Like some have mentioned before, yes it’s time for ValuePickr Scorecard update, last updated in Dec 2012. Its updated every 6 months, so June 2013 the next edition is due.
Doing some thinking aloud and inviting a lil’ bit of discussion before Admin polls senior ValuePickrs and comes out with the next edition of ValuePickr Scorecard.
At ValuePickr we have always been advised to differentiate between our best picks. We did not want a 10 stock Portfolio, with a safe & typical 10% each allocation. In 2011, we published ValuePickr Capital Allocation framework (a work-in-progress) which for the first time gave us some practical, easy to follow guidelines. High Conviction with High Undervaluation - implied High allocation. If any of the two is Medium, allocation could only be Medium. But of both Conviction and Undervaluation was minimum - allocation had to be only nibbling.
Yes, this is a more aggressive investment/allocation strategy. But it was advised primarily for the reason that at ValuePickr we do extensive in-depth research, where sometimes our insights into the business & sustainability of competitive advantage is of a high order, with scores of folks tracking new developments/commenting on the same - Conviction sometimes is High, and when that couples High Undervaluation, it’s time to strike. Certainly this is not for everybody, surely NOT advisable for passive investors (who can’t/don’t spend much time analysing businesses).
Following this allocation framework, I must say has come in very handy for me. It has brought in lot of discipline ( & hence clarity) in how we think of Business Quality; understand better why Mr Market may allocate higher ratings for for one business but not to another (nevermind that financial metrics are actually better in the latter). Importantly this allowed us to slot businesses in different grades - and as Hitesh is fond of saying - learn to ride these businesses differently.
In thisMayur thread, we had argued back in Sep 2012 when Valuations had stretched to 12x+, that time had come to allocate away some capital to other deserving (on one hand the growth picture for Mayur Uniquoters had moderated, and on the other Valuations had completely caught up - it was difficult to see a consistent ~15x+ for Mayur). Arguments were made in favour of Astral Polytechnik and Kaveri Seeds (where growth was intact & likely to go higher).
Think that was a very timely & engaging discussion we had. Both Astral & Kaveri Seed calls are playing out. Which existing businesses (in the ValuePickr Portfolio) currently call for more Capital allocation? And are there any strong contenders that you think should make a maiden entry into ValuePickr Portfolio?
My vote would go to Kaveri Seed for more allocation (till say ~1450-1500) in Long-Term Portfolio. (Will defend this shortly in the Kaveri Seed thread). Canfin Housing and Finolex are study-in-progress contenders for Short-term Portfolio. Unichem I must finally sit with - was told is it languishing at trailing 10x, why?