Caution Investor Portfolio Please Review

Q&A: Questions & Answers Portfolio Q&A
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Hi
I work in a small firm employing 90 - 100 people. The owner is a nice person who is there for us at all times. He is into stock markets big time which got me interested too. Upon his suggestion I started with Mutual Funds and ELSS. After investing for 4 - 5 years, the returns were below my expectation and I exited last year when markets were at near peak around May 19 with the thought that I will invest directly.

I waited patiently for months for the markets to correct and in September - October 2019 my moment came. I started slowly putting moneys in bluest of blue chips like Reliance, HDFC Bank, HUL, TCS etc. I just deployed 8-9% of my funds and wanted to invest more. But our FM Nirmala Sitaraman suddenly announced Tax Cuts and Market started zoomed again and within no time markets at peak again. I felt like I missed the bus and Cursed our FM that she robbed my chance of investing. During this time I still invested 2-3% of my money in Bajaj Finance and DMART.

Then Again during End February Market fell because of Coronavirus and I bought SBI, Eicher Motors and L&T. Now my portfolio, reason, and worry:

Reliance: Avg. Price 1250 (Highest allocation about 20%)
Reason: Mega Market Cap Company. Value unlocking of Telecom and Retail Business. I will hold and add more for long term with no worries.

HDFC Bank: Avg. Price 1050 (About 12% allocation)
Blue chip. Sector leader. Planning to hold for long. But worried about Stress in the system and NPA due to lock down. I will not invest anymore money until things settle down.

HDFC: Avg. Price: 2000 (10% allocation)
Largest NBFC Housing Loan company. May emerge stronger after the crisis. Planning to add slowly during corrections. Not much worried about my investment in this.

HUL: Avg Price 1900 (Minimal allocation less than 2%)
FMCG Leader. They moved in lightening speed and are investing in 100% subsidiary to get the Tax benefit which I liked. Worried about high valuation and may correct a lot.

Kotak Bank: Avg Price 1350 (About 1%)
I believe in leadership of Uday Kotak. Fund manager Nilesh Shah Joined recently in their mutual fund. Wish to add more during correction.

L&T: Avg Price 1050 (3%)
I felt that current govt. will focus a lot on infrastructure. Wanted to have some exposure in Infra company. But now I am very much worried if I made a bad decision. I would like advice of seniors in this forum If I can buy some more say upto 7-8% of portfolio for long term of 10 years?

SBI: Avg price 220. (2%)
Our employer created salary account with Axis Bank for us. Because of YES Bank crisis and PMC Bank scam, most my colleagues are worried and requesting our boss to change salary A/c to SBI. That is the faith an ordinary man on street has on SBI. This sounds funny: The day salary is credited, my colleague friend goes to nearest Axis Bank ATM, withdraws all the money. keeps monthly expense cash and rest deposits in his A/c in SBI. He has no credit cards and no internet banking with SBI Bank because he is scared of phishing!
Again, I am very much worried with this investment because of NPA and their investment in Yes Bank. I am planning to completely exit and book loss. I request advice from seniors if my decision is correct.

RITES: Avg Price 250 (Small allocation)
We have a dynamic Railway Minister. I have faith that he will improve railways a lot which will benefit RITES - my belief. Also there is good dividend income. I wish to add more during correction. I seek views from seniors.

Shree Cement: Just one share bought at 19130.
Wanted to have indirect infrastructure exposure. But because of its high price, worried that I may not be able to add more if it falls. So undecided to hold or sell…

Last but not the least: DMART! - Highest allocation of about 30% at avg of around 1900.
I have been to Reliance Smart, Big Bazar, Star, Spar, Metro Cash, MK Ahmed, and so many other stores for shopping. But there is something about DMART. I can’t explain. Despite being so crowded I feel at home at DMART. There is a honesty about price. There is a kindness towards customers about the people there. Best quality if you buy their packed items. I have been going there for 2 years almost every month and have not found discrepancy in billing. I have a lot of faith in this company. Only concern is high valuation. But I feel DMART will continue to be my highest holding going ahead also. Is my priority misplaced here, I don’t know.

I had invested about 30% of my cash and when the NIFTY fell below 8000, I got very anxious. I thought if I made a right decision of investing in stock market. And in last 2-3 days of up-move of market I have sold some L&T, SBI, Bajaj Finance and bought my Equity level below 25% and have 75% cash to be invested. But I have decided to hold back for some time. The %ge allocation given above may not be perfect because of terrible price movements.

Also, I have a 4 year old kid and my wife has opened one Sukanya Samridhi Yojana Account at a Post office 3 years back without telling me! She have been putting money there every now and then without my knowledge. I request to know if this scheme is good. I have not much knowledge of finance.

I have been reading this forum at an internet kiosk whenever I had time on the way home from my work place. Recently I have purchased a used Pentium 2 Windows XP system at very very cheap price for investment purpose :slightly_smiling_face:

I thank all the nice people here wholeheartedly.

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My humble two cents:

  1. I would reduce my 20% allocation in Reliance to say less than 10% on every rise and would allocate more to defensives like Nestle, HUL, Asian Paints till the uncertainity subsides.

  2. I would switch/reduce from HDFC Bank to Kotak as I feel HDFC is yet to decide on who next after Mr.Puri.

  3. Instead of SBI, I would add Axis/ICICI below 300, which according to me gives great valuation comfort. I believe in long run, India will have atleast 4 big banks.

  4. I would add Trent along with Dmart as the growth as been impressive there. TATA group means mgmt is trustable.

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Basic things I would do if I were in your situation:

  1. Create an emergency fund (monthly expenses of 10-12 months) which will give you peace of mind. Keep it in FD and not in any debt funds.
  2. Have online term insurance for yourself and health insurance for your family.
  3. Open PPF accounts for your family members. Try to invest maximum 1.5 lakhs into it.
  4. Sukanya Samridhi scheme is a good scheme and continue to invest 1.5 lakhs into it like PPF.
  5. Create basic financial plan.
  6. Now if there are any money available which you don’t need for the next 5-10 years and willing to mentally lose a part of it - then invest in equity. Better to invest in direct mutual funds or Nifty index fund instead of trying to create a concentrated portfolio which has high chances of declining.
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Decent selection.

Suggestion - Give minimum 5% allocation to a company. Add small quantities on decline.
If you are worried about SBI why not exit completely, you already have 2 banks. Ask yourself if SBI will rise or fall going forward. If you think its price will fall then sell immediately while you are getting a better price. If you think it will increase then why would you want to sell a rising stock.

Portfolio will be more volatile than index due to concentration but it should not be considered risky. Risk is when the company falls or stagnates which is less likely in your selection.

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Hi

Good to see mostly large caps in your portfolio.

I think for a person like you who is building a portfolio for next few years and benefitting from market meltdown, its a good time to keep looking to add on declines during the next few months.

My preferred list of companies would be hdfc bk, Asian paints, pidilite, bata, dmart, page inds, hul,nestle etc

Above list is of companies who have been around a long time (barring dmart) and whose business models are least likely to suffer from disruption. Temporarily they will all be affected but these will provide good entry points.

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@mparadkar: Thank you for feedback.

  1. I have still about 75% Cash. As I start investing more, weightage to Reliance will come down. I am looking at Asian Paint and Nestle for sure.
  2. I will not add HDFC Bank in near future and add more Kotak Bank which will balance out.
  3. I planning to sell SBI completely and put the same in HDFC, Kotak bank and possibly Bajaj Finance if it goes very low. I am not comfortable to divert to any other banks for now.
  4. Trent: I am waiting for valuation to come down and if there is a meltdown, definitely buy.

@bhaskarjain
Nice suggestions. Every month ever since I married, I have been giving 20-30% salary to my wife. Recently I got some money from my old man which my wife has kept aside in FD. Debt fund? I do not understand about it.
I had life Insurance with LIC which upon maturity, I have taken term insurance with Aegon Religare (is this company reliable?) I thank you for rest of your suggestions.

@akash_das: I have 10 - 15 stocks on look. I will sure diversify. I will surely sell SBI & L&T.

@hitesh2710 Sir:
Very happy to see you going thru my portfolio. Asian Paint and Pedilite I will surely add. HUL, Nestle and Dabur in my watch list. My problem with high price companies like Page, Shree cement, and Eicher motors is that I may not be able to add more as I may run out of money for other stocks. I am also looking at New area stocks like SBI Cards, HDFC Life, HDFC AMC Etc very closely. But it is very difficult to understand the business model. But still wish to add them in my portfolio for very long term like 10 years. I very much seek your advice on such new companies.
I thank all the members for your kind suggestions.

Just an addition: My English, especially written English is improving as I read this great forum - which I have been using in my workplace for communication letters etc. Donald Sir topics like Deep-drive templet etc goes above my head :slightly_smiling_face: but anyway reading carefully for improving my English Skills.

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Applaud your wife for taking this step. Indeed it is a good scheme and just like SIPs etc. do continue with it or PPF/EPF/NPS.

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Can you tell your reasons for chosing Term insurance from Aegon Religare?

Honestly, although I follow and invest in Life Insurance business but never heard much about this company. Regarding safety, although it is best to have insurance from most reliable partners but IRDAI ensures that consumer interests are not lost (most of the time). In case of bankruptcies, they would ensure that the insurance company is taken over. Just Like Yes bank depositors were saved and earlier Sahara and even Religare.

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Sorry, It is Aegon Life and not Aegon Religare.
Actually, one LIC Agent was behind my father to buy a policy from him. So my father got me this policy when I was still studying. Once I got Job, I started paying premium. 2 years or so back it got matured and I got amount. Since then I did not have any insurance. After that this Aegon Agent kept on vising our work place for policy and he demonstrated that Aegon Term Insurance is cheapest compared to other Companies and I got a cover of 25 lacs for a premium of around 4500/- which I took for my family safety. I just checked their website. It is a international company and seems to be safe.

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Yes please stay away from all LIC kind of policies which mix investments and insurance. Good thing you took online term policy. General idea is to take cover for 10 times your annual salary, so you should see if you can take another term policy maybe from a bigger insurance company. Continue with the Aegon one since IRDAI would ensure another insurer takes over the policies if there are issues.

What I missed adding in my earlier note is that you did well by buying good companies instead of speculative plays which lot of retailers end up with. If you want to invest in direct equity continue with high quality companies like Hitesh bhai has suggested. Just understand that stock returns are not linear and there will be volatility in the prices but over a long cycle (5-10 years) they should outperform other asset classes. So you should have courage to hold on to them, so plan and commit only that much amount which you are sure you don’t need.

Read Peter Lynch’s book - One Up on Wall Street if you have not read it yet. It explains how in our daily routing we can pick good stocks by keeping our eyes open. This is same regarding your feeling about DMart.

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Steps in the right direction.
I’m not very experienced in the markets, but I’ve read a lot of books and studied sectors and companies and about investing in equities.

I would not get too enthusiastic about Dmart. Sure it’s a we’ll run business, with great management. But retail business iss hard business. Too many moving factors, high skill needed to manage inventory and supply chain efficiency. And it is a low margin business.
It can probably create a lot of wealth for investors, I hope it does. But I have avoided this sector because of players like Reliance, Walmart and Amazon present here. I’m expecting big competition in this sector soon.
And grocery business is a business where a company doesn’t have pricing power. But it can create competitive advantage through low pricing. Dmart currently has very low prices which attracts a lot of customers. Tomorrow another big giant can come and match or offer the products at lesser price. This can pull away dmarts customers. This same phenomenon will not be seen in case of let’s say Nestle’s Maggi or the baby milk products they make. Nestle can keep on increasing prices regularly without having a prayer session everytime they do so. Because customers will pay higher prices to buy their products. That’s how differentiated they’re.
Do not mean to discourage, but these are fragility checks I put before investing and Dmart didn’t pass them. Just sharing what I felt.

About Debt funds, I think it is best to play short duration debt funds like: liquid, overnight, ultra short term, short term. Mid term ones like: corporate bond and banking and psu funds.
Because taking risk in debt funds never has proportional rewards.
You can check out a channel called freefincal for info on debt funds. How to choose them.

You can also invest in gold through sovereign gold bonds and gold funds. Gold has been a decent wealth creator in the long term and I’m hoping will continue to do so. It will also hedge your total portfolio against short term volatility risk.

I would have also looked at companies like:
Whirlpool, Dr. Lal pathlab, Bata, relaxo, Britannia, Havells, polycab, icici Lombard, titan, TCS, Zydus wellness (sugar-free maker. Now has Heinz products in portfolio)

I like avoiding high capital intensive business. I like avoiding psu companies. Because one should never underestimate their ability to underperform.
I also avoid investing based on macro themes like: infra growth of India, air passenger growth etc. Because Rajeev thakkar has said: just because a sector is growing doesn’t mean it’ll be profitable. We have seen this happening in Airline and telecom sector (lack of competitive advantage, product differentiation, high capital intensive )
I have always been in favour of investing in simple businesses as investing is not my full-time job.
Buffet says: buy a business even a monkey can run because sooner or later a monkey will.

Disclosure: currently holding all the above mentioned stocks in my portfolio.

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@bhaskarjain Sir, I have taken note your points. I appreciate.
@Sahiriaralam Ji, Very nice suggestions. I am just constructing a Portfolio for long term. I will not invest more than 9% or so in one company I have decided. DMART seems good so far.
I wish to have some exposure to pharma and I am focusing on Divi’s. I have gone through entire thread of Divi’s in our forum and what a great information! the time from Dec’16 to July’17 is like thriller. In that topic most of the seniors of this form have argued and it was a pleasure to read Donald - Anant - Hitesh Sirs and OM_1417 article is excellent.
Also Nice to know bhaskarjain himself invested in Divi’s during that difficult time. Eager to know if you are still invested in Divi’s.

I am planning to read Annual reports and slowly adding Divi’s In my portfolio. I am considering Cera Sanitary and Polycab India. I will sell SBI and L&T and add some more Shree Cements.

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Yes I am still invested little bit, had sold off major part since the stock had a very good run up. It has gone up much more after it :slight_smile: My entry was during the stock price decline due to the USFDA issue. Management did very well by resolving the issues much quicker than any other company. It’s a quality business but valuation is something we have to take a call on.

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As planned, I have sold SBI and L&T. It is really painful to take heavy loss in such short time. I almost bought Shree cement, but could not get enough courage as it is a very high cost stock. So just gave it up. But I took a tracking position in Divi’s Lab.

In this period of lock-down, I am planning to read Annual reports of companies that I am interested in. And also go through the threads in our forum and build conviction. But this kid of mine - she is not letting me do any thing. I can have my personal time only when she sleeps! But I am very sorry for small kids. They are having very very difficult time locked inside home. NO school, no playing in the park with friends and no going out at all. Right now she is sleeping after throwing lot of tantrums. I am feeling very heavy in heart…

I am sorry for being personal.

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Indeed it is difficult for kids. Sad the kind of world we have given them. Hope we do not make same mistakes again and again, for benefit of Humanity.

Profit/Loss is all temporary. Pls stick to basics - Chose fundamentally sound businesses and buy in a very staggered manner. The more cyclical the business, less should be the rush to buy and the incremental capital invested into it. If in any doubts, sip into mutual funds rather than direct equity.

Stay safe and do not take any panic driven decision. Do not invest more money than you can digest say a 40% temporary loss from here and avoid panic.

Thanks

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Companies which address Basic Human needs and have good balance sheets and are in cash should be sorted out… Roti, Kapda, makaan, dava aur daaru… but initially Roti and dava will click majorly followed by other categories… Now as we have progressed a lot from 80s, banking is also now a human essential… so good and strong banking names… IT is basic these days… good IT names, Banking and IT may not click immediately but they will surely click in 6 to 9 months…

Lets see how people react to entertainment and socialising… if India comes out of this in 2 months we will see sharp rebound… if this goes longer in terms of both medical and recessionary crisis, say for 6 months to 15 months then we are looking at depleted savings of families in that case we can forget entertainment and other discretionaries like Auto etc… In second case we will also see depletion of cash reserves of many good companies and they can go under… so stick with the basics Food and Pharma and very very good financials for the time being…

Real estate has been highly leveraged and we all know that Basic value of any dwelling is far lower than the Inflated value of the market… Values have remained inflated for a very long time now… it has happened on the basis of two things Loaning Industry and potential future incomes of society at large… in case this crisis goes for longer term then people will lose their earning abilities and we might see a collapse in real estate…as such Pink slips and reduction in salaries is getting common across many sectors… How do you judge the basic value of real estate… the old matrix that rental yield should be 5 to 7 % of the value of the property… In Indian context the best of the properties have not more then 2 % rental yields and average rental yield of Indian real estate is way lower at around 0.25% to 0.75%… This difference should close down and not by increasing rents but by decreasing the inflated value of real estate… This has its own multi dimensional effects especially on banking and loaning industry… besides on cement, steel, hardware, etc etc… Lot of ready unsold real estate will come to market and many home hunters with cash in hand may get lot of good bargains for a short period…

Our best hope is that this crisis dissipates in 2 to 3 months and we NIFTY remains between 7 to 8000, things become normal and salaries and earnings bounce back in 2 quarters… If not then for many of us Investing will be a luxury… Looking for a roof and food for your family may become the normal for many of us…

Best of luck… stay home, stay safe…more to come as corona numbers give a better trend…

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I have just sold HUL. It has given me Nice profit in short time. Even thinking of selling some DMART and Reliance slowly in this pullback. Reason: HUL already above its 52 week High. I am not sure their sales doing better than what they were before COVID crisis. Same is true for DMART. The store may be open but how many people are able to go there and buy things freely? Both the stocks are trading at very high valuation. I wish to study their numbers for next 2 quarters and then only do significant investment. If this thinking makes me miss the bus, I am okay with it. I feel there will be lot of opportunities in the future.

I have been doing very small intraday tradings and trying to make some money in the mean time.

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selling winning stock is never advisable…hul and dmart performing very good.i think one must cut loosing stock and keep winning stock in portfolio

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In a short period of time, I got about 35% profit which is terrific in this kind of market. I have lost a lot with L& T and SBI. If it had not gone up so much I may not have sold. It could be a mistake.

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It’s sad that one would invest in l&t a high capital intensive company which depends on government deals a lot and SBI a psu bank and expect good wealth creation and then compare it with a compounder with high roe, rice, moat like HUL.
It’s like comparing gold with iron. Sad