Yogesh's blue chip 10 Portfolio

(csteja) #163

Young bro, you got me wrong. It appears that you have read so much from internet. At times, reading too much is harmful in decision making as you cannot decide what idea/theme to pick. Data is not important, information
(mining of the data, coming to conclusion, then act) is. I suffered from it.

I stay in India.

Coming to the point, I didn’t mention markets doesn’t make you feel rich. They do. But every else are on the same page investing in same markets. Hence you are no richer than them. There will be exceptions and smart investors always beat general public. But when average investor is acquiring more knowledge/education on markets, it takes extra effort to be a smart investor. I wrote it in that context. The more you dig into something, the more you like it. I have been a stock market evangelist for years. I fell in love with markets. It took me years to come to senses that Buffet and RJ days are gone. I believe most of Buffett or RJ’s wealth is because of their timing. They participated when markets are nascent. Yes, MF may still make 18% CAGR. But if that happens, then everyone (me, you, my friends, my relatives) is going to be rich which cannot be true.

According to me any field that you choose should have tailwinds and should not-be-priced-in (not many should believe or participate in it). It takes more effort today than 10 years ago to pick value stock as markets got more efficient. This effort to pick a quality stock to produce market beating returns is only going to increase either in US or India. I am not talking about bear or bull markets. I am talking in general. Of course, I park money in markets not to miss out on that 15-18% which every other average educated Joe of today in my circle is making. Its just my personal opinion. You have right to disagree. The reason to share my opinion is that I see an younger self of mine in you. The other people over here are too matured and experienced in markets to change their concentration to other fields. Its tough for them. My dad belongs to that category. He is a stock trader since 20 years.

I felt like experimenting on few businesses/field(s) which are uncertain/risky but are in naive stage. The same effort that I keep in markets could yield me better returns. I am talking in that context. I don’t want to talk without much progress to show on my side. But if I succeed I come back one day with a story to share. Give me some time.

(1.5cr) #164

Warren buffet has been screaming for people to compound wealth in the markets. What you are discounting is how many investors will stay the course leaving their MFs untouched for 30 years disregarding market swings etc etc. If this correction continues you will see redemption pressure overnight. Let me ask you something, Take USA and China for eg. youngsters there still dont know anything about investing and compounding. Ive met people who have studied and who work in investment banking and dont understand simple compounding. You tell an Indian that you wont make money for the first 10 years they wont be interested in holding their investments.

I cannot understand why everyone doesnt just dump money in MFs. Or for that matter in the USA index funds. Results dont show overnight, nobody does it.

Due results coming only after long periods of holding, retail investors dont put large amounts of money in MFs. They will buy insurance policies, they will buy products, cell phones. An Indian on 50k a month minus monthly expenses wont put more than 2.5k a month into MFs I guarantee you. And when the time comes to buy his house he will redeem his investments. Everyone starts, no one sticks to the plan. You are 26 today. 10 years from now I wonder how many of your friends will increase SIP or even hold their investments.

I will tell you something, in the next 10-15 years there will be huge in flow into MFs and funds. No doubt, people will know more and get more educated I agree. Everyone will invest in MFs. Not many will have the common sense to go and buy these amc companies from the open market and ride the theme. End of the day, I can virtually guarantee you that no one will take investing seriously enough to hold investments for 30 years to see results/ no one will invest big enough to see a massive return even post compounding. Nobody will dump 10-20-30-40 lakhs today and leave it for the next 30 years.

(csteja) #165

What so ever, you cannot be Warren if you start investing reading his books today. I read all his shareholder letters during 2013-14. They are superb. I was attracted to markets because of Buffett. He narrated businesses in a way that you feel it so easy to invest and make money. It pulled me towards market. The point that we miss out is, during his time, markets are not so efficient. RJ is the one from whom I learnt Buffett times are gone. When Buffett lessons are extensively available in 1990’s, RJ followed a different strategies to buy businesses. Listen/read his old interviews. He stood out. All I want to say is old lessons won’t work to produce market beating returns. Today most VPrs can say Buffett quotes even during sleep. I mean, they are priced-in heavily.

Its all your perception based on the people you meet. Only future will tell whether its true or not. I see youngsters of today are multi talented. Also, I see that you are always comparing with youngsters who doesn’t have financial education and who chill out. I am comparing with that seizable chunk who realize that there is an opportunities out there to seize because of internet. Why do you want to compare with average Joe out there? Compare with people like you, me, VPrs. Zerodha is the best example. Today, many IT people are traders. All in my office are traders. Some make money, some lose. Even though you compare with good ones, they are seizable chunk. When a seizable chunk thinks like you, acts like you, you don’t have an edge. This is happening in every field where internet bridges the gap. During older days, RJ has an edge as he stay near exchange and does trades. He gets (insider) information quickly where as people like my dad has to wait for newspaper to publish. Today, everything is instantaneous. Yes, there are guys who wants to chill out and they will be high in number (say 80%). But you are missing out comparing yourself with that seizable chunk (20%) who are making use of opportunities. I generally ignore those 80% and compare myself with 20%.

All I can say is you didn’t meet enough. May be the people you generally meet are dumb. You cannot conclude anything from it. My experience in my circle has been different.

How can you guarantee all this? I met people in my circle who invests 80% of their wealth in equity. All are below 28. There are around 6-7 people. Imagine, how many could be outside my friend circle. I mean they are seizable chunk who see opportunities like you. We are just looking at past and concluding. Opportunity is there for everyone.

Bro, I just don’t want to compare with average Joe out there and say I am doing better than him investing in markets. I always want to compare with best of participants (top 5-10%) and beat their returns. I just don’t want to be rich but filthy. It cannot happen if seizable chunk thinks and acts like you.

Hope this discussion instigates the fire in both of us to prove our points. Some are not in our hands. Only future will decide. All I vouch out for is that, the field that you should pick should be nascent. I realize that I have to prove my point with working results before making further talk. I will keep more energies in what I am doing currently. Hopefully it should work.

(1.5cr) #166

See filthy rich you have to be one of the best at whatever it is that you do. If you compare yourself to the minority, like those on this forum then naturally you dont really have much of an edge. You are obviously of above average intelligence and naturally you will gravitate towards people who are smarter than the average joe. Hence your friend circle is also going to consist of smarter people. Let us say well informed people.
At 18% CAGR ,you cannot be filthy rich unless you either start with a large enough amount or compound long enough. Both of which not many people can do.
My goal is not to be filthy rich. I do it because 30% I enjoy it and 70% it can make me very wealthy. I have certain other goals that many will call charity but to me it is a passion project.
I want to grow wealthy enough to have enough cash flows from various investments to be able to be a part of 2 angel funding rounds a year for start ups that are doing something to make an actual difference. I would also like to teach people that compounding from a young age can you make rich. Everybody has different numbers for “rich” and “filthy rich”.
Agreed on the “nascent” part. But in a way as investors we are all looking for themes and opportunities. We are all tracking the EV space, we are all looking at the rural opportunity in India etc etc: If you are talking about being worth 100m$ plus (approx 600cr plus) then yes, I agree you have to be up to something or spot a few big opportunties and bet big. But not everyone considers 600cr as a financial goal. For every 100m you make If I make 20m I would be extremely satisfied haha!
If I manage to beat the index by 3-4% over a 3 decade period that is more than enough. Along the way if i come across something/come across someone then why not. My monetary skill/status is not something that I judge myself by in any case. In fact I would go as far as saying that I want to show the average joe that without being brilliant like most of our forum members and yourself, one can still achieve financial freedom.
I have always said that we dont do anything productive by being investors(dont take that too literally, but you understand what I mean). We have only one goal and that is to create a return. If a company that is destroying our planet will give us 100x in 10 years we will all gladly throw our money at it and say after that I’ll stop. If a company is doing good to the planet and will give us only 10x in 15 years we will chose the “evil” company over them.

Thats it from me wish you all the best teja:)

(Kumar Saurabh) #167

Guys , this thread is about Yogesh portfolio strategy for NIFTY 50 companies. Humble request, please continue the interesting discussion shifting to a more relevant thread . I am not being sarcastic or something like that, so, please do not misunderstand . It is just that every thread has a purpose and when certain things get stretched, whole purpose of that thread gets diluted for readers .Hope, I am not offensive

(aashu24ahuja) #168

I second that, because every time I see a notification I expect something related to Yogesh’s portfolio, but when I visit the thread I see something else.

(KKP_Investor) #169

Yogesh has a good question and we can revert back to that one…

I feel that owning companies in Nifty 50 or BSE 500 or Sensex 30 and eliminating the non-performers will always work well. Now, the problem is defining what does “non-performance mean”. If you set the non-performance period to 30 days or 90 days or 220 days, then the rally in that stock might start right after.

So, the challenge is first defining your ‘holding period’, then the ‘measurement period’ and then ‘how often do you want to churn your portfolio’.

As soon as I have held onto something in India that has not performed, write lots of negative things about it, the stock takes off and doubles from there.

Example: HUL, RIL, TGBL…All three went through a LONG period of boring times, and when the giant woke up, it doubled and doubled again after that. Look up the 30 year charts on each of these and you will know. Glad I only sold a bit of it and bought into other missing sectors in my portfolio. But, I kept the faith.

So, in my special case, I give the Non-Performance term to be just under 10 years. When HUL woke up, I had already sold 10% of my holdings, but I am glad I was holding 90%. It went from staying between 200 and 345 for almost 10 years, and then went to 700, in 2 years, and then went to 1400 in another 2 years. How would I have felt by not having ANY in my portfolio?

Play Indian Market with a Long Term View like Mr Agrawal says from MOSL. He went from virtually Rs0 to Rs1000 crores, which we cannot replicate but if we can replicate some of it, it would be great.

Just my 2 cents and a different view than many since I am a multi-decade investor and will hold some stocks for another 20+ years.

KKP Investor

(Peabody) #170

Brilliant -mighty impressed with your holding capacity and patience.I wish we imbibe at least 10% of it.

(Yogesh Sane) #171

I wouldn’t value a mining company based on PE or P/B basis. You can only use price multiples to compare valuations of mining companies around the world with each other but these companies generally go up or down together so a relative value analysis is not very useful. If the company pays regular dividend, you can use DDM to value the company but that generally yields low value.

DCF using operating cashflow can be used but operating cashflow tends to be volatile. You can normalize cashflow for cyclicality and value the company based on that but such a valuation model is sensitive to assumptions so wouldn’t give you accurate valuation.

Mineral reserves of a mining company is an important indicator that determines valuation but I have seen it being used to justify high valuation rather than a base valuation. Reserves is just an estimate and provided by the management and may not be independently verified by a third party so such number should be used with a pinch of salt.

I really haven’t been able to come up with a way to value mining companies like Vedanta. The only sure way to buy a mining company is when mineral prices are down, stock price is down and company’s balance sheet is still strong enough to sustain few more months/years of downturn. However such situation happens once in a decade (if at all) so it cannot be an investment strategy.

(Yogesh Sane) #172

Aurobindo has been able to grow its book value only by growing debt along with it. This indicates low (or no) free cashflow. Market generally value such companies much lower than companies like Sun and Lupin that have managed to grow their book value without pilling on debt (until they they acquired other companies with debt).

Aurobindo was expensive stock for last several quarters/years as it went up along with rest of pharma companies but its financial fundamentals aren’t as strong as Sun & Lupin. I am saying this based purely on financials and not based on its portfolio of drugs or its R&D capability. I believe at this price, valuations reflect the fundamentals so any uptick in earnings should results in higher price.

(Yogesh Sane) #173

Looks like the taxes are finally having their effect on volumes and pricing power of tobacco companies. Govt will raise taxes until volumes stop growing. I know ITC no longer release its volume numbers anymore, not sure about other companies. Godfrey’s margins have been shrinking for years as it has not been able to pass on taxes to consumers. ROE is now in single digits.
Based on the data I have, United Breweries has been able to grow its top and bottom line for last several years. Its stock price is going sideways because it is very expensive so there is a time correction. Higher prices may be causing some marginal consumers to switch to cheaper brands.

(1.5cr) #174

what I dont understand is ITC foraying into the hotel business. They have a wonderful business in the cigarette business and a half decent fmcg business. Why funnel cash from their cash cows into the hotel space.

(ishikaghose) #175

"Aurobindo has been able to grow its book value only by growing debt along with it."
Yogesh, I am a newbie - trying to understand financials. Reading the balance sheet - 2013 to 2017 - what I see is that the non-current liabilities have come down from 1117 to 139. Should I be looking at TOTAL liabilities (current and non-current) rather than non-current alone? Please excuse my ignorance. Invested in Aurobindo from Rs 128 levels

(Yogesh Sane) #176

Yes, you should look at all financial interest-bearing liabilities and in some cases non-interest bearing liabilities (like accounts payable, deferred taxes, provisions etc) if these are large (relative to overall size of the balance sheet) or growing rapidly.

In accounting statements, liabilities are classified as current and non current then further as secured and unsecured. However, from an investor’s POV, what matters is whether liabilities are interest bearing or ‘free’. Typically borrowings are interest bearing and classified as financial liabilities. Sometimes having too much of non-interest bearing liabilities can be bad too as that indicates company is having trouble paying down its liabilities.

Typically a non-financial company should be able to grow its equity without taking on too much liabilities. What is too much depends on industry and especially stability of cashflows.

(ishikaghose) #177

Thank you very much for clarifying and for giving me an explanation. Sincerely. Ishika

(Sunil) #178

I think we should look at debt during such scenarios. If a company is having debt and not able to pay liabilities then it might be in trouble. But if its a debt free company then rather it can be good sign if liabilities form from trade payable. That means company has power to negotiate terms.
Please correct if im wrong.

(sarthak kumar) #179

Dear Yogesh ji,

When is the annual rebalancing of the portfolio scheduled.


(Yogesh Sane) #180

I usually do it after all the annual reports are released. Around Diwali time.

(Ar) #181

Hi @Yogesh_s, I have been going through your posts and your thought process and its clarity is amazing. Thanks for enabling us all to learn more!

While your portfolio and its picks have been discussed above, what I (and I guess others) would also like to know how you come up with the stock ideas in the first place specifically in the small and mid cap space (as large caps are fairly well covered) for eg say an APL Apollo tubes or Kovai. I guess you must have quantitative screeners (based on ROE etc) but are there any other sources/resources you use to hunt for ideas? For eg following other great investors, blogs, on ground checks within your network etc. Would be very interesting to hear about your idea generation process

Apologies if this has already been asked and answered

(Dr Manoj) #182

Thanks a lot for such a convincing and inspiring strategy.May I solicit your opinion about MOSL in long term context.