Thank you. Very painful lesson to learn. Your example is a case where conviction is too strong, a good argument for a little diversification and skepticism.
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Here is a fantastic read on the same context.
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Hi,
Discussions in this thread are very useful.
There are ample examples around me in office where I work, where people start investing with just 4-5 stocks since they have less sum to invest which is all right to begin with but when your investment amount slowly becomes larger and cross certain threshold, then protecting capital and minimizing risk becomes equally important apart from growing money at 20% CAGR or more.
I know some of my friends holding overvalued stocks because those are given to them as stock options where they work, and then one bad quarter, and stock price corrected by 30% and later by another 20% in few months, has reduced the size of their portfolio of 5-6 stocks by huge amount.
So thumb rule in my style of investing is - keep a diversified portfolio of 15-20 stocks, and based on conviction I can invest 3% to 6% in one story, but generally caps the max % of one stock in portfolio to 12% ideally in such case. Such diversified portfolio also has another advantage. I can start position with just 2% also, and that becomes 9%-10% in few years if it generates 400% returns ahead of other stocks. If the price is slightly high than my comfort zone or conviction is less, I have liberty to start position with just 2%-3% as well, and if it performs better ahead of my expectations, position becomes big. Concentrated portfolio on other hand may not allow you to take such small position.
There are many ways of investment style and you must have a process and should stick to the process.
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Thanks for explaining your strategy in portfolio build up. My strategy is also exactly the same. My pf evolved over a period of 10years into 17 stocks; not by design but by default!!
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Hi @ayushmit sir,
Do you track Ajmera realty? It’s around 10 PE trailing, good dividend paying co which is delivering good results, coming quarters should be even more better. It’s the co with lowest D/E among real estate.
Thanks,
T Bhargav Kartik
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No. Will check and contribute on the respective thread, if i have something to add. Thanks.
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Hi Ayush,
Thank you for sharing the deck and for providing response to the above queries. Good to get insights in your approach to diversified investing.
Got couple of questions:
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Curious to know more about this VP Chintan Baithak. What is the main purpose? Is it annual event? Who are the participants/audience? Is it attended by invitees only? Please respond, if you can.
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What is the main goal of this long tail approach with 25-30% of the portfolio? To make extra annual 1-3% OR to learn about new businesses/industries/trends/market behavior, etc as you remain active with this allocation?
Thanks,
Amit
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@ayushmit - thank you ayush bhai. it was a very nice presentation and lot to learn from you. you’re doing fantastic job. I love screener as well. keep doing good work.
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A pertinent question in forming portfolios - Concentrated vs Diversified
Ayush is following the right strategy instinctively which is right for novices like us, who want to learn from this forum and select Stocks.
.
VP’s strength is in identifying Infants who become Giants.
Now the sheer idea that we are making a nursery with seedlings means that there could be many casualties, despite their superior health indications (Financials), Good Parenting (Management), Excellent weather conditions ( Business opportunity).
We are not qualified Plant Biologists having superior knowledge, expertise or enough experience in identifying " THE RIGHT ONEs ".( even they would hesitate)
Things can reverse in no time, killing most of them but others who survive have the potential to become Giants (Multibaggers) .
So water your growing plants, starve the wilted ones and go on adding many more to the Nursery.
The realization that we don’t know lot of variables and also that we may have missed some of the Known’s and there are also Known - Unknowns & Unknown - Unknowns, should help in keeping us cautious to only Stumble where others get Killed.
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Nice Presentation and some good things to learn from it…Thank you
Request your thoughts on selling as the same is not discussed much, and I have realized is more difficult decision. Thanks for sharing the above presentation.
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Hello ayush bhai.i was researching about high margin of safety.because in recent down trend valuations of many companies have fallen from say 3 times book to under 1 time book.so I was resarching about companies which are generating roes and roces at normal level for example 8 to 10 % but having price to book of less than 0.4 or 0.3.your views on these kind of medium quality stocks but very cheap
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Personally i feel investing into “undervalued” cos is easier than investing into cos which are really great. Infact a lot of money is lost when a co is believed to be great but it falters or things go wrong and in today’s world lots of unexpected things happen. So broadly if the co has some decent track record of growth etc in past…then i would like to buy when it is out of flavor and it’s trading at cheap valuations (even though current ROE ratios may not look very good).
To add to above, its imp not to pursue cos where some fraud has been proved or there are material balance sheet risks (these maybe value traps).
Regards,
Ayush
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Hello ayush bhai.Few days back i was listening to interview of mohnish pabrai in which he is educating to investors to look for hidden pe of 1.Recently i was reading your interview by stock and biceps where you suggested to look for single digit pe stock which are growing earnings.Sir i want to understand suppose a company is earning net profit of 10cr in current year if it is expected that this company will coumpound earnings by 20 percent yoy at end of 5 years it will be making 27cr in profit.In this case should we try to buy entire company at 27cr (1pe),54 cr(2pe)or81cr(3pe).Thank you in advance.
I do relate with both the theories
Mohnish Pabrai and Ayush Bhai
They both are similar in some extent.
High Growth Low PE Co’s may turn PE 1 Co of Mr Pabrai in few Years only
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Hi Sohan - there are no right or wrong answers. In ref to your above example, if I was in your place and I was very confident that company would grow at 20% CAGR for next 5 years then I would have not waited for 1/3 PE - I would have started buying it at even 7-8 PE or 10-12 PE (today) and will try to accumulate on falls, provided I was very confident on future growth (the industry will also matter though). Ofcourse, if one can buy it lower at 3-5 PE multiple, it will be excellent.
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Hello ayush bhai.sir according to your personal experience what should be minimum volume of shares in which we can invest.i was following volumes for avanti feeds and ajantapharma when they were very very small but volumes were good.But some microcaps under 50 to 60 cr market cap companies have volume of under 500 or 1000.your views on such companies sir.
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Low volumes is not a major concern. But while considering such names, it’s important to focus on high growth potential, uniqueness, undervaluation etc. If one is wrong, entry and exit will be costly. But if one is right, if would be rewarding. Also keep buying slowly without impacting the price too much
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Hello ayush bhai.Does Qibs,prefential issue, rights,warrants,price at which promoter increase stake help in determining value of company
It really depends on case to case basis. If the amount was material, it helps in putting a benchmark/ref value and many often it can act as a base price. But if dilutions are frequent, its not a good sign.
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