.

(Amit Jain) #2

Only trying to hv a discussion here.

HDFC at PE 28 is expensive. There are some better Banks at lower PEs. No matter how good HDFC is, if bought high, it may not give returns in the near long term. Just like:

HUL PE 60
Asian PE 56
dmart PE 102

Surely, it will be tough for these companies to give a handsome return from these levels.

I would suggest get out from expensive stocks, and getting into cheaper ones. Like Yes Bank, Mayur, Finolex and so many others…


(devarajank) #3

Thanks Amit.

From my experience, quality will always be expensive. I was a staunch believer of value investing but have seen that most of the value stocks remain value traps.

Intention is to build a core portfolio with steady growth first, then venture out for some value buys. Avanti is one candidate, exploring Mayur as well. Will stay away from Yes Bank. I havent tracked Finolex.

The long term return I expect from heavyweights like HDFC Bank, Asian Paints, HUL etc is 12-15%, which they have given in the past and am hopeful of getting in the near future.

DMART is expensive no doubt but I will wait to see one or two bad quarters before exiting.

I am exploring more stocks as I wish to expand the current list of 12 stocks to 15 or 20.


(Amit Jain) #4

The likelihood of getting into a value trap increases as we stray away from large cap stocks.

In the same breathe, getting into High PE stocks is a trap from the very start. To illustrate…

HuL was a dud from 2006 to 2011…
Infy from 2010 till date. Luke warm performance…

I could go on and on. LT, Tata Steel etc.

Everytime we buy a large cap at a high PE, it is almost always trouble. It could be a different case with mid caps, as they have plenty of room to grow. But it is still a risk.


(James Sebastian) #5

Very interesting and looks to be good picks. What’s the share of stock PF in percentage out of overall investments ? How much cash you hold to invest further to stock PF as a percentage to total stock PF allocation ?


(Susindar) #6

One test I use based on Peter Lynch principle is that PE should be less than growth rate. So you can buy a high PE stock as long as the growth rate remains above the current PE. Bajaj Finance passes this test. Other quality stocks you hold looks quiet expensive to me. Your holdings are well researched and have a history of good performance. There is a good probability that future will be good as well for these stocks performance wise. It is only the price that looks expensive for some.

I never understood quality investors. But your selection may be good in an overheated market looking to fall anytime (which is what is happening now) as the downside will be protected.


(Amit Jain) #7

Pe less than growth. Means PEG less than 1. Is suitable for midcaps

Large caps tend to ask higher PE as they are popular and on the list of fund houses. And growth is less, due to their sheer sizes.

I mean, metrics for Large Cap and Mid Caps will be different as far as PEG is concerned.


#8

You mean PEG less than 1, please correct the typo.


(Amit Jain) #9

What typo :slight_smile:


#10

If some absolute newbie happens to read your comment, he may get confused PEG with PE, I would if I were one, so asked :slightly_smiling_face:


(Amit Jain) #11

Expensive compared to what? Quality will be expensive, is a universal truth, but by how much. Can we quantify it?

If Page demands 87 PE… then how much EPS and EPS growth must it have?

12%…15%… Is proper expectation over the very long term. HuL tends to consolidate for several years then breaks out. Five years of no share price gain, or moderate correction, then break out.

DMART
110 PE… A tough spot to be in.


(devarajank) #12

As of now, stocks is 25% of overall portfolio and 50% of Equity portfolio.

Cash holding is not uniform, typically around 10-20% of stock portfolio.


(devarajank) #13

BFL was my largest holding till sometime back, reduced as it crossed 20% of total portfolio. In the hindsight I was lucky to miss the NBFC crash which took even BFL down.

In fact, my increased allocation to Asian Paints, HUL happened as a result of too much % of Financial services in the portfolio.


(devarajank) #14

Appreciate your views.

There was increased allocation to Asian Paints, HUL due to my worries on diversification - i.e., too much into financials. I will switch partially to some of the growth/value stocks.

As I mentioned earlier, Dmart looks to me as a different story even at this PE and will wait for 1-2 quarters of poor results. May be I am biased because of my low buy price :slight_smile:


(amanbindra) #15

Hi Devarajan, don’t you feel the portfolio is very BFSI heavy. The financial sector is almost taking 40% of the portfolio. I feel you should diversify slightly with your plan of adding a few stocks .Rest looks pretty solid i feel.


(devarajank) #16

Yeah. Started that already some time back. Btw, it is not 40% but only 34%. Piramal is only 50% BFSI as rest is Pharma.