Building a long term portfolio

Q&A: Questions & Answers Portfolio Q&A
1

Hello community,

I’ve been involved with the markets for quite some time now. Started my journey with the help of tips and advices here and then. Initially things were going great. It was a great year to begin too, beginners luck that roped me in completely. Then started following the market more. Got into technical analysis. Got into F&O. Long story short made a lot of losses there.

In hindsight it was a combination of lack of discipline, poor risk management, poor position sizing and the biggest reasons - being too reckless and feeling I know too much. And then towards the fag end of that phase the baggage of all the failures made be perform even worse. Certain learning don’t come without a price I guess. My losses made me introspect and realise my mindset flaws and market was the boss. No point questioning it.

I don’t want to go back to that route again in my life. I still believe there’s good wealth that can be built by investing in the markets. And
I want to focus on long term portfolio. And I wanted to do it in the right way.

One of the things I realised through my journey is a lot of things depend on the approach and mindset. The differentiating factor between successful and unsuccessful people. Even though both try equally hard some times.

I request you all to share your thoughts with respect to what I’m mentioned below. Other wisdom is also highly appreciated.

Themes I’m betting on

  1. China + 1
  2. India Consumption story
  3. PLI
Stocks in my watchlist
Sectors % allocation Few ideas Logic
Pharma - API, CRAMs 15 AMI Organics, Beta drugs, Natural Capsules PLI benefits, Super growth projections, CRAMs space benefiting
Chemical 20 IGPetro, Alkyl Amines, Guj Alk, Navin Florine, Best Agro, Syngene My full time job is cable manufacturing. Supplying to all of these companies, doing good consistent capex and payments have never been a problem. China +1 and now Eu + 1 should help
Capital Goods 15 Triveni Turbine, Hind rectifier, ABB etc
White Goods 15 Voltas, Butterfly Gandhi, IFB India consumption story. Household income increasing would lead to purchase of this category. PLI benefits too
Auto 15 M&M, Tata Motors, Pricol, Mida Auto seems to be in a bull run. And auto and auto ancillary could deliver good results. Looks like the Auto upcycle has become after long years of consolidation
Solar 10 Borosil Renewal, Swelect PLI benefit, China+1 and solar is the future
IT 10 Tech M, Wipro, Persistent, Cyient Contrarian bet. I feel IT sector has bottomed out
100

**My concerns **

  1. While getting trying to get exposure in a sector. How many companies should the investment be broken down into? E.g for chemical sector should one attempt to pick up. 2 companies or 4?
    2. And within that sector what should be the approach? Should one have exposure in the market leader too? Or just focus on niche pockets
    3. Should companies that are claiming 25-30% CAGR growth over the next 3-5 years be bought even if their PE is high?
    4. How to decide when it’s a good time to start buying? And should the investment be done in 2-3 trenches or in one go?
4 Likes
2

Hi Siddharth!
welcome to the Forum!
How old is your portfolio and what kind of returns are you expecting?

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Hi Sandeep.

Thanks for responding.

A had sold my PF at higher level around May. Now looking to start deploying cash.

At the sake of sounding stupid I’m looking to make 20-25% CAGR

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Since you were able to cash out higher levels, I believe you can take a bit of risk. Try to analyse stocks and sectors which have outperformed their index in the last 6 months, for eg, Auto, Banks, Midcap IT, Cables and Wires, etc. If you are able to find out stocks which are at or just below their all time highs, then these stocks most probably are the future market leaders.

Also there are many sectors which are really good value buys like Large cap IT, D-mart, FMCG is always good, Diagnostic Players and API manufacturers. I guess these are really beaten down and are a good value buys.

I hope this helps.

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Thanks Ishu for your suggestion.

Just one query?
For example if you recommend Mid IT space. How would you play it? Breakdown this in 3-4 stocks or just 1? Also go for the biggest name or the name that’s seeming more promising from concall and ppt for future prospects.

Since you’ve mentioned Wire and Cables sector. My core business is Cable manufacturing. It’s a family business. Based on my network, dealer & distributors of Polycab not to happy with their treatment. Also, Polycab has a key man risk. I feel KEI & KEC are better bets. Not studied their fundamentals. Just based on what I hear from the market in terms of them being aggressive to pick up orders

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As you are from business field, you know that behind ever stock there is a company, and a company does some business. So if you want to allocate a portion to a sector in your PF, know about the sector, its future growth prospects, because as there is sector rotation in the market, even though the selection of stocks is good, the stocks may not move much, as the sector is out of favor.

Then focus on individual companies. Going with one company is preferable only when there is a compelling reason behind it, say someone choosing Infosys over TCS because he works in Infosys, or valuation is a reason, there could be so many reasons. Going with a basket approach will limit any future fall to some extent, but also limits the upside too, just like an index. Again, if it is a performing sector, then the basket will be profitable.

If your technical knowledge is enough, you can wait or start building positions, depending upon the charts.

Long term means years, at least a few years. So we start at some point and slowly build our perspective, our process, along with it our PF. There could be 20 different changes owning to 20 different reasons before one reaches a long term PF.

Also, this is my perspective, there are investors with different perspectives, from different schools of thought, having different strategies, and we all develop and follow a process that suits us, many ways to skin the cat.

There are many types of investors here in the forum, know their styles, the time spent in the forum will be rewarding.

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7

Yeah so in Midcap IT, stocks like Kpit Tech are doing very great. They are into EV development and have industry’s biggest clients as their coustomer. More over, the kind of space they are in, is getting billions of dollars of investments, in developing new technologies and making the EVs better. I feel this space will be a huge revenue driver for these companies. One can also look into Tata Elexi. Not sure if it’s a Midcap or not.

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Thanks Chaitanya!

Appreciate the advice.

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Thanks Ishu, just a quick query on KPIT and Tata ELexi, would you get bother by their PE?

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I am not worried if the Pe is in 50-150 range if the companies growth is better than its peers. For example, Olectra Greentech is trading at a very expensive valuation but there is a reason for this premium. Their quarterly delivery of electric buses has been factored in. So yes, if the earnings growth is strong, I don’t mind paying a premium price for a stock.

And why just Olectra Greentech or Tata Elexi, look at D-mart valuations, it’s PE has never been below 100, yet it’s a Multibagger stock at 120 PE.

I hope this helps.

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Perfect example! Thanks

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