I would really not study or worry about the performance under the previous management and promoter. After Diageo took over, they did cleanup, brought new CEO and now focusing on on the premium brands. Economical brands have been franchised to regional players for annual royalty payment. Premium brands were around 50% of total net sale value prior to this management which they have grown to 60%+ and plan is to take it to 75-80%. Premium brands have much superior margins. USL also acts as sale agent for Diageo’s products which includes some great global brands.
With all due respect i never really understood when members talk about Nifty PE average. Which is the average of the Nifty 50 which in no way can impact my choice to start or accelerate my PF holdings unless my PF is almost identical to that of Nifty 50. And PE indicator alone cannot be a validation point of individual stocks let alone an index.
So it all boils down to the individual stocks one would like to invest, the growth potential for the business and the industry in which the company operates for next 10 years at least, OPM improvements, Cash flow trends, companies ability to bring down or manage a health D/E depending on the business they are into. And on top of all, an ethically sound management whose every action is taken in the with the sole intention to grow the underlying business in the right direction.
Please enlighten me here if am missing something about Nifty 50 PE average and its significance for stock investors who are not into Index investing.
You have built a diversified portfolio of companies with good track record of profitability and market performance. It is also not skewed toward one or two stocks which is often the case with many portfolios that I see here on VP. There are a couple of things I can highlight.
Expected return - Since you are expecting an 18-20% return from this portfolio, you need to check expected return on each stock and ask yourself how is that going to be achieved? Earnings growth, PE expansion/contraction or a combination of the two. Some of these companies are already trading at high PEs and some may not achieve 20% EPS growth. I am not suggesting you can’t achieve your target return but 3 years is rather short for equities. You don’t have to put that data here, this is only to help you set expectations.
Margin of safety - Mistakes in investing can be broadly classified as either buying wrong company or paying a wrong price. Your portfolio has good names so chances of buying wrong companies is low. If you need MoS against the high price, buying 25 stocks isn’t going to provide that. You need to have a higher % of cash if you think you might be paying a high price.
Is this comment of yours mean if my portfolio has high quality stocks but bought at expensive valuation or PE, then cash %should be high. That means in case there is a PE contraction or mismatch of growth vs expectation, then that cash war-chest can come to good use by aggressively averaging down.
@Yogesh_s please check whether my understanding is correct.
Hi Abhishek
it is good that I landed at your portfolio I wish I should have these 5 year back and most of these in my portfolio for next couple of years but NOPE… I found this esteemed sharing EPIC tribe of VP’s TOO late and I had made lots of mistakes and I had blocked my capitals in some of the lazy scripes BUT that’s fine
Look GOOD Vs Perform Good
Portfolio look very good and expected to preform very good. on the other side at what price you entered makes a huge difference .Since i don’t know at what price you had entered in he scrip i wont be able to justify my answer yet …
Some Slot of allocation such as
_CDSL ( in case of most of rating agencies scope of disproportionate growth is very limited best companies don’t relied on these reports also these companies has algorithm to evaluate the credit rating. However, the major factors are credit history, credit type and duration, credit utilization, credit exposure, etc. Every month, these credit rating agencies collect credit information from partner banks and other financial institutions WHICH IS NOT BINDING BY LAW ,
Piramal enterprises ( i differ on majority if you bet on Ajay Piramal i can be with you but as an company PE is not able sustain it’s position in long term if you campre wih H*** or B**** F*******) .You can visited my remarks in respective thread
These can be regroup to you your best conviction stock or hunt for new scripes in SECTORS in BAD TASTES at this point of TIME
Caution
You have very high valuated companies in your portfolio for that it is worth sharing beautiful words @value_hunter
Did: i may be wrong as these are my personal views in the above companies i may have interest but this is not any Buy and Sell recommendation .For investing one may consult registered Analyst i am not any sebi approved Analyst
thanks Raj
Nice and worthy feedback indeed.
I have evolved since then and now portfolio is reduced to 12 companies . CDSL,PEL both are out.
Only NBFC are bajaj finance gruh and I was courageous to acumulate them during crisis time.
So the shift is gradual from a MF portfolio to conviction oriented
high PE companies: -agree margin of error is very less; but then as long as earnings remain intact and if it follows a QGLP philisophy(Ramdeo agarwals) I keep price at only 25% weight in this formula…if PE remains flat and earnings continue, then few quarters down the line, it will become less expensive…subjective though and differs from people to people.
Hi @abhijain, your portfolio stock selection looks good and few seems done well in last one year. Are you still holding the same portfolio or have you done any churn.
What strategy are you following in current market.
I have reduced portfolio to 15 from this 25 list
Removed CDSL,Bajaj finserv,everest,graphite twins,hdfc life,jamna,tata elxsi,l&t fh,phyrocare,piramal,radico,bluestar in the last 7/8 mths.
Top holdings now are: Bajaj finance,HDFC bank,asian paints,pidilite,nestle,gruh+bandhan,hdfc amc,DMart
Hi, I was considering Radico Khaitan for investment. Is there any reason you exited from this stock? Financial looks good for the company. So wanted to see if you see any risk which I am missing.
Would be great if you could give reason for ur exit and the returns u made…
I hold piramal enterprises, jamna auto, thyrocare, asian paints, d mart and pidilite among the names u mentioned
I continue to buy asian paints, pidilite and dmart via Stock SIP…
All of these(exclusions) are good companies.The primary reason for exiting all these 10-11 companies was because I wanted to reduce my portfolio to max 15 companies.Earlier it was kind of a mutual fund with 25 companies and I was unable to track the results/progress of each of them.
As i evolved in the process,I created a filtering criterion which is as follows(In the order of preference):
Does the product have a moat, USP?
is it industry leader?
Management?
Entry barriers?
monopoly/duopoly/tripoly?
Is it a structural business?
Industry growth?
Company’s 3/5 yr growth?- Revenue,Profit,EPS (15%+)
Company’s 3/5 YR ROE
Company’s 3/5 yr ROCE
Debt to equity?
Cash flow?
Govt regulation?
Promoters shareholding decreasing/increasing?
Pledging of shares?
So,as a result, the 3rd,4th,5th or 6th ranked company of a sector was removed( L&T FH for example)
It was basically one time elimination.And it worked quite well for me.
Regarding HDFC life, I am not a big advocate of insurance business as a whole(Pat Dorsey has explained it quite well in “5 rule for successful investing”)
HDFC AMC is an outstanding business- MF penetration is just 6% in India- huge room for growth; the HDFC group pedigree adds more conviction.
While some may say that I am looking from a rare side mirror, carry a hindsight bias, missing the “NEXT HDFC bank or Bajaj finance”, I am ok to stick with the real ones as long as they are growing their top and bottom line handsomely and grabbing the business of competition.
This looks like a strategy followed by Marcellus Consistent compounders PMS, run by Saurabh Mukherjea and they have been doing pretty ok till now. Infact, my own portfolio resembles a lot like yours and I have a similar thesis for building wealth as of now until I run into a 2013-14 market again where I would be a lot more comfortable buying into small highgrowth companies.
