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


(divyansh ) #291

A very informative discussion going on. My two cents on the same.

  1. I do agree with Donald that we should keep ourselves in atleast 20% cash in case of any unforseen correction.
  2. From the early days after the Nov 16 crash , first to recover and rally were the good quality stocks , followed by the cyclical names which were benefitted from the uptick in business cycle and reduced interest rates. Now there is lot of talk around the commodity dominated stocks, and one can c them moving quite a bit. All in all stocks are displaying a trend of moving from underownership to overownership. Anything which is overowned might not find new buyers and hence there risk adjusted returns might not be good.
  3. Election years have been volatile but if one looks at all the years before the elections , they have been net positive years for the market. So we need to be patient for corrections , lap up the stocks we have decided to buy.
  4. My personal strategy would be to trade volatility , and slowly by the end of 2018 come down to cash levels of 50-60 % and then wait on sidelines.
    Regards
    Divyansh

(Saravanan B) #292

@Donald What about agriculture theme playing out? Micronutrients, fertilizers segments are completely flat.


(Sarvesh Gupta) #293

As Ken Fisher says, markets love to humiliate the greatest number of people the greatest number of times. Ofcourse, sometimes they let most investors make money as if they never allow people to make money, everyone would opt out of the game and hence markets would have get no audience to humiliate. When I look into the position of Indian markets Feb 2016 onwards, it sometimes seems to be that this was one such phase. Nobody I knew has not made less than 30-40% annual returns in this time, irrespective of what strategy they run (value, growth, small, mid cap or large cap, special situations, non-special spetuations, even private equity etc.).

So as I look into the next 2-3 years, one thing is likely, the return profile for the next few years isnā€™t going to be anything near to the last 2-3 years. Infact given where valuations are, probably investors would be better off thinking about the situation from next 5-10 years point of view rather than 2-3 years, as most investment strategies may be unjustified from a 2-3 yr perspective if there is a P/E compression in stocks which will likely create negative returns even with high growth. And please donā€™t get overly impressed by high growth which in many case is anyways cyclical and donā€™t forget the fact that in bull markets all the good news is already priced in. The classic case was post 2009 crash, where many stocks continued to post record growth and record level of earnings even when the stocks were past their peak price and never touched their peak prices till several years later or never again in many cases too.


(Investor_No_1) #294

Wow! amazing and inspiringā€¦which is that stock?


(KKP_Investor) #295

HUL. And, many other stocks from their original IPO stages. Of course, it is a 2nd generation now and will be passed on to the 3rd generation, since the dividend payments are greater than the cost of the stock now.

Lot of non-believers in Buy and Hold, and then you have Mr Agrawal of MOSL talking about turning 1Cr to 1000Cr. So, true that volatility gives opportunity, but never sell a good business model like HUL, RIL, LnT, MnM, ABB, Maruti, Tata stocks (slow performer), Birla stocks (slow performer), and others. These are the foundations of a portfolio, and then you can build many floors, balconies, glass windows, and other things over it that come and go, but do not forget the foundation / base / cemented footing. If you ride your entire portfolio on newbies, then the whole building is going to have side effects of hurricanes, tornadoes, and cyclones for a long time.

KKP


(Chirag) #296

HUL was 300 Rs in early 2000 and it stayed below 300 till 2011 ā€“ For 11 years it stayed below 300.

It needs a unique mindset to hold a company with zero or negative gains for more than a decade during which the company has given a CAGR of 10.2% (over the last 18%, not including dividends).

Also, most of the time people TOTALLY ignore ā€œsurvivor-ship biasā€ while talking about very long term holding (very long term meaning 15-20 years plus).

For every company that their father or grandfather held that ended up becoming a HUL or RIL or LnT or MnM or Maruti, there will be 10 companies that ended up becoming a RCOM or Suzlon or Videocon.

I am stating these facts and figures to just put things in perspective.


(Growth_without Debt) #297

Donald - Kindly update your post with re-adjustment done during this down cycle. What should be oneā€™s strategy during this time when mid/small cap corrected significantly.
You are our GURU, kindly share your thoughts please.


(Investor_No_1) #299

For almost a decade, it went nowhere until 2009 and then gave excellent returns next decade. Amazing you held on for the first decade. Just curious if you would have held it for a decade with no returns if it was not coming from previous generation and instead you had bought it yourself? Thanks


(Investor_No_1) #300

Someone, I think WB saidā€¦Time is best friend of good companies and biggest enemy of bad onesā€¦I dont think an HUL guy would buy RCOM in same proportions if he knows what he is doingā€¦but true as minority investors we never know what can happen to HUL alsoā€¦there are so many ways a company, a management, a balance sheet, a country, a parent company, a business model can fall apartā€¦we will know only once that happens, if that happens


(Investor_No_1) #301

One of the most difficult thing to do. You need immense discipline and clarity of thought to do this right. Can you pls elaborate your thought process how you achieved this? Which stocks (not the names but like say the top 3 or bottom 3 etc.) you sold, how much you sold and why you chose those stocks and not others in your portfolioā€¦because i think anyone can buy and earn good in medium term, it is selling or holding what defines great investors. Thanks


(KKP_Investor) #303

Buying started in 1954 and cost in 1991 was Rs2.91 and remember it was a 100 rupee share. So, fluctuations did not matter. Cost did not matter. Price did not matter. All that mattered was the dividends.

Holding good companies that go up in the 1000% to 10000% range pays for tons of Satyams, RCOMs, Ispatā€™s. It is REALLY HARD to do this with a Demat Account, Logging into Demat daily, and also seeing green going up in Decā€™2017 to Marā€™2018.

Remember HUL may come down to Rs1000, and if you knew that today, what would you do? If you can be true to yourself and answer this question holding a good chunk, then you have discovered yourself!

Finally, ask yourself if you are buying L&T Finance for them to loan thousands to millions of people, and then make the arbitrage of the rates from those loans, or are you buying a stock. I am switching stocks here cause I want to ask each of you to think what you are buying >>>>>>> A Loan Business or a Stock with Symbol LTFIN? If you are doing the latter, then at 250% gains (I am sitting on this right now), will you sell? Or will you hold for 400% and 500% for another 1-2-3 years.

Just some thoughtsā€¦There is no right way or wrong way to make money, but at the end, are you producing ā€˜wealthā€™?

KKP


(KKP_Investor) #304

Regardless of the options to buy or sell using physical shares, there were traders, investors and also patient Buy and Hold people. Today, it is hard to find these kinds of people who agree with Mr Agrawal that 10 years is called ā€˜short termā€™.

To your point, holding good companies that give bonus after bonus after bonus and in your portfolio go up in the 1000% to 10000% range pays for tons of Satyams, RCOMs, Ispatā€™s and Videocons. These same investors did have them also.

Also, if you ONLY bought 100shares of Dr Reddy at Rs10 and 150 Rights at Rs25 in 1980ā€™s, it would be worth Rs47L in 2007. It was a statistic given in the AR meeting for Dr Reddy. How many Satyams are built into that profit? But, can you hold Dr Reddy from 1988 to 2007? Are you holding it today after a fall from Rs3400 to Rs1800? I am and I will for another 10 years unless something really really drastic changes.

KKP


(KKP_Investor) #305

1st Trading Day in Janā€™2000 was Rs230 (MC.com) and today July-2018 at Rs1686 looks to be 633.04% return, plus Dividends is a pretty good return.

RIL has done the same thing if you do the LT since I get a lot of people asking me why I donā€™t get tired of no-performance, so I do this HW for them. RIL was Rs62.93 on Jan 1st,2000 and now it is Rs1120. 1679% Gain + Dividends. Not as good as HUL.

Both the above include the carnage in 2001-02 and 2008-09.

Here is my learning in the marketsā€¦Large Caps are like Dino-Elephants. They move like a Huge Ship, and then when they start to coast, while they need to refuel, they will slow down and test the patience of the weaker holders. Then, they will gather steam and take off again.

RIL and HUL will go through this ā€˜testing phase soonā€™. That is why I am asking, what will you do (avg investor), if you know that HUL is going to Rs1100 or RIL is going to Rs950 (just random numbers). Be true to yourself.

I am not recommending HUL or RIL or any stock hereā€¦Just think about the methodology so when you little one become much older, and says ā€œPapa papa, aap to stock market mein 25 saal se invest karte aaya hain. Kya hua?ā€ Just kiddinā€¦

Please take the last comment lightly, but I am planning to answer that question for sure. No one will ask what was your CAGR for 5, 10, 15, 20, 25 years! No one that cares for you will do so. Competition will.

KKP


(Investor_No_1) #306

Thanks, is there a way to put multiple quotes in single message, as I wanted to quote and reply in one message, If yes, I will follow that. thanks


(Investor_No_1) #307

Interesting, incidentally L&T Fin is my largest holding since almost IPO times. The only reason I sometimes get jitters is because of the nature of the NBFC business. I will be least worried if my HUL is down by 30% but if an NBFC is down by 30%, it will make me think more, if fundamentals are right or notā€¦thats what I had been doing last 6 months when my largest holding fell 35% from peak, glad I did not sell a single share as I found nothing wrong in fundamentals, infact improvement in fundamentals.


(Investor_No_1) #308

Sometimes, I feel 2000 and before or even 2005 and before was a long term holderā€™s stock picking paradise as so many good names, solid well known companies were available at decent valuationsā€¦but now it is really hard to find such companies at decent valuations (Pls correct me if wrong and if all these companies were richly valued and difficult to buy back then as well). Like for eg. today I would think ok HUL is 3 lakh cr mcap and richly valuedā€¦should I buy it or say Godrej consumer or britannia at lower mcap and growing fasterā€¦I would not have thought like this 20 years beforeā€¦Incidentally, all three are excellent companies but this may not always be the caseā€¦a lovable can never be a pageā€¦


(Investor_No_1) #310

With all due respect to you, it is you who thinks that these discussions do not carry value. Investing is not only about numbers, it is a lot about psychology and learning from generations, learning globally. Are you moderator of VP? I think what @kkpatel1924 mentioned above instills lot of confidence in holding the true winnersā€¦and not getting jittery and holding cheap low management multibaggersā€¦I am sure one cannot imagine the dividends HUL holders might be gettingā€¦much more than 100 baggers of many peopleā€¦and sorry to say in moneycontrol tips are given and not such broad minded discussions are held


(KKP_Investor) #311

Well, like any other loan based entity, there is always be an element of losses and it is usually built into the equation. We WILL have quarters of unusual losses with each of these loan based companies, but knowing that this is L&T and it is reputation, we should be OK with it. I am holding a good size position also, but will hold onto it since India is SO NEW at loans, but with the huge middle class and also the 16 to 35 year generation coming up (330M), we will see that everyone wants things ā€˜nowā€™ and the loan industry will make things happen just like the USA.

US currently has furniture on rent, furniture sold with no payments till 2021, and leasing cars galoreā€¦It is all on some elseā€™s dime, but there is a loan company making boo-koo-bucks doing this also in the US behind these businesses.

Same model, just more people, but also more companies. The latest ad on WhatsApp rotating around is ā€œGet Married by taking out a Loanā€ from Bajaj Finserve. Oh well, if they can find one customer to do this, it will be a business model that will flourish!

No doubt, keep the low beta stocks in your portfolio also, to balance the higher SD in L&TFin type of situations.

KKP


(KKP_Investor) #312

All the folks younger than me has the same argumentā€¦I cannot find companies at Rs10 par and there is no reason to stay invested in them for 5, 10, 20 years.

Business is Business. It has not changed. Yes, it has become disruptive. So, invest in companies that are creating the disruption to disrupt others. RIL is a great example. How many believed in them when they were in the dumpers at Rs800, and by the way that was one bonus ago? Jio had just come out, and everyone was questioning it. Since Jio has been out, it went from Rs800 + 1 for 1 + Rs1120 now. Life time Jio free kaar diya.

Of course, history lessons are good, but they are also good today. INVEST. Donā€™t digress from this. INVEST. Then play with some % of the money for trading, micro-caps etc. Leave things alone for L&TFin to give loans, HUL to sell biscuits, ITC to sell cigarettes, L&T to build things, Dr Reddy to replicate meds, Siemens/ABB to import Germany to India, and above all have faith in dumpers like Tata Motors also. It takes ā€œfaith, conviction, and patienceā€, but this is not common today. We donā€™t like an app, delete and get a new one. For an App it is OK, but not for a ā€˜silent partnership in a businessā€™. Think if you open a Coffee Shop or got a Starbuck / McD franchise. Would you give up if you have 2-3 years of bad environment?

Sorry for a bit of ā€˜wiseā€™ statements, but, just trying to helpā€¦I am new to ValuePickr and a good friend of mine introduced me to it a couple years ago, but was no active in searching/reading/finding, and I am liking how the email updates come and show the updates/replies. Good forum.

KKP


(KKP_Investor) #313

Sounds good. Apologies. This might be my 10th or 15th message on VP and enjoying the discussion, but will make sure it is focused, short and not in any excess quantity. Thanks.

KKP