Susindar Portfolio: help please!

Hi Sarvesh. Thanks for taking the time to send a detailed message. This has increased my conviction on how useful such a forum is for investors like me.

While I appear to be a novice, I have been investing for more than 10 years now but with much more limited funds. I have been through the last financial crisis, had the conviction to hold on to my stocks and sold in 2015 for more than double my investment which may only be a little better than bank interest. I am happy that I did not panic sell and loose my pants during the time although I regret not investing more (due to lack of funds). I also had to take out the money to invest in a house in 2015. During this time I have learnt the lesson of risks involved in equity investing. However I am still prone to mistakes retail investors make such as running after returns disregarding risks and buying and selling at wrong time while all I want to be is a long term passive investor who can beat the market both on upside and the downside with more than 15% return. This is where I am hoping my post in this forum would help me to fine tune my investment with the collective wisdom of other forum members.

Yes, I did ask for stock tips from strangers as it is becoming increasingly harder to find good stocks at decent valuations. I will also do my own due diligence before investing. For example a boarder mentioned ITC, Nestle which although great stocks I would not invest due to extremely rich valuations.

Also, about my risk profile, I have invested a little less than 20% of my personal worth in equity. I also hold real estate, debt fund, pension fund in mutual fund and gold like most other conservative investor. So I can afford to loose what I have put in equity in the worst case scenario which I hope does not happen.

I am averse to investing in mutual fund as they have their own risks who tend to take more risk to beat their competition and shave off a good percent of returns on fees. I am more comfortable managing my own money where possible.

You have mentioned to grow in my field in your post. For some reason, I have had a passion for equity investments for the last 12 years. I blame this (or attribute to depending on whether I succeed eventually) on Rich Dad Poor Dad and Warren Buffett. This is to the extent of changing my profession to finance after getting campus placed as a software engineer.

My aim is to achieve true financial stability with multiple sources of income rather than to merely follow most other middle class and achieve a single source of pension which may not be enough to cover emergencies. I believe merely investing in mutual fund who most of the times mimic the index funds with more than 50 stocks will not take me to financial stability.

I would be happier to have tried this, burnt my fingers, tried harder and at least partially succeed than to have not tried at all and invest in mutual fund.

I agree with you that equity investing is not for people who do not have time to dedicate and learn. I also agree with you that my portfolio is nowhere near perfect. I am committed to learn and grow in the investors community. Any pointers in this regard will be much appreciated such as book suggestions or stock screener tips.

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Hi Sarvesh

It will also be helpful if you can mention what you think are wrong with my current portfolio (besides the obvious of no diversification) which will greatly help me to learn and grow.

Thanks in advance

I blame this (or attribute to depending on whether I succeed eventually) on Rich Dad Poor Dad and Warren Buffett. This is to the extent of changing my profession to finance after getting campus placed as a software engineer.

Please note Rich Dad is a self help book, it motivates you as many others. Beyond that it can be dangerous. You read Robert Kiyosaki other books like on investment. You will realise he doesn’t make sense anywhere when it comes to specific. Either he doesn’t want to disclose or perhaps what worked for him just difficult to mimic.

My aim is to achieve true financial stability with multiple sources of income rather than to merely follow most other middle class and achieve a single source of pension which may not be enough to cover emergencies. I believe merely investing in mutual fund who most of the times mimic the index funds with more than 50 stocks will not take me to financial stability.

There are few quadrant, I am sure you would have got a idea from same Robert Kiyosaki’s Cash Flow Quadrant. A few readings wealth value chain would help further. One quadrant or even subset takes up entire life.
Coming from an financial institution I won’t say mutual funds/AMC mimic index funds. Index funds/ETF may be one instrument . There are dedicated teams to understand thematic investments, bottom up etc. If some one think we are smarter and intelligent than fund manager then re-think. We as individual have certain advantages over them, not due to we are more intelligent than them but entry/exit timing, position size, risk management etc. And as pointed out earlier these are life time lessons.Even 59 stock wizards interviewed by Jack Schwager wiped out more than once in life.

There are lots of people covered books and suggestions in this forum. I have been writing on various subjects relentlessly, please feel free to rectify me and ask questions if any.

As a co-incidence I met few yesterday even in Airport who are gung ho on stock markets. I wrote something or shared yes day. Caution ahead!

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Hi red2red,

I hope you did not intend to mean your returns by your nickname :stuck_out_tongue:

I am no where near our other boarders when it comes to investing in equities. So please do take my 2 cents with a pinch of salt.

I have prepared a list of don’ts when it comes to investing with my limited experience in stock market. This could give you the reason why I do not invest in some of the stocks although I myself do not follow this all the time!

  1. never invest in PSUs. Chances are high that the stock is a dud more than a star. Following could be the reason. Lethargy of management, lack of accountability, government high handedness ( profit is not governments aim), cooking the books like no tomorrow (upper management in a government organization tend to work in terms. So it is easier for them to brush under carpet and act all is good until their term expires rather to answer difficult questions). Also what government pays do not attract best talents. PNB Housing, PTC financial services are quasi government organizations. Example are SBI vs new age private sector banks, l&t vs BHEL etc, not to forget Air India, BSNL and MTNL. Also nobody knows what’s under the closet of REC and Power Finance. I have heard 30% NPAs. Safest bet is to stay away.

  2. Never overpay. The metric I use is PE as I am not very sophisticated in this regard. There is a risk of loosing out on turnaround stories. There is also the risk of value trap. PE I am comfortable with is 15 although recently I have extended up to 25 for Capital First.

  3. never invest in high tech companies. Chances are more that a superior tech make yours obsolete. Nokia comes to mind. Maybe Tulip IT.

  4. never invest in sectors that have high investment requirements all the time. Chances are high that they fall in a debt trap. Telecom sector and partly Infra.

  5. never invest in the most fancied sector of the time. Real estate an Infra before financial crisis comes to mind. Chances are more that some are fly by night operators and some cannot cope with the tide turning. Remember tide always turns. I am a bit afraid that housing finance might fall under that category now although I invested only in lower valued stocks.

  6. never invest in stocks that promise the heaven. Embarrassingly Pyramid Saimira comes to mind.

  7. never invest in small cap stocks without a Moat. IMP transformers and paramount communication comes to mind. I am not good at identifying MOAT and hence I generally stay away from small caps.

  8. finally beware of debt fueled growth stocks. When things do not turn out as planned they fall under a debt trap. Power sector and steel sector currently. Also stocks like Suzlon, JP Group, GMR Group and GVK Group comes to mind.

That finally leaves with very few sectors like IT, Pharmacy, Financials, Banks, Media(? Deccan Chronicle comes to mind), Education (a dozen duds comes to mind like Core, MT Educare etc) Petrochemical ( except Reliance not much private sector options), retail and consumer durables (good luck finding value picks).

That left me with banks, financials, IT and Pharmacy.

I also have 10 valuation metrics to screen stocks further (happy to share if you like).

I did not invest in PNB Housing Finance for the following reasons:

  1. being a quasi-PSU. Although, I invested in Canfin homes below Rs2000
  2. being in the highly fancied housing finance sector
    3)extremely high valuations at PE of 40
  3. lack of historical information being a recently listed IPO
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High PE has become synonymous with overpaying and Low PE has become synonymous with underpaying. Only under certain circumstances that is true. In my opinion & experience , investing in low PE stocks is far more risky.

There are many stock ideas on the forum. Kindly avoid the usage of the word “stock tips” & if possible delete it from your original post.

Thanks
Bheeshma

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:grinning: I did not notice the meaning of my nick name with respect to stock market. When I started to invest 2 years back, while creating a moneycontrol ID to maintain portfolio, it was a small user name with both alphabets and numbers which I just kept by chance. Now , after your comment , I am wondering is it one of the reason for my portfolio not going up much , eventhough it is in green… lol.:grinning: . Anyway , now i changed my profile in moneycontrol and mmb to red2green; however I am not able to change it in valuepickr.

Kindly share your 10 valuation metrics to pramodram@gmail.com

Any comments by you or other boarders regarding the weightage of financial sectors to keep around 28% as in SENSEX.?

Hi Bheeshma

Thanks for your suggestion. I have edited the word stock tips from my initial post. Regarding valuation metrics, I only know P/B other than PE which i feel is totally vague in Indian context. For example Warren Buffett buys stocks close to book value. But in India stock prices are easily multiple times book. What valuation metrics do you use?

Thanks TCC. After reading your post I am more wary of playing in the stock market. But my intention is never to play. Buy a good business, hold it for years, watch it grow and reap the benefits. Of course it’s much easier said than done. I am not a zen investor, just a little better than butterfly fingers.

I am probably not prepared for another stock market melt down. My problem is short memory ie not learning from prior mistakes. I will reduce my holding in stocks and increase other asset classes. What do you think is correct equity proportion for retail investors?

After reading your post I badly want to edit my profile to remove semi-retirement by 40. But I am unable to edit! Such a cliche.

What do you think is correct equity proportion for retail investors?

If you read under same thread, ‘My investing journey’ I never hold any
other asset class. I still believe one asset class can create life changing
impact, experienced that as well. The belief drawn from premise that one
has to understand a particular asset class, practice them and rectify
methods again and again. I still remember a quote from Bruce Lee. ‘I am not
scared of those who are practicing 10000 kicks every day. I am scared of
those who practice one kick 10000 times.’

My approach may be unconventional, I have written 2 posts dedicated to
Personal Financial Planning under thread ’ Guru Mantra Series’. Position
size, risk management let me cover post my workshop here.

My/others intent is not to discourage you from equity but alerting you with
pitfalls and requirement so that you become more stronger. I don’t want to
repeat, but if you want to do something you can do it. Don’t even care if
some one says it’s not possible. But tricks and methods are part of
feedback loop.It will work like catalyst to your beliefs, confidence and
fine tune process of hard working!

Good luck.

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Thanks TCC. I was indeed confused a bit by your post. It is true that I am very determined to make it as an equity investor. It is also true that I cannot dedicate 100% at least for now as I have a full time job. What I can do is dedicate at least 20 hours a week, learn and grow. In the mean time invest only a part of my portfolio (less than 30%) to limit downside until I am confident to take the leap! This forum is an ocean of resources which really helps people at my stage of equity investing.

Refer below for my stock screener

10 factors and 10 points each.

  1. Historic growth (past 5 and 10 year sales and profit growth)
  2. Forward PE
  3. Dividend yield
  4. Debt/equity for non-financial and CAR for financial
  5. Return on equity
  6. Growth prospect
  7. Cash flow for non-financial and GNPA/NNPA for financial
  8. Size (Market cap)
  9. MOAT 2 points each (top player / quality / large addressable market / highly recognizable brand name / low cost advantage)
  10. Corporate governance

You just need to set some variables with this screener that you are comfortable with. For example in PE, I have set as 40+ = 1 point 35+ = 2 30+ = 3 25+= 4 20+ = 5 15+= 7 10+ = 10 5+= 8 <5=2 no PE=0

Once you set this most of the emotional variables are taken care of. Only emotional item is corporate governance which you can set as per your conviction.

I have attached a screenshot of this screener and a few examples in my portfolio.

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Hi Pramod
I personally think we do not have to mimic index weightage as we would be better off buying index funds which contains top player in each sector.

Investing is mostly about the price we pay and growth opportunities for the stock. While a well diversified portfolio will help in preventing downside we should also be wary of diversifying too much. Per Buffet’s principle, a portfolio of 8 to 10 stocks is good for a retail investor as it is easier to track.

Regarding sectoral weightage, probably the most important criteria is whether we understand the sector. Even Buffett never invested in Technology stocks as he did not understand it. Ideally 3 sectors and 8 to 10 stocks would do for me.

His post was well intentioned and true that equity investing is very risky. But it is at times wrong to have never tried at all than to have tried and failed. Like Will Smith said “Bliss is on the other side of fear”. It is up to us to decide whether to take the leap. :+1:t4:

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Possibly you would consider to tone down the first line. Subjective discussions have different perspectives, always better to have different feedback loops.

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Here is an update of my portfolio.

Listened to esteemed forum members and started looking beyond PE for valuation and hence added RBL Bank and PNB Housing Finance. Reduced exposure to top holdings as portfolio was getting too concentrated. Also attempting to catch them young with Arman Financial (thanks to forum members).

Still guilty of sector concentration as I am unable to find value in most sectors. My rationale is it is better to get a company at 30% growth rate where the sector is growing at 20% than to buy a company at 10% growth rate where the sector is not growing (IT and Pharma).

Seriously considering to enter L&T infotech, Natco and IRB for portfolio diversification. Waiting for the right valuation.

Comments are invited.

This observation is not for you specifically, but as you have an appetite to respect our unsolicited advices perhaps one more time sir.

A steroid discussion on portfolio or a stock name is perhaps the most seductive part of network effect like online forum. It stems from research report, the folklore about multibaggers etc. I was no different perhaps still no different, still would pin down few stickers. Here they are:

  1. How many people you come across talks about an individual stock or portfolio who has survived a bear market? In Indian context if some one started around 2005/2006, beaten down in 2008/2009, you will see them reluctant like a contract post to discuss about stocks. The reason is not revealing secrecy but they have realised subject is far more complex than a name. Then a prolonged period of frustration before recovery of market cycle. If we agree they don’t discuss (in my interaction most of them shy away) , to avoid bad behavioural finance. This requires elaboration which will be voluminous, my request if you not covered some readings of it will help you in this context.
  2. There are three (3) decisions one need to take in a place of probability like stock market. One is what to buy, second is when to buy and third is when to sell. All three decisions are ingrained to investment philosophy, before it sounds rhetoric preaching in simple words like two finger prints two investment philosophies can not be alike.
  3. Stock name or a discussion is the easiest way of seduction by institution (they are the one controls demand supply, not sure how many are even aware of) is throwing a dart/stone or a stock name. And then build stories as per their philosophy like if you are a mutual fund house they call SP is a relationship (I haven’t seen bigotry bigger than this in recent time), if you are a equity advisory they will use CAGR (CAGR is good, but from where to where, stock moves from 3 to 3000- how many really enjoyed 1000 times)?

In my view what really can be fine tuned is process of investment which would be:

A. Investment document-20% (business understanding, management overview, valuation, special situations, catalyst)
B. Investment execution-40% (risk management, position size, metrics, crowd foot print etc)
C. Behavioural finance- 40% (there is no single jacket here, not even collar; of course the neural science and fractal remains same for everyone but incredibly diversified in application).

May I suggest you, let us have a investment document, or risk management with scrambled data (for privacy). Trust me this will accelerate your compounding, I was not comfortable doing with a group so I chose a mentor. He reviews every metrics every month like a teacher and I get scared always before meeting. Doesn’t matter its Bandra West or New BEL Road.

Good wishes and happy Diwali all.

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I normally give 20% weightage to future growth [ the RUNWAY ] and 5% to the historical performance , else you might miss some good stories .

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I give equal weightage of 10% because future growth is not guaranteed. when management have proven in the past 5 or 10 years with good growth performance, the likelihood is higher that the management will be able to deliver in the next ten years too. This is just to weed out incompetent management who promise the moon but deliver nothing.

Otherwise, the most important criteria for an investor’s point of view is EPS growth rate.

I would like to thank all valuepickr members for helping me in my investment journey and grow as an investor. Over the last two years I have immensely grown as an investor although unknown is still the ocean.

Without valuepickr I would have struck in an infinite loop of first order thinking (ie struck in valuation forever such as PE, DCF, PB etc). Valuepickr members have taught me to go beyond valuation to the second order thinking (ie quality of earnings or the moat of the business). I think I am somewhere between first and second order thinking as an investor now. I am pretty sure that I can learn much more from seasoned investors and one day be able to achieve third order thinking (ie ability to invest based on a high level conviction of future events).

I fully exited the stock market some four months back with a YTD loss of 15% (which is luckily not bad considering the 37% YTD fall in small caps comparable to my holdings). I did this as I was too hooked to the market and started trading very frequently with both positive and negative outcomes. But I lost my ability to think as a long term value investor. I am reentering the market as I can see some value emerging.

I am posting below an update of my portfolio. Views are invited.