Please share your investment philosophy

Hi

I suggest that a new thread can be created where in all members can share their investment philosophy in detail.I see many advantages of this first of all it will help all newbies a lot toappreciateand understand various investment philosophies. It will be easier to understand the stocks recommended by anyone, when you know their investment philosophy. Last but not the least, it will force each and every senior members to think and put down in writing various rules which they might be following consciously or unconsciously on paper in a logical manner which in turn will help themselves.

As a novice, I know that I would benefit from what you describe above. I request senior members to participate in this thread.

Hi Friends,

A little diversion from the content of this thread - but I am sure the originator wouldn’t mind this one. I want help from fellow boarders.

I want tomanage a portfolio by using a Screener of my own - I want to use this screener with a frequency of 6 months to select new stocks for purchase or Sell from existing portfolio.The parameters of the screener should be as below

1] Companies with ROE >X% for last 5 years, last8 quarters

2] Companies with ROCE >Y% for last 5 years and last 8 quarters

3] Companies with Debt-Equity ratios <=Z for last 5 years

4] Companies with Working Capital to Sales ratio <= P for last 5 years

5] Companies with EBITDA margins >= Q for last 5 years

6] Companies with Div payout ratio (or Dividend yield) >=R for last 5 years

7] Companies with Sales growth >=A% for last 5 years

8] Companies with Net profit margin >=B% for last 5 years

Regards

Amey

Hi Seniors,

please help on this one

Amey Desai.

You can easily achieve that screener with help of screener.in.

You can try your method there and see what set of stocks meet the criteria and can take it from there

Dear Amey,

The ratios u hv mentioned may or may not work. It is the future that counts.

JM

Janakji,

Theoretically your statement make perfect. But the real question is how to find out the future and quantify it

fellow boarders,

along with my equity portfolio, i do have 3-4 active SIPsdifferent fund houses. I intend to find out how much annualised return have I made in my mutual fund SIPs. does anybody have an excel sheet that will give me my annualised rate of return for a SIP? If there are some dud SIPs, i would rather stop them and divert that money to equity directly.

i tried preparing my portfolio on valueresearchonline.com and it gives following annualised rate of return for my SIP investments - fellow valuepickrs - pls help me with excel file if anybody has it

DSPBR Top 100 Eqt Reg-G- 22.5%

HDFC Mid-Cap Opportunities- G- 25.34%

HDFC Top 200-G- 7.74%

IDFC Premier Equity Plan A-G- 33.78%

UTI Dividend Yield-G- 6.8%

Hiteshbhai, Donald, Ayush, Subhash - please guide on MF SIPs

[quote="ameydesai, post:10, topic:992374925"] > i tried preparing my portfolio on valueresearchonline.com and it gives following annualised rate of return for my SIP investments - fellow valuepickrs - pls help me with excel file if anybody has it > > Top 100 Eqt Premier Equity Plan 6.8% > > Hiteshbhai, Donald, Ayush, Subhash - please guide on MF SIPs [/quote]

All the funds are good though I would have preferred DSP Equity Fund to DSP Top 100 and UTI Opportunity Fund to UTI Div yield. One fund you can look upon in the large cap category is ICICI Focused Bluechip Equity fund. Although the mutual fund returns are not going to anywhere near the direct equity portfolio(particularly the ones being discussed in this forum).

DSPBR

HDFC Mid-Cap Opportunities- G Link: ../../../funds/newsnapshot.asp?schemecode=5067 - 25.34%

HDFC Top 200-G Link: ../../../funds/newsnapshot.asp?schemecode=104 - 7.74%

IDFC

A-G Link: ../../../funds/newsnapshot.asp?schemecode=2886 - 33.78%UTI Dividend Yield-G Link: ../../../funds/newsnapshot.asp?schemecode=2730 -

Reg-G Link: ../../../funds/newsnapshot.asp?schemecode=1540 - 22.5%

[quote="ameydesai, post:10, topic:992374925"] > i tried preparing my portfolio on valueresearchonline.com and it gives following annualised rate of return for my SIP investments - fellow valuepickrs - pls help me with excel file if anybody has it > > Top 100 Eqt Premier Equity Plan 6.8% > > Hiteshbhai, Donald, Ayush, Subhash - please guide on MF SIPs [/quote]

DSPBR

HDFC Mid-Cap Opportunities- G Link: ../../../funds/newsnapshot.asp?schemecode=5067 - 25.34%

HDFC Top 200-G Link: ../../../funds/newsnapshot.asp?schemecode=104 - 7.74%

IDFC

A-G Link: ../../../funds/newsnapshot.asp?schemecode=2886 - 33.78%UTI Dividend Yield-G Link: ../../../funds/newsnapshot.asp?schemecode=2730 -

It has been my experience over the past 2-3 years that it makes absolutely no sense to invest in MFs if you yourself can devote 2-3 hours a week to study the stocks under your radar or discussed on good forums like valuepickr and pick stocks from there. Even for SIP purpose one can make a list for some great stocks and keep buying every month or whenever it suits oneself.

Reg-G Link: ../../../funds/newsnapshot.asp?schemecode=1540 - 22.5%

[quote="ameydesai, post:10, topic:992374925"] > i tried preparing my portfolio on valueresearchonline.com and it gives following annualised rate of return for my SIP investments - fellow valuepickrs - pls help me with excel file if anybody has it > > Top 100 Eqt Premier Equity Plan 6.8% > > Hiteshbhai, Donald, Ayush, Subhash - please guide on MF SIPs [/quote]

Same feeling from my side. I do track my stock, fixed-income, and MF investment gain % on a daily basis, and it became clear to me pretty early that I am able to beat MF return hands-down by following stocks being discussed here. So I sold all my non-tax saving MFs and invested the proceeds in stock myself. My remaining tax-saving MF returns are lagging sensex by 4-5% in a year or so.

Having said that, I can't deny the fact that FMCG focused funds have given real good returns in last 3yrs (30% cagr if i am not wrong). I have been tempted to invest a small portion of my portfolio in a FMCG MF (say 5% of portfolio) so that I can invest in a bunch of FMCG player without much research from my side, and at the same time get a Fixed-income beating return; so far I am yet to do that. The risk with FMCG MF option is that big FMCG stocks are slightly over-valued at CMP, and more often than not, FMCG MFs have very high exposure to single stock like ITC (upto 40% of portfolio).

DSPBR

HDFC Mid-Cap Opportunities- G Link: ../../../funds/newsnapshot.asp?schemecode=5067 - 25.34%

HDFC Top 200-G Link: ../../../funds/newsnapshot.asp?schemecode=104 - 7.74%

IDFC

A-G Link: ../../../funds/newsnapshot.asp?schemecode=2886 - 33.78%UTI Dividend Yield-G Link: ../../../funds/newsnapshot.asp?schemecode=2730 -

Reg-G Link: ../../../funds/newsnapshot.asp?schemecode=1540 - 22.5%

having burnt my fingers initially now my investment philosophy is

1)The most important factor while investing is quality of management and I do not focus

a lot on other factors if I find a ten grower in ten years run by quality management. I am ready to pay premium for that.

  1. I have a two stock core portfolio (gruh finanace and hawkins ,50-50) with occasional trading bet 5% of overall folio (fresh cash injection).Gains are again invested in buying gruh finanace.

3)I stay away from small and midcap companies who have to hedge in forex. Past experience has been invariably they goof up handing us heavy losses.

4)Stay away from companies in which second/third generation of family is running business. These people are there by birthright and not because of competence.

4)I like companies where previous years sales actually keep on contributing next few years (long term home loans) in addition to future sales.

5)I do not like project based/EPC companies and utlities.

6)I like companies where people repeatedly buy their products and are happy with them.

7)I do not like companies who sale their products to other companies and not to end consumers.(like mayur).

8)I do not like companies who work as a franchisee for some other company (like page,astral etc).They do not have external opportunity.

  1. I do not like companies who are in bulk API business and CRAMS business.

  2. I do not like companies who compete on pricing with MNC to steal their bread and butter. Midsize domestic pharma companies fall in this category.They run the risk of running outpriced overnight if MNCS decide to wage price war (ajantha, bliss,unichem type of plays)

Learning is still on silently on this forum.

1 Like

prasad very very valid points.

Can you pls explain the disadvantages in little more detail ( 5, 7,9)

  1. EPC/PROJECT BASED COMPANIES

These stocks are news driven and mostly we end up buying on news and subsequently stock

corrects significantly post digestion of news. Hence pattern is prolonged flat to downturn with sudden spikes which act as suckers. In short for long term stock picker these stocks give only pain and no gain.

7)B TO B companies.

These companies sell to other companies which are always looking at new vendor developement and diversification of vendor base. As they have limited ability to pass on increased cost their margins are always under pressure. Any increase in margin is ultimately squeezed by big companies to which they supply.Stock price appreciation is limited till the time there is relative undervaluation and long term price targets are difficult to establish.

9)API/CRAMS

These companies are basically contract manufacturers and very little research actually happens.So again they fall in above category B2B .Large capex are required and eventually they go as unutilised capacity. Constant threat from cheaper avenues like

far eastern countries is always there. Hence long term stock picker should stay away from them.

Here I am talking about buy and hold and forget kind of investments and not trading bets. I have seen so many people buy something today with high conviction and sell tomorrow with higher conviction (trigger may be 30% rise in price or 30% drop in quarterly profit). I am trying to minimise trading and rotation of capital and make investment simpler

2 Likes

Cant agree to much of the thesis articulated here. eg Not investing in B2B companies…then we would have missed the biggest story, Infosys.Almost all enterprise software companies come in this bracket, arent they good investments? Investment is about findinga company with a moat, whether it is in a B2C, B2B or whatever.

hi prasad v k

Its pleasing and interesting reading your viewpoints. If one follows your norms in selecting a company for investment then the stock research will narrow down to very few stocks. That at least gets rid of a lot of headache (and often pleasure) of researching a lot of companies.

There will always be different styles of investments followed by different people with varying levels of success.

Your style and criteria remind me of Phil Fischer’s book Common Stocks and Uncommon Profits although some points in both differ but essentially the thought clarity is same.

regards

hitesh.

Thanks Hitesh Bhai. I have learnt a lot from you and have asked a lot of stupid looking questions to you on TED. And you have patiently answered a lot of them.

My first real multibagger vivimed labs was because of you. But ever since I have come across a stock called gruh finance I am just not able to find anything better than it. If emotions are kept aside and if price anchoring effect is kept aside I am just not able to think beyond it and now it forms almost 60% of my portfolio. I have joined this forum just try and convince myself that there are stocks beyond gruh and hawkins and money can be made from them.

findinga

I am not against B2B companies but what happens with these companies prices move up very sharply,stay at peak for a while and again correct back to square one.(on PE basis). Hence entry and exit strategy has to be very sharp and nimble.

This thing requires skill and continuous monitoring.

What happens with strong consumer franchisees is that they rise sharply for some time then they pause and again they give decent compounding for prolonged period.Then they consolidate at level. Hence at every stage there are entry points

and even lazy investors like me can make money.

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Any how infy was not a actually commodity based B2B stock when it made money but surely for now it has become one.

Although there is no doubt that B2B companies can be a very good investment, there is an important point to remember. In case of B2B companies, the customer is a business constantly try to reduce its cost. Further the customer is not going to be very impressed with brands recognition. In fact a B2B company can maintain a competitive advantage only based on real differentiating factors (as opposed to perceived factors like brand) from its competitors!!! And competitive strategy tells that it is almost impossible to maintain real differentiating factors for long.

Another problem of B2B space is constant search for better way both by new competitors and customers. Further concentrated revenue attract many people to try their hand there. Thus B2C space is better than B2B, although scalability shall be much slower in B2C space. Thus a B2B operator can grow at very high pace at the time it enjoys competitive advantage, like software services companies, it will attract stiff competition sooner than later. The strong pace of growth is reflective of willingness of business customer to try new things and accept sooner if the product is better- it will also result in loosing business to another competitor quickly the moment a better competitor arrives.