I have this simple investing philosophy to pick stocks at any point in time,
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Sales and Profits have grown at an excess of 15% over the last three, five and ten year time horizons.
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The stocks have paid good dividends in the past i.e. (Dividend Payouts >=15%). This ensures that the management cares about the minority shareholders. Regular dividends is something that is imperative for my picks.
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Portfolio concentration (Owner Mindset, Pick one or two stocks at max). This ensures a lot of homework from our side and at the same time we are sufficiently rewarded if proved right.
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I generally tend to look at micro-caps (Mcap < Rs 1000Cr). The primary reason being that the business itself isn’t hugely diversified and makes it easy to understand. Also if proved right, we will be sufficiently rewarded.
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As a disclosure: I have currently picked two stocks that play the consumption theme. (Chaman Lal Setia : Consumer defensive and Prima Plastics Consumer Cyclical)
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Valuations are usually not a concern, the reason being that a lot of growth is ahead and usually micro-caps do not trade at huge premiums.
What are your opinions on a highly concentrated portfolio and also developing an owner’s mindset over the businesses invested in?