Portfolio Re-Structuring/25% CAGR quality-growth for next 2-3 years


(Donald Francis) #210

Shifted the side-discussion, where it can be pursued with vigour :slight_smile: for those academically inclined.

Let’s try to take some practical learnings out of the exercise:

One thing I have always admired in Ayush-style: Investing in business-in-transition - obviously you find things to quibble about there. There are n number of objections that are raised …while story is developing. Mr Market conviction develops very slowly. over 2-3 years- but by then the business numbers race are far ahead. Mr Market takes a long time to accept the sustainability of the cash being thrown out! …recognition - that hey this seems to have transitioned to a robust business model …

In my limited experience of last 6-7 years in markets, I have observed - sometimes, the fastest wealth creation happens in such kind of slow-to-be-accepted businesses - Atul Auto, Avanti Feeds, Oriental Carbon, Manjushree Technopak, Canfin Homes… to name a few
(Discl: this is about past wealth creation …while the story was unfolding before our very eyes, they are no more that juicy, probably. This is NOT a Recco)

A combination Portfolio with a good mix of exemplary opportunity bets (Shilpa, PI, Bajaj Finance types) and above kind of well-chosen opportunistic business-in-transition bets (the quality of earnings potential - gives hope of migration to medium to long-term portfolio as well) seems to work really well.

If there is one correlation factor - where the Market over the medium to long term - say 5 years plus - rewards most handsomely - we can check back and see there is great EPA generation - in other words, there is usually a mix of both high growth momentum and high earnings-quality momentum kicking in.

We can try and choose better, there is always a scope to become better at this game: Can that be a key takeaway?
Views Invited.


(Bhupesh) #211

[Transaction data in picture]

Picture only shows transaction and transaction value not the portfolio return.


(bvr007) #212

@Donald great indepth study with examples given by you sir…really it helps in starting new thought process , Just want to ask why there is no new initiative taken up by value picker to meet the management of these potential companies (please Correct me if i am wrong but Last one was with MPS if i remember correctly) with Q&A so that we can move with more conviction. Thanks…


(Donald Francis) #213

@umang_1991 and others

Some of you wondered about folks entering our Markets in 2015 or 2016 - whether one could aspire to superior portfolio returns along similar lines as VP Portfolio/above portfolios.

Here is another such portfolio sent to us - which establishes - that if one is patient - and is prepared with homework/buy list of superior businesses, superior returns are possible - because every year Mr Market does give you opportunities to buy 2-3 times in the year!


And enclosed is the tradebook shared generously by the user - shows transactions starting Dec 2015
8503XXXXXX_TradeBook.xlsx (51.7 KB)

Request/encourage more folks to send us live portfolios/transaction history - no better way to establish the right things to do


(Krishnaraj) #214

There is grave danger in trying to study high scorers in a game where luck and skill are so inextricably mixed. If there are 10 people throwing a die, someone is very very likely to get 6 on every throw. It is not skill, it is sheer law of chance. And each time it is likely to be a different person. Studying those who get high returns every year is to an extent same as studying those who get 6s on each throw. It won’t shed much light other than to establish some laws of chance. On the contrary some random observation may be taken as a truth.

You get a similar result trying to find out which Mutual Fund scheme outperformed every year. Some fund or the other will deliver an outsized return every year, even in a down market. That is not enough to say that even in a down year you can aspire do very well. Your aspiration and your luck are independent variables and one may be confused for the other.

Persistence of achievement is critical to establish that more skill is involved than luck. Then understanding the process of that person will help extract some investing wisdom.

To clarify I have no intention of belittling the investment prowess of the person who’s returns are shared. One needs greater rigour to do a good job of separating luck and skill.


(Vijayk) #215

Agree with Krishna here. These kind of sample portfolios are just survivor-ship bias. And, just sharing them after they have delivered returns, while not sharing 100s of portfolios- that have not given returns- is not justified. Is Kitex not a superior business? The businesses that have delivered good returns in last 1 year are superior vs those that have not? What’s the logic you are trying to display here by showing past performance of some portfolios that have out-performed vs leaving that have not done well! The financials (small banks), NBFCs, HFCs, Fertilisers, Chemical have done well in last 1 yr, so portfolio or Mutual funds heavy in these stocks have done well. It is that simple! @Donald


(ASPN) #216

@diffsoft, Krishnraj, do you really believe that picking a stock is as simple as throwing a die? Really not a good comparison at a forum which is full of investing wisdom.

@Vijayk, if you take a cursory look at the portfolio, each and every stock has a thread of its own and is very well dissected, analysed and covered with pros n cons.[quote=“Vijayk, post:215, topic:4286”]
The financials (small banks), NBFCs, HFCs, Fertilisers, Chemical have done well in last 1 yr, so portfolio or Mutual funds heavy in these stocks have done well. It is that simple!
[/quote]
Now you know this in hindsight. But the person who started investing since Dec2015 wouldn’t have known this. Thats the point - IMHO - @Donald wants to make. Even if you have entered the market in 2015/16, there is a good chance to make above avg returns, if you follow a disciplined approach as enumerated above.


(Vijayk) #217

This sectoral out-performance- everyone knows now. Should have mentioned this one year back that these sectors are likely to out-perform. You are selectively taking winners portfolios- who went into right sectors/stocks. It is a hind-sight analysis on which portfolio performed and which did not. Obviously, there will be some winners.
@Advait_6270 selecting a stock is not throwing a dice- BUT selecting winners portfolios out of 1000s of portfolios with hind-sight analysis is survivor ship bias. You can do this every year. Every month, infact , there will be some portfolios that will do very well. You select them after they did well, and then show here.


(Sudhakar Moharana) #218

Please go through the respective thread of each stocks of the above portfolio at this forum. So that it will be clear the understanding of each stock of the portfolio. I hold almost all stocks listed above. Following the discipline is more important in investment. Understanding this thread needs more patience. Please do not criticise. I respect @Donald so much. :slight_smile:


(Nikhil Jain) #219

Commonest follies of stock market participants.

  • if a stock I don’t own or decided not to own goes up, find negatives related to it.

This is almost natural for us humans and hinders our ability to be objective.

  • if a portfolio does better than mine, they were just lucky.

In order to feel superior, we always stick the label of luck on more successful fellow humans. I used to do this too. I think I’ve learnt my lesson now.

In the long run, luck always favors the hard-working, disciplined investors/traders.

Our job is to learn from fellow investors’ successes as well as mistakes.


(Saji John) #220

Thanks @Donald for sharing the portfolio. It helped me understand few things 1. It is not pure luck to hold on to winners. There is a thought process and a deliberate attempt to avoid churning and wait for the story to unfold irrespective of the macro situation. 2. The ones that have been sold of didn’t work the way the investor expected and he had no emotional attachment to them. 3. If there is a black swan like situation, he’s now in a position to exit totally with minimum tax implications. 4. Most importantly, VP has enough stock threads to profit from and I have decided to limit my stocks to the ones discussed here!


(bvr007) #221

Fully agree with @Donald sir, The example given here as a sample portfolio are very well discussed in this forum by our members, and lots of efforts has been done while researching and finding out these pearls, there are many random stocks one can demonstrate that has achieved many fold returns such as Avenue supermarkets PNB Hsg. Etc., but here discussion is not about that. It’s only about picking right stocks with full conviction and holding it with patience during the rough times and selling it when valuation becomes overstretched… And in my honest opinion it’s an art rather then luck…! I also own some of the stocks mentioned but couldn’t hold on to them just because of playing with them to take small profits and they did not give me the chance to re enter again… Though lucky enough to get the allotment in PNB Hsg and Avenue Supermarket, but losing stocks like Bajaj fin.,Avanti feeds etc at lower levels even after having conviction and spending so much time is really painful and taught me few lessons, So demonstrating example as above will we of great help for novice like me, And I must thank Donald sir, Hitesh Sir and Ayrsh Sir and many more fellow members for providing this platform to learn about the stock market investment. Thanks…


(Value Seeker) #222

It is always good to hear out opposing views and not drown them out. That is how balance is maintained. Will be informative to see failure patterns in portfolios with VP stock picks ;). Lest we forget, there is no silver bullet in this game…


(Santosh Dave) #223

@Donald
Thank you Sir for the encouragement… Let me admit that it was not pure luck but conscious decisions I had taken which is why I am having alike results for my small PF which I started in 2015-16.
Reading of threads are important to improve conviction rather having ready recommendations.


(Donald Francis) #224

Great to see some energy in a very important thread.

Welcome all opposing viewpoints - and some valid points being raised here by @diffsoft @Vijayk. The more strident the opposing viewpoints - the better it is for the disciplined/process-focused investor.

If we can handle all objections reasonably well, then we really KNOW what we are doing/preaching. Else we have nothing but to learn/gain from the process.

Really welcome more opposing viewpoints - this is a very important thread in today’s markets context. Let us all show patience in accommodating every reasonably argued viewpoint. As @valuedude75 said, let’s not drown them out.

A request to everyone reading/participating in this thread - please read-through-top-down to understand the CONTEXT of this thread, when it was started and its underlying objective :slight_smile:

I apologise that I failed to bring this out in every post I make - there is an underlying common thread in the portfolios being shared, these are not random darts - appreciating that itself should help answer 60% of the objections.

The balance objections, I will certainly try my best to answer - later in the day.


(Bheeshma Sanghani, PhD) #225

My takeaway from the portfolio shared is that someone looked at the ideas on various threads and at some point took bold, decisive steps instead of endlessly discussing it. Being able to pull the trigger at the right time ( buying or selling ) is something i have to improve upon as often information is not known or the information is not complete. It is something like window shopping - you don’t actually buy it but enjoy the thought of buying it more.

The time taken to build the basic conviction should happen quickly otherwise one will never be able to act quickly.The time taken to validate your conviction can take as long as you want to. The VP community is a great place to present your ideas or participate in an ongoing one but your portfolio should be the final arbiter whether you have done anything with this knowledge.

The portfolio presented is proof that the collective knowledge on the forum was put to good use in a quick decisive manner by the owner. The person has learned and booked some of these learnings into earnings!

Sincerely
Bheeshma


(Vivek Mashrani, CFA) #226

I think such kind of buying works in the bull market when each fall is followed by a bounce back. In the bear market, after plunging to buy after a fall may further lead to bigger fall and the buyer doesn’t know when it will end. And future falls may be much severe than initial falls and possible that it takes very long to recover.

In the bear market, it takes extremely indepth analysis, high conviction, patience to hold and capacity to survive through bear phase without liquidating.


(vinoths) #227

@Donald - Thanks. Most of the companies listed in the portfolio are good quality with unique business model. The key point to remember (and highlighted by other members as well) “market timing” is an important factor to build the portfolio for stellar returns like shown above (along with patience).

With current market situation, most of the stocks listed in your portfolio are expensive. Two common approach is,

a) Wait for good amount of market correction or black swan event to build such portfolio. Sitting with “Cash” when market is extremely valued is also important practice / behavior. I have failed to follow this multiple time :slight_smile:
b) Use SIP method by weekly/monthly basis to build the portfolio over next 6 months to one year

Can you share your thoughts based on current market situation and timing to build the portfolio?

Regards,
Vinoth


(Donald Francis) #228

Ha Ha …Kimi. Heard a better line from a senior friend recently…“This year’s performance is like throwing a dart, and then drawing the circle around it”…everyone is hitting bull’s eye. :wink: So I do understand your concern, and where your are coming from.

At the same time, you have completely missed the “Context” under which this Portfolio is put up …substantiating that keeping up the patience for tracking superior businesses and striking decisively when the opportunity presents itself …is worthy of taking notice!! Surprising since you did notice the other Portfolio (of over 6 years performance) presented just about 3weeks before …with a 54%+ XIRR, and commented on it too.

I thought what was worth noticing was that this Portfolio constructed mostly within 2016, has 9 of the 12 businesses in the 54% XIRR Portfolio, and Gruh Finance additionally…with a 35%+ return to boot. No one has a crystal ball - as to how these 2 Portfolios will perform in the next 2-3-5 years.

But one will have to admit - they are doing some of the basics dead right !! Which is??


(Donald Francis) #229

A senior friend who has maxed the compounding game …over 500x on the Portfolio in last 17 years articulates his “own” success formula as below: