Changu Mangu The Bull - Portfolio

[valuestudent]

Dear @bhaskarjain

Thank you for the kind reply. Right. As you do most of the time you have hit the nail on the head.

@bhaskarjain

But what troubles me is the so called experience of their analysts. In one AGM youtube video, they introduced them in the end and all looked very very young.

I too found it funny when they had these young guys up on the podium and it was a strange sight . They were a small if I remember right a below 1000 crore fund till about 12 months ago with less than 20000 portfolio’s. Suddenly they got additional 800 crores but 60000 new portfolios so basically a lot of small investors. I could see the change all the while. I think that they have been trying something to see how they should present themselves as a company, or something to do marketing of their company, but they are making some presentation bloopers. It is for me not taking away from their investing style, they are trying a marketing style, so that is fine. Let them try some marketing. But most of it is silly to say the least. Their AGM’s were and are good enough. They should cut out the rest of this stuff they have gotten into.

For that matter even Quantum has started sending out funny emails trying to market themselves and they do not reflect what I think of them. So I wonder why suddenly these both want to get into marketing themselves, what they have stayed away from all these years.

@bhaskarjain

Fund manager does have maturity and market experience. But then we are depending on him 100% taking into account all his biases. So there is a huge keyman risk here.

Right again, and quite frankly this is something else I had discussed over email with one of our VP members. There is a huge keyman risk and I am basically watching the positions they take and their strategy. For me their are two keyman risks, one is the fund manager leaving and the second is the fund manager dramatically changing his strategy. If either was to happen I would exit the fund. Also, point to note, another keyman is the gentleman who handles the debt and from what I could understand also the currency side.

@bhaskarjain

Noida Toll turned out to be a dud which is ok since some positions will. But what bothers me is they continued holding onto it and justifying their position till the end. Same with Mahindra Holidays.

On Noida toll bridge I think they learnt a valuable lesson. Trust me I really don’t understand why they have Mahindra Holidays. I really don’t see the logic and don’t like the company in the portfolio, but I had to make peace with it if I like the other 24. I do hope they relook their logic on Mahindra Holidays.

For that matter, my other MF Quantum bought Yes Bank at the wrong time. I know they will have their own biases and in a MF if 1-2 stocks are not suiting my thinking, or they end up making a bad decision, I will have to live with it.

We have just seen so many famed funds taking a hit with DHFL and ILFS. Both Quantum and PPFAS were not into any of these. Their learning and experience buildup plus skin in the game shows here. They have no incentive to play with other people’s money because it is their money also. I like to think that is a better way to bet for me.

PS: PPFAS also bought Google much earlier and recently Charlie Munger said that they made an error or commission and they should have bought Google a long time ago and you are correct, they bought Amazon before Berkshire.

So the gist of what I could see was, having burnt their fingers a bit with some bad decisions and having taken some good decisions they are in a reasonably sweet spot of a couple of decades of experience and with a couple of more decades to play out. I will watch like a hawk.

Dear @yudiagg

You could check it here https://www.valueresearchonline.com/funds/newsnapshot.asp?schemecode=19701

Dear @777

I am a novice and unable to predict the end of good days of an entire economy which is a world superpower .

Dear @gautham1

I am not sure but I think they started buying Lupin around 800 odd maybe I am wrong. I must admit I am not trying to double guess the manager but I agree the logic they gave out on the PE of Nestle USA was not making sense. Nestle USA is a low growth high dividend stock and not so comparable to Nestle India. They may have their logic on valuation, but that logic made no sense since growth of Nestle USA is so different. If they had a pure valuation logic and not an apple to apple comparison, it would have made more sense to me.

On their performance, sure it is quite similar to most others, but like I said, there is a currency risk also being taken out to a reasonable degree so I am happy with that.

Long and short, there are going to be risks in the stock market. We just choose what we can live with and what makes sense.

Dear @sarthakkumar19_

Like I have said before; I am not looking at returns. I am looking at risk. Whatever the returns I am ok, I am fine and I am content. I am more focused on saving consistently to grow my corpus than being dependent on the stock market. I am not looking for a fund that beats benchmarks, if that is what is the focus of my fund manager I would be scared because they would take higher risks and doing short term punts with higher churn to try and beat the market. I do not want to think about returns. I want funds that think about risk mitigation and risk management. Currently both Quantum and PPFAS fit the bill.

Great questions all. Thank you for them.

[777]

We all are novice here my frd, just learing from each other and sharing our thoughts. I was just repeating what I have been reading that US has outperformed the entire world in the past 10 years, and that may not be same in the next 10 years. I am sure, US is superpower now and will remain after 10 years as well.

[hitesh2710]

I was very keen to see the kind of portfolio returns the guys talking really long term investing make. And the poster boys for this kind of investing are PPFAS and QUANTUM. The kind of returns made by PPFAS as depicted by a boarder are nothing much to talk about esp in view of the bull market thats been on since 2014 barring the odd few weak quarters.

I think someone needs to compare these returns with an ultra conservative portfolio of Indian companies which have been approved by Indian markets. Companies that come immediately to mind which have a long runway for growth and dominating market positioning and decent managements are Asian Paints, HDFC Bank, Bajaj Finance, Pidilite, Nestle, TCS, Infy, Bata. From the newer listings may be one can add HDFC AMC and HDFC Life looking at the kind of underpenetration and management pedigree.

I think above group of companies would probably offer much better risk adjusted returns than the aforesaid long term oriented schemes. Though this approach doesnt take into account the geographical risk which is somewhat mitigated by PPFAS.

And if one can add one or two businesses every couple of years after due checks and study and if needed weed out anything where the confidence is low it could improve returns.

[valuestudent]

Dear @hitesh2710 Bhai.

Thank you so much for your valued opinion.

@hitesh2710

And if one can add one or two businesses every couple of years after due checks and study and if needed weed out anything where the confidence is low it could improve returns.

So, honestly that is what I thought. If I can run the portfolio on autopilot and keep hunting with the thought that something must be really special for me to buy it myself, then and only then will I strike directly. That would mean maybe one stock in 1 or 2 years.

Second, and though I intend to make a longer post about it, I read and re-read a book to come up with a investment strategy that I can stick with for extended periods. Now, will I stick with it for an extended period, or will I back out, I will only find out in time, but I will surely post the learnings from that book on this thread soon for your and our other members review.

Sir, when I came to the stock market I thought I am guru then I learnt so much here at VP, I found out I am a novice, an ant. Then the learnings here on VP gave me courage to at one point now become fully invested, to accept, in fact, embrace the uncertainty (which for me was a big step). This is my ongoing journey in which especially you and some others are the friendly, helpful and knowledgeable shapers of my gradual education. I am truly humbled here sir, and I know in few more years, if I keep learning here, I can and will do much better. And I intend to.

[nav_1996]

For currency risk why don’t you just invest in ICICI US Bluechip/Frnaklin US opportunities/MOST Nasdaq 100 in proporation you want to hedge. And you are free to select any other fund which you may want to choose. But being tied to PPFAS for currency hedge does not make sense unless you like the fund for Indian holding. I didn’t like them holding Noida Toll and justifying it even when writing was on the wall. Persistent is another very poor choice when they have mandate to own a tech/IT company anywhere in the world.

[sarthakkumar19_]

Dear Hitesh ji,

What do you think are the reasons for the subdued returns of PPFAS. What is it they seem to be missing.

Thanks

[valuestudent]

Background; I came across a very interesting book on financial capital allocation, for those who are allocating a particular percentage of their savings (percentage is to each his own) in equities.

I will give a link to the book at the end of the post, but from it my understanding is;

1. There is no real way to know for a retail investor whether today is a good day to buy more or sell or hold.
2. So, a small retail investor should follow some guidelines to invest, and these guidelines below work best with MF or Index Funds. These below do not work with stocks as they are more prone to moves on fundamentals and news, but as an aggregate a portfolio in MF or Index can give around market returns.

So, let’s start, and this is complicated the first time you go through it, so go slow. My only objective is to bring out an Idea, and you will have to read the book to understand more and there are multiple strategies. I am using what I liked from it.

Take your corpus and make the first decision. Let’s say you have 200 INR to invest.

Now decision 1; (not from the book) Do you not mind it all in INR, then that is a decision taken, done and dusted. If you want a particular percentage in let’s say USD, then that’s a decision taken.

Now decision 2; (from the book) What percentage of your net cash worth do you want in equities? 10%, 25%, 50%, more that 50% is not advisable (at this point of setting up the portfolio), remember you are a small retail investor.

So let’s assume you decided 50% equity and 50% fixed deposits.
-Take 50% and on any day buy MF’s or Index Funds for that amount.
-Take the rest of the 50% and put it in fixed income.

So for example, if I have decided I want 50% in USD/INR and 50% each in Equity/Fixed. the screen will look like this (I will share a google drive link for you to download and use);

Now, the book outlines strategies will sell rules and no sell rules. You will have to take a call on what you prefer.

So now after investment you are 50% each approximately in both debt and equity. Also, you are earning some income from fixed deposits. Now when do you buy more using that interest income (or other income coming in from salary or business) or when do you sell?

So, first the buying opportunity;
Let’s say markets start falling. You don’t know should you buy after they fell 7%, 10% 20% or 43%. When would you buy? So here is where rules help.
Rule 1; We have to wait for the equity to become 45% and FD to become 55% of the portfolio. So that means the market has to fall 19% for you to rebalance Equity & Debt to 50% each again.

See screenshot of when to rebalance next is below;

So I have to take out 10000 from FD and move it to equity. Good news is, I don’t need to know the reasons for the fall and I don’t need to read the news. I can say, I don’t know and I don’t care. I am at 45/55 allocation and I will rebalance to bring more into equity and and take that from FD’s and incremental income earned in the duration to rebalance to 50/50.

The rebalanced portfolio will look like this below. For simplicity I will now only buy into quantum and reduce from INR Deposit in this example.

Now lets say, it was the global financial crisis time and the markets fell further.

So again the portfolio will drop by another 12-13% more and balancing will again be 45 Equity and 45 FD. Like below;

Now since net worth was already down before the prior rebalancing from 200K to 180K, this time we have a fall of 15K in the portfolio from 90K to 75K. So we have to sell FD worth 7.5K and rebalance. So we will rebalance again to 50/50 and it will look like this;

So now although your net worth is down. You are doing the most important things in stock markets.

1. You are buying low.
2. You are not going all in, in a hurry.
3. You still have FD’s in case the markets don’t recover for 3-5 years.

The above is just a simplification of the method. There are also sell rules. There are other permutations and combinations.

Net net, these have been known to provide little better than market returns and give up to around 15% PA over very long periods.

You need to read the book below; I have read it 3 times now And I will start my 4th reading this week again. At least read the summary on the amazon page. It will give you some idea.

Buy Value Averaging: The Safe and Easy Strategy for Higher Investment Returns:...

See, there are lots of people in the markets, and they all have different and unique experiences. I am going to be frank, there are very few investors who are famous for making money in the stock markets like RJ, DK, VK, AK etc… Then we have a group of people right here on VP. They all got into nearly the same stocks (although not exactly the same stocks) at the same time (when markets were very low priced) and it worked out from 2011-2013 to 2017 end, and god bless them for their courage and they were showered with blessings. But all these people have a bias they don’t know about, it is called “Anyone can do what we can do” bias. They think everyone is as capable While we know that is not true.

Ben Graham has said, getting a reasonable result from the market is not too difficult, but getting a more than market result is very very difficult. So if a 12-15 % average result is what you are looking for, maybe you could take time to read this book.

Please note; there are various other ideas in the book like deploying incremental capital, selling whenever equity reaches 55%, instead of only rebalancing at 45/55 there is also an option for quarterly rebalancing, updating the invested amount to consider new cost price every year based on interest rates plus market risk premium etc… I am just outlining an idea for you to research.

Link to the sample google sheet: https://docs.google.com/spreadsheets/d/19WWyCtit4b6jFAM5LJN6adVNEcOEVXJRPxIQ9iTMfJY/edit?usp=sharing

Best regards.

Disc - I am not a SEBI registered investment advisor and please do not act on any information above. The above is just for learning purposes.

[pkdash83]

This rule based investing is widely promoted in US markets. A 60(equity)/40(debt) index re-balancing approach has been back tested and have yielded decent results. Even some MFs like Quantum AMC and PPFAS follow it up to certain extent.

Since we don’t know how much the market will fall or rise in a given period of time, it’s wise to re-balance at the same date every year. So basically you are rotating money to keep the ratio as 60/40 exactly after one year.

[valuestudent]

This is a collection of quotes (people’s experiences and learnings) I liked, and they have slowly helped me shape a (albeit still work in progress) philosophy to learn about money and investing.

I like to read them every once in a while. Might not be of value but maybe something helps someone somewhere so sharing.

“By Three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third, by experience, which is the bitterest. “ – Confucius

“Don’t invest in anything you don’t understand. Don’t invest until you are sure. Don’t invest for peanuts. Don’t invest at high prices.”

“If you have not figured out the risk, then you shouldn’t even think about the upside.” - Weijian Shan

“RETIREMENT is one thing that you don’t want to do twice”.

People started talking about the end of the world. Security prices melted down. Activity Froze. Because everyone was uncertain. Will there be a tomorrow? If I buy anything today will there be a market tomorrow. Will it have any value tomorrow? All liquidity dried up. It was the most pronounced cycle. Roosevelt said; the only thing we have to fear is fear itself. People were just afraid. They were not afraid of anything rational. What you have to do is just keep your wits. One of the hopes is, if you understand history and you understand cycles, you will be able to reduce the emotional influences at that time, cut through them and keep your wits about you. - Howard Marks

Templeton - “The time to buy a stock is when the short-term owners have finished their selling, and the time to sell a stock is often when the short-term owners have finished their buying”.

Stanley Druckenmiller : “There’s another saying Drellus used to have… “The higher they go the cheaper they look”. So when things are going up it’s easy to buy them. When they’re going down, it’s hard to buy them”.

“We must base our asset allocation not on the probabilities of choosing the right allocation, but on the consequences of choosing the wrong allocation” - John Bogle

“It is the quality and not the frequency of ideas that matters.”

“Earlier you recognize that there are no short cuts, sooner you would be on the path of right investing.”

“When a stock cracks after holding very firm for very long, we jump to buy. Window of opportunity appears short. Later, we find the stock simply keeps cracking time and again. More money is lost buying dips than by buying the top. Even Contrarian Investing needs ample caution.”

“There can always be losers in portfolio. But it’s important to have risk management in place. Having established companies with track record and strong balance sheet is one way of doing it. Most will not lose money that way.”

“Surest way to lose money is buy what’s popular. Second surest way to lose money is to buy the unpopular.”

“Recent news, last read book and latest performance of markets; all influence us disproportionately. Just need to be aware of this.”

“Never ever ever buy a new low. Wait for it to settle down.”

“if you’re a speculator you have to accept the fact that you’re going to get burned, fooled, defrauded. It’s a little bit like dating: you may go through an awful lot and be disappointed. It doesn’t mean you go to a monastery. You stay in the game”

“Total solitude is needed to pursue a line of thought. A little interruption, and you are lost. The trance is over, the magic gone. You may recover the rudiments of what you were thinking. But that unique excursion into the realm of thought with its rich intricacy is lost forever.”

“In the short term stock’s moments are linked to dozens of news, some relevant and many totally irrelevant. But in long term stock’s moments are linked only to one factor. Profits.”

“Affluent people get carried away with expressive benefits of owning assets and FOMO since there often isn’t a clearly defined goal.”

“If you cannot accept uncertainty then stocks are not for you.”

“I am not running to become the next Warren Buffett. I am already Changu Mangu”

“Whenever u feel that you MUST buy a stock RIGHT NOW or you will miss it forever…

Do yourself a big favor… Wait for 3 months.

One of two things is sure to happen

1. You will get it much cheaper.

2. You will no longer feel like buying it.

Tried and tested by me.

Exceptions, if any, are very rare.”

“No magic formula exists. Save more, invest prudently, take a long term view, give time to compound and have patience. This is the workable formula.”

“Success occurs when you are willing to wait for opportunities. Let the game come to you" - Mark Kingdon

“You can’t be a good value investor without being an independent thinker - you’re seeing valuations that the market is not appreciating.” - Joel Greenblatt

When I buy a stock, I buy a share of business. I don’t buy themes, it’s real money not a fancy dress competition.”

The most sensible and successful investment strategy is buying for long term.

Must be good established businesses (proven by high ROE and high ROCE, insignificant or no debt) and with no corporate governance issues, then long term. Everything else including future growth is unknown. Unless markets are very very very cheap. SIP or buy DIPS is best into such organizations over a 4-5 year year period to smoothen any price worries.

“Don’t chase Multi baggers. They make Multi beggars.” - Changu Mangu

“A content person is difficult to manipulate. That’s why contentment is derided.”

“You need not worry about bear markets or corrections if you’ve no plans to sell. You can be happy about bear markets or corrections if you’ve plans to buy.”

Warren Buffett once said that the cornerstone of his investment style was “lethargy bordering on sloth”

God, it seems nature DESIGNED me to do well with investing! - Changu Mangu

“We spend so much time worrying about things outside our control and so little perfecting the few things within our control. What you see or read today doesn’t matter in the long run. How you react to it does. Your behavior determines your edge”.

“You, and only you, decide.”

“Have an investment philosophy. Without one, you would not know what to buy, when to buy, how long to hold and when to sell. Difficult to be successful not knowing these. Not only good investors have an investment philosophy, they stick to the same all the time.”

“Good years are more than bad years. By not timing, though we go through bad years, do not miss even a single good year”.

“There are periods of high returns, low returns, no returns and negative returns. We need to go through all these to get long term returns”.

“We’re irrational. The odds of thinking and acting irrational increase when we’re tired, overly focused on a goal, rushing, distracted, interrupted, operating in a group”.

“As long as we avoid blow ups, even at moderate returns, our wealth would grow very well over a period of time”.

“The real boring part is seeing equities not move much year after year. Most of the time, this scenario pans out. Not giving up is a key”.

“The key to long term performance is the ability to ignore short term performance”.

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so” Mark Twain

“Low ability and high confidence can be a deadly cocktail. A small dose of self doubt is good for everyone”.

“To be a successful investor, you need to make only a few good decisions and for that you need to actively look for reasons not to buy a company. Knowing what to avoid; being wise is a far superior approach to being smart”.

“Listen, business is easy:
If you’ve got a low downside & a big upside, you go do it
If you’ve got a big downside and a small upside, you run away
The only time you have any work to do is when you have a big downside & a big upside” - Sam Zell

“Arrogance automatically reduces when the role of chance is deeply understood”.

“How do you know if you have taken on too much risk - use the sleep test : are you losing sleep over it ? is a position or its size causing u to worry or lose sleep ? if yes, forget the math. reduce the size or exit the position.

Another test: If you get that uneasy feeling in your stomach when you look at a company, its management or its business model and can’t explain it ? Don’t try to rationalize. Just pass on it and move to the next idea”.

“Any investment strategy would have stretches of underperformance. The solution is not to keep changing the strategy but stick to one knowing it is the price to be paid for long term outperformance”.

“When to sell is more difficult than when to buy. After selling, what to buy next is much more difficult. By investing in good companies with long run way for growth, we’re able to avoid these difficulties”.

“Patience has its origin in a French word meaning suffering. To be patient is to suffer. No doubt, investors find patience the most difficult trait to develop”.

As simple as it can be. “Simplicity compounds. Complexity zeros out”.

[arunsg]

Very good collection, @valuestudent !

The big daddy and simplest of them all “Buy Low, Sell High” ! One can derive meaning out of this simple statement all through one’s investing lifetime and it gets deeper with experience!

[duggu007]

Nilesh Shetty, fund manager of Quantum Long Term Equity Value Fund, speaks...

[valuestudent]

Thanks @duggu007 That’s precisely why I like them. In fact funds like PPFAS and Quantum should stop benchmarking themselves against arbitrary benchmarks, and keep themselves ever more isolated from the call of the sirens. They both will find investors who are not looking at benchmarks but are looking at how these teams navigate retail capital through all seasons over long periods. Why do they need to judge against a benchmark. They should judge only their investment process and focus on what works and learn from what does not. This beating benchmarks, generating alpha, there are enough funds for that. If these two can totally ignore all that noise, they will be my dream funds.

Siren (mythology)

[valuestudent]

Although those posts were removed by me… I feel I should share this.

At some point during 2020 I moved from investing to day trading.

Initially lost some money and then started making 5 to 7% per month. This was on a capital of around 3 crores. Everything was rosy… I had it all figured out. I then built algorithms to day trade for me.

Net result, I lost over a crore day trading “manually” and “algorithmically”, both.

After 7 years with all gains lost, and accrued losses, I finally learned that buy a part of “good businesses” when they are on sale, i.e when markets crash.

After day trading (futures, options and spreads)… meri ghar waapsi ho gayi hai. I am back to being an investor.

Hope you do not have to learn the hard way, like me, that we cannot predict the day to day movement of anything over long periods of time.

It is best to invest, not day trade.

Regards.

Changu Mangu.

[ranjitmehma]

Welcome Back, more than investing, I missed your witty writing and humour

[jamit05]

@valuestudent

After day trading (futures, options and spreads)… meri ghar waapsi ho gayi hai. I am back to being an investor.

Hahaha… Missed your humor… Welcome Back.

And your timing of ghar wapasi is good.

[valuestudent]

That would be correct since my humor is better than my investing

[JOSE_ABRAHAM]

You were a pretty value focused person who I thought would have figured out that day trading is frought with swift capital loss and too much stress. Sad that the realisation came after such a huge loss. Better late than never.

[vikassethi]

My story is similar to you my friend. Except for few things.

I lost more than 2.5 crores in 2013 and learned my lessons not to day trade. But, there is a “But” here.

Instead of day trading focus, I started accumulating stocks with focus on investing and trading both.

So if I buy let’s say Elecon, then 50% of my quantity is for trading and 50% never gets sold till the time I have faith in growth story.

So if during a day, my saudas are not giving me profit, I simply take delivery home and wait for another day when I can sell them.

There are few things required for this approach:

1. Hardcore discipline in both picking the stock and deciding what amount to invest in it. Once I pick the stock, I stay with it for a very long time.

2. I am only into Cash trading. So I buy within my capacity.

3. As I have been working from home since last 25 years and have ample amount of time, I have luxury to watch the screen daily. Now I don’t get tempted with flash trading and don’t run after stocks. No FOMO or greed factor.

4. I guess loosing money teaches you the most. That’s because one looses money only in extremes and come back from an extreme makes you better/stronger. Provided of course you learned your lessons.

Huge respect for you. It’s not easy to confess your losses in stock market.

[KS16]

I really missed your posts…it always brought a smile and whenever I was down and I went over your old thread to read and re-read…welcome back…It is absolutely not easy to admit failures and definitely not easy to avoid rancor, self-pity, blame game that goes with it…looking forward to your posts

[gagandeep]

@valuestudent

After 7 years with all gains lost, and accrued losses, I finally learned that buy a part of “good businesses” when they are on sale, i.e when markets crash.

Welcome back buddy…!! i hv been learning along with you… luckily i left day trading very quickly without any major losses… as you mentioned in addition to crisis investing, one of my key learning is to step aside during bubbly phase of market and play in multiple assets… earlier i use to try shorting and somehow manage through bear phase… but i realised its better to step aside and move to relatively underperforming asset… since 2019 to till now my asset base and gone 3X… thanks to aggressive buying during corona crisis and then existing completely by end of 2021… since then i am trading HUDA plots in Gurgaon and investing in real estate in my hometown… in India real estate is really very under-appreciated by investor community… there are times when financial assets do well… and there are times when real assets do well… so Crisis investing + side stepping bear phases and getting whatever positive return you can get makes hell lot of diff in long term compounding… Wish you best of luck and Happy Hunting during current bear phase…!