Diversified Portfolio with growth target of 18-20% CAGR

Thanks Amit for your views.

The portfolio was 60% in Large Caps + 40% in Small Cap + Mid Caps, probably till 2016.
Mainly due to surge in prices of Mid Caps and Small caps now it is tilted towards Small + Mid Caps.
I have recently exited Vinati Organics and have increased my cash component to 7% which is definitely on lower side as per my thought process.

I have been contrarian investor or value investor for long time, so will like to increase cash component.
I am working towards it. My cash component could have been 15% or more at these NIFTY PE levels, it is only due to recent change in my policy to hold stocks for longer time, it has not happened this time which is my worry as well.

All I can say is I am worried. Your cash component is 15% in a completely vulnerable portfolio. Whereas, some wise folks in VP have a cash component of over 60% in a much sturdier portfolio.

Your company selection is good. They will give good returns, but in a longer run. In other words, your portfolio is likely to go 40% down, before it goes 80% up…

Hi,

I thought of sharing lessons learnt from my Equity Investing for some time.
Now, I am sharing it in this forum for the first time.

Conservative Diversified Investing Approach V1.0.pdf (840.4 KB)

This approach is always evolving as I become more mature as Investor, and this is as per the current form.

Since I am more a Value Investor rather than a Growth Investor, my portfolio some times underperforms the rising markets, but I am now used to it and comfortable with it over last 6-8 years. Mainly my journey started in early 2011 and market corrected by 25% during that year. That was the time when I was able to pick up names like HDFC Bank, M&M, Yes Bank and portfolio has changed a lot over a period of these 6 years.

Kindly note that, these are just my personal observations and strategies and this is not general strategy for all Equity Investors. Due to limited bandwidth to understand all business(s) in detail, I do use some paid services. After that, I do my own analysis which can take any where from weeks to months. Once I build my own conviction then BUY transaction happens. I have my own personalized SELL strategy which has worked some times, and may not have worked in some cases.

Reason for sharing this here, is that, others readers can also share their lessons learnt if they feel so.

Disclaimer : This is not a generic Equity Investment Strategy and not a BUY/SELL recommendation. This is personal approach.

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Hi All,

I have started my blog on Personal Finance recently.

I just thought of sharing the link in my topic:

https://prudentmoneymanager.blogspot.in/

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Hi @gsapte, would like to know how your portfolio is currently fairing and which sectors have you been invested.

@sainkar : Thanks for showing interest in my portfolio.

My portfolio has changed to a large extent in last 1-2 years, since some of the overvalued stocks as per my analysis are no longer there.

Some stocks which have exited the portfolio during past 1-2 years:
TCS: It was overvalued during last year (around Apr to Aug 2018), where in market stretched its P/E beyond 30, and most of the 2-3 year upside was factored into it.
Edelweiss Finance: The exit was driven by overall business model. I was not comfortable to hold it during last Aug-Oct 2018.
Mindtree: Fundamentals were intact but P/E was stretched to 33 during last year i.e. around Jan-Feb 2018. Also there were speculations about promoters selling their stake which eventually happened.
M&M : It was overvalued during last Apr-May-June 2018, and most of the upside was factored into it. This is position for 3-4 years only and this was not for long term.
Vinati Organics: Exited around Sept 2017, when valuations touched P/E of 40 after 1-2 quarters of solid growth. Though it had a chance to grow further for few quarters at 25% CAGR, but decided to close the position for some profit booking. It had grown at higher rate than that after that. I decided to close the position as risk looked high at that point.

Some new entrants in past one year are as below:

Company Name % Current Allocation
AMARA RAJA BATTERIES LTD 2.32%
EICHER MOTORS LTD 2.79%
CAN FIN HOMES LTD 6.68%
CENTRAL DEPOSITORY SER IND LTD 2.16%
HOUSING DEVELOPMENT FINANCE CO 5.64%
CYIENT LIMITED 4.57%
TATA ELXSI LIMITED 1.64%
AJANTA PHARMA LTD 2.60%
LUPIN LIMITED 5.42%

As you can see, it is based on my comfort with the current valuations. Either stock should be undervalued or fairly valued. I do not chase growth stocks as that is not my cup of tea, and it has never worked for me in the past 6-8 years.
Undervalued stocks are naturally out of favor stocks, such as, NBFC(s), Auto, Pharma and some IT/BPO companies.

Amar Raja & Eicher are fundamentally sound businesses, going through tough period. Long term story is intact in my opinion. We need lot of patience for both these.

Canfin Homes, and CDSL were available at valuations at which I am comfortable during last Aug-Oct 2018; hence I have taken positions in that, with long term holding period of 5+ years, provided they remain fairly valued.

HDFC is to support the portfolio, as it may list some of its subsidiaries which they did in early 2018. Some value will be unlocked further in my opinion, though upside would be limited.

Tata Elxsi and Cyient are doing some thing different than other IT companies, and are still available at fair valuations. I believe that, Cyient is more risky but it has presence in aerospace, defense and some such sectors which are not addressed by large IT players.

Ajanta Pharma and Lupin are purely based on undervaluation. Potential upside will evolve very slowly. This is again a difficult thing to predict when turn around will happen.

As you can see, portfolio is tilted towards Finance, as I am holding HDFC Bank since 2011 on wards, and that position is now close to 11%.

This portfolio is not at all suitable for all, as it is tilted towards Finance, Auto, and Pharma and all these 3 sectors are going through difficult times. My thesis has remained the same. Invest in the company when others are not looking at it and sell when all become interested in it, and stretches the valuations beyond my comforts.

It has worked well during 2012-2017, and it has not worked well during 2018-19. But this portfolio is for my goals which are after about 8-10 years, and not for goals which are due in next 2-6 years, so I can wait with patience.

Returns till 2017 were 18% CAGR approximately and now showing about close to 16% CAGR, which are in line with my conservative expectations so far. The starting point was April 2012.

Hope that this helps.

Disclosure: I am using services of an Independent Equity Analyst, so my convictions are based on their analysis, and then my own analysis, after that. Many times, I have done lot of due diligence and has not taken positions recommended by them. This has been the model since April 2012. My mutual funds (Large Cap, and Multi Cap have performed below my portfolio returns so far, so I may like to continue my own portfolio for some time/years). I am not worried much about returns but focus is on reaching the financial goals.

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As we can see now in July 2019, NIFTY and large cap funds are showing some where about 10-11% returns since 10 years, or from Apr 2012, i.e. starting point of my portfolio.
My large cap tilted portfolio is showing about 15.5% CAGR as of now. So some times it is necessary to have your own portfolio, though it may be tilted towards large caps.
Other reason for own portfolio is in MF, I am not able to invest lump sum where as in an individual stock, I can invest lump sum once it is undervalued.
Due to this, my MF returns are always much less than my portfolio returns.
The rational behind own portfolio is to able to buy/sell lump sum for some goals.

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Nice portfolio @gsapte

May I know your latest portfolio? and your learnings after your last post. Thanks.

My only comment.

Your PF is not aligned to any of the decadal trend that are likely to play out:-

  1. Innovator CDMO / CRAMS
  2. Pure Play APIs
  3. Clean Energy
  4. Speciality Chemicals (cos engaged in complex chemistry)

Consider the above especially in small allocation if your conviction isn’t there yet.

Best wishes and happy investing :slight_smile:

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Hi All,

I have decided to close this discussion.

I will remain active in all other threads of ValuePickr.

gsapte

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