Update on my stock selection,I’ve reduced my allocation to cupid from 50% to 0% as I feel the risk of such small cap stock doesn’t justified the return I’ll be making.
This is my current portfolio as on 22/04/18
Indo Count Inds. 35.11%
Accelya Kale Solutions 19.23%
Capital Trust 17.87%
Ajanta Pharma 16.57%
L&T Infotech 11.25%
Cupid - Product may get obsolete ?? Care to explain ?
It pains me to see such naivety on your part however I don’t blame you. At 21 good decision to invest but invest only in blue chips as of now (for you market cap should be greater than 2L crore) and try to develop understanding of businesses. The research houses you spoke about produce retail research and their quality of research is a joke.
After maybe 4-5 years of hard work and development of your mental faculties in such matters, you should think about investing in such high risk small caps. I would also recommend not spending much time on this forum and spend the same on reading books and getting yourself good quality education which can also help you in your family business or job.
And finally don’t seek answers from others, try to first understand the laws and workings of a business rather than sprinkling money on stocks recommended by third grade brokers.
And most businesses you have mentioned here are fairly untested and would loose 80% or more of their market cap in a downturn or bear market - remember you can’t play international cricket unless you first play Ranji well - so first start with basics, invest in blue chips and figure it out. All the best.
I thank you your advice. However I respectfully disagree.
Yes, I know that I should do my own research and and not follow the research houses as their work is a joke. My investment decision was done prior to the the research houses and their recommendation meant that my research was correct and more demand for the stock and hence stock price rise.
I again disagree with you on the fact to concentrate on my research bluechip stocks. ITC was once a small cap stocks in the 20th Century. How many of us would have predicted ITC to turn from a small cap to a large cap stock. At my age, certain risk has to be taken where most money is to be made in small-mid cap rather than large caps. Anyone can invest in companies like Britannia or HDFC. But then again,why should I spend my time in researching such well known companies when I could easily buy a diversified mutual fund and not bother about the market conditions.
An advice for an Average investor is to not be average. That means invest in potentially good companies where no one has thought about investing. That means even investing in potentially untested companies.
Ultimately the fact remains, ROE,ROCE matters the most ( & buying the company at reasonable valuation as well) rather than understanding the core of the business.
This is very risky portfolio, you might loose heavily in case of a downturn
So what happened, after all your research into Cupid and no change in fundamentals whatsoever in the last 6 months, why did you sell out?
Every company was once tiny, but for every company like ITC today, there are 5000 companies that died along the way.
Personally, you seem to be investing based on generic principles that could apply to any company or sector. You need to make a bit more effort to understand businesses and how the market perceives them. L&T Infotech may look really cheap and show high ROE, but it really may not give you any returns at all. Let’s say it actually doesn’t give you any returns, how will you dissect that? How did you dissect Cupid and sell half your portfolio?
The process matters more than the end result, most of the time.
1)Well,the promoter of the company Garg transferred his shares to his wife.
2)Moreover I meet some of the doctors and found out that female condoms aren’t going to be so popular,since its very inconvenient.
No succession planning, and they don’t have a CEO yet.
My guess was this company would be bought by big players or QIP,that didn’t happen.
Being a small cap company of just 300 Cr,I didn’t want to take such huge risk. I bought it around Rs 100 and sold it at 295 Rs.
Well, I follow pat Dorsey’s book of “five rules of investing”.If you have even read that book you’ll understand that your statement makes sense. So you could say that he believes that ultimately a good ROE,ROCE is important. Not that understanding the core of business isn’t,but its not that important.
How many of the employees of suzlon bought suzlon stocks because it was the next big thing. They knew the core of the business,they knew the working.The market went gaga over suzlon. Now where are those people now. My friend(suzlon employee) lost serious money just because he thought renewable energy was the next big thing
Ok this is really lame statement. The whole process of investing is buy low and sell high. Maybe you’re a growth investor and I can understand that you keep running behind high PE growth stocks which will be “the next big thing” for the market. Yeah no,good example I can give is Suzlon.
See,every industry has its cyclic phase. And I am very much assured that IT sector will follow a bubble. 5,10,15 years? Who knows. But even so their EPS growth will surely see a increase in stock price. If not they have a dividend yield of 3%(according to my stock purchase).
If you look at my portfolio. I have a mixture of
50% growth stock
50% value stock
as well as
50% small cap
50% mid cap stocks.
This is the a diversified portfolio.
Okay Shubham, you seem to already have your investing career sorted at 21. Don’t understand why you are here then.
@shubhams95 I went through your thread and read through your response to each and every suggestions by well meaning boarders. I get the feeling that you have a bias to your own opinion and I will not blame you for that as you have youthful exuberance and more than average exposure to the market for your age. I must congratulate for the progress that you have made. Only if one approaches the market with open mind and try to understand other views; if not give some time to think about it(since your replies are coming so fast I get the feeling that you are not giving much thought to it) I am not trying to put you down. Probably I would have done the same thing if I had disposable substantial money at 21 years with hardly any cares of this world! To be frank your portfolio looks like a pf of a market veteran of 20+ years experience who is absolutely sure of what he is doing. I hope you will take this in the right spirit. As it is said “only if one is able to empty himself he will be able to fill it with ideas”
Actually this is something every investor has. How many investor actually thought of buying credit default swaps before the huge crisis. These investors were termed supid and foolish investor. Now have a look at these people, enjoying their retirement.
If I’ve offended any investors then apologies for the same. I’m just trying to defend my stock picks. And with the rupees appreciation,the market is going south on my export companies. I get it,it’s just a temporary phase but it’s really irritating to see that there is no logic and market is going haywire .
@shubhams95 market is teaching you Patience which is the most important lesson I am learning even after a decade in the market!
Yes, you are right. Return on Equity is important but along with it growth rates (sustainable) are important too. For example refer the following equation.
Sustainable Growth Rate = Return On Equity * ( 1 - Dividend payout ratio )
That means if payout ratio is high then Growth Rates would be lower. High payout ratio would also mean that company is not finding enough opportunities to reinvest the capital.
In case of LTI, you might have observed that historical payout ratios are higher and growth rates are lower though Return on Equity is very high > 30%. So my only suggestion would be not to see these figures in isolation but co relate with other data points.
Very interesting point. thanks for that.
Actually my logic was I wanted a good known company which would pay a good dividend. It was part of value investing.
And since the stock was cheap,it was a good bargain.
In my experience buying sustainable high growth companies with decent ROE, ROIC rewards you in the long term. ROE, ROIC are good as a cutoff but too high ratios means book value may not be priced at market. Also competition will anyway erode high ROEs eventually.
Valuation multiples like P/E and P/B are not that important as market in general efficient. If you end up buying overvalued high growth stocks you may loose profits of 1 or 2 years. But in long term it will still reward you handsomely.
Financials and Consumer space provides most sustainable growth ideas and midcaps are always preferred for long term growth.
DCB, RBL, Federal in pvt banks
Pnb housing, Canfin, Repco and DHFL in housing
Capital first, L&T finance in NBFC
Ujjivan, Satin, Equitas in Microfinance
dmart, Thyrocare, Future consumer are good option in consumer space. Valuation are probably too high in consumer space right now, but these should be great buy on market correction.
Hi @Alphin, Request you to explain how products of Cupid has obsolescence risk.
Till date Cupid products have not been mass adopted. They are mostly sustained by government orders. In order for a product to sustain there should be a demand from the consumer which is not there at present for Cupid.
In case of contraceptives there are many convienient choices available for females. Cupid forms only one of the possible options which is not as convienient for females. The only positive for it is that it is very effective to prevent transmission of STD. That is the reason for government and NGO demand. In future if a more convenient solution to prevent STD ( e.g tablet, gel etc ) is developed government will stop funding to this and divert funds to the new product. Hence risk of getting obselete. Without government orders the demand will be drastically low.
let us know if there is a shift in your portfolio from the earlier allocations. having went through the discussions, wanted to understand if there is statusquo or othewise… and the rational … this is in the best interest for all the readers here.
I had recently sold off capital trust, reducing my portfolio to just 4 stocks.
The reason for the selloff is not only capital trust fired its CFO the second time, but it also posted it’s first loss for the financial year, probably due to demonetization. I have a feeling that the management might be having internal clashes amongs themselves and it is wise to exit the stock.
Indo count had a bad result and serverly impacted my portfolio. However, the management is confident about their future endeavor and the scalability of the business is huge.
Honestly the indian market is highly overvalued and it is getting difficult to buy great companies at reasonable valuation and I’m getting a feeling of market correction/crash in the near future.