Debadree's Blue-chip Portfolio

Hello forum members, this is the first time I would be posting something here, I have been reading topics on this forum for the past one year or so and have been on my investing journey since 2020 and this forum has added immense value to my investing knowledge so I would like to seek all of yours feedback on my portfolio, I have been building this pf for the past 2 years and the present climate I believe is conducive to adding more. I have included both my thesis and anti-thesis for the stocks in as short as possible.

Instrument Allocation % Thesis Anti-thesis
ITC 9.98 Complete dominance in cigarattes, with huge pricing power maintaining profitability even with declining cigarette volumes, good revenue growth in FMCG business with steady increases in EBIDTA, and infotech, agri businesses adde cherries on top and last but not the least company has been returning capital wel to its shareholders via divs Increases in taxes on cigarettes, profitability in hotels business and tough competition in the fmcg space from established competitors are a threat
DEEPAKNTR 6.57 Leader in the space of speciality chems, company has long track record of excellent execution and further building capabilities across the value chain, had entered at around 711 rs massive gains over the past year has resulted it having second position in pf Prices of comodities can affect margins, international competition from china, regulatory risks on environment and other compliances as well as risks of accidents in factories (has happened recently)
INFY 6.5 Bellwether IT stock with capable management, has stable capital allocation policy of dividends and buybacks, infy has quite a few huge deal wins the past year and reason to think the momentum wouldnt continue going forward in the cloud and digital space especially Attrition IT companies are facing serious pressure from high-paying startups and MNCs and India’s huge and cheap labour force is their prime USP although indy has been reducing the risk by increasing hiring in other countries locally like in the US. Also reduction in global IT spends in present scenario is a risk
HDFCBANK 6.41 One of the largest and systematically important bank in India (TBTF), has the best track record on lending standards and net interest margins and I believe upcoming merger with HDFC will be a net benefit HDFC banks biggest weakness has been its tech infrastructure and it has been seen because of this their credit cards business had been affected last year
LT 5.74 Probably the company building new India, no other construction biz has shown the scale and efficiency of LT but more important than construction is LT’s holdings in valuable businesses like LTI, mindtree, LTTS and LT finance excluding the values of which would put the constructon biz at pretty attractive valuations and also company has delivered good dividend yield over time. Also recent government initiatives to invest upto 100lk cr on infra means huge opportunity for LT The construction biz is most sensitive to macro environment recessionary env would be detrimental also government spending plans would have a huge impact on the company’s success, running construction biz also means higher leverage and larger capital requirements which also could pose a risk
ICICIBANK 5.54 This bank has seen a massive turnaround in its preformance in recent years with new management, has reduced npas, increased NIMs and has a much better tech strategy than other large banks also its subsiiaries like icici pru, lombard are also of great value The bank has a history of aggresive lending and getting stuck in large corp scandals (chanda kochar case) but those risks are largely reduced under new management
HCLTECH 4.56 Same case infy, much higher dividend yeild whats interesting about hcl is their ER&D business which i believe has quite a potential Same risks as infy also recently company has been spluttering a little more on its financial perf
Alphabet Inc - Class A 3.8 Probably the best case of “wonderful company at a wonderful price” if the present rout in the US market continues google has massive cash reserves on its balance sheet (100B+) and geneates huge fcf of 50B+ and is a monopoly on search and presently available at < 20 pe, google’s business segments like adverts, cloud, youtube etc have shown explosive growth over the past year and the main focus is on its cloud biz which an serve as a competitor to aws Google’s revenue source is still not well diversified still most of its revenue is from its Ads business and given global stuations ads spend is likely to reduce in the short term, also google has the regulatory risk of facing anti-trust actions has already faced problems with the EU
IEX 3.49 A new age business in Indian power sector, the company has shown good revenue and profit growth over the past years and has extremely high profit margins given the nature of the business further this sector is very underpenetrated The stock was subject to a lot of speculation last year leading to unsustainable valuations, give early nature of this sector there is no guarantee that the dominant position of IEX would be maintained also the stock is most receptive to regulatory risks entire business could be disrupted by small changes in regulations.
HDFCLIFE 3.15 Underpenetrated sector and a play on LIC loosing its market share (has been seen across all sectors in india public loosing to private) also hdfc has amongt the highest vnb margins and a very balanced product mix with not too much dependence on ULIPs et al. Building trust in the life insurance sector is biggest hurdle in this sector LIC is already a household name although hdfc is also a huge brand its adoption at te level of LIC is dependent o management capabilty, company also faces regulatory risk in the sector
Amazon.com Inc. 3.13 Another company available at a very good price, my primary thesis on amazon is AWS 50% of market share in cloud is on AWS and cloud adoption is still low poised for much higher growth Anti-trust regulations, and unprofitablity of ecom and logistics segements in this economic situation present a risk
MARICO 3.11 Another bellwether FMCG stock owning some well known brands like parachute, saffola and has made forays into the d2c space by acquiring some d2c startups, maricohas also been trying ot increase its international biz with forays in markets like bdesh, egypt, etc. has delivered faily good roce and roe along with dividends and more fairly valued than other fmcg cos Prices of comodities again a risk here and currency fluctuations in international markets also management calibre to deliver on intl markets at the level which it has done on domestic markets remains to be seen.
ICICIGI 3.08 Again a play on underpenetrated sector health, motor, etc present huge opportunities, the company has steady financials and has delivered close to 20% RoE over the long term Regulatory risks, merger with bharti-axa how it pans our remains to be seen also shocks after covid and present eco situation
Microsoft Corporation 2.96 Aain another wonderful tech stock in the present turmoil, again microsoft’s cloud business is the key focus with azure running up second to aws along with their sass offerings like office, msft also has been growing its dividends steadily over the years Microsoft faces relatively less risks presently gievn how diversified their revenue sources are and hasnt faced any large regulatory ire
ASIANPAINT 2 Dominant force indian paint industry, huge distribution network with proven mgmt track record Upcoming competition from competitors like jsw, rich valuations
SYNGENE 1.85 Most interesting stock to study, something in the cutting edge sector syngene is one of the few companies engaged in CRAMS one could simplify it as IT of biological molecules, the company has shown exponential growth at times, overall i believe the sector could be at the cusp of exponential growth Global spends on biotech outsourcing, regulatory challenges and also capex on bringing new plants ext online (ex their mangalore plant)
TITAN 1.63 Bet on indian consumption, especially india’s festivals economy Rich valuations, gold prices.
PIDILITIND 1.59 Again a monopoly stock similar to asian paints Risks are also similar to that of asian paints
CANFINHOME 1.5 An interesting HFC, has shown one of the best asset quality in the industry, competitive returns on equity, stable returns on equity did report some of the best quaters in the last year and management is well experienced and most of is customers belong to the salaried class with lower ticket size loans. Real estate market risks, still owned by a psu (canara bank) which is trying to sell it without much success, managemen’s goal of doubling balance sheet is quite ambitious also lot of competition from established companies like hdfc
Berkshire Hathaway Inc. - Class B 1.43 The legend’s company I don’t think much explanation is needed here :-), Berkshire’s stock serves as exposure to america’s various sectors like insurance, railroads, energy, etc which I dont have the expertise to analyse Succession of the company
Facebook Inc - Class A 1.28 Most riskiest tech stock right now but facebook still is able to generate nearly 20Bn+ in fcf, and fall in earning’s hasnt been as drastic as the fall in the stock, facebook still has many avenues of monetisation like reels, whatsapp for business, etc and even thouh facebook’s metaverse pitch is far fetched but not entirely impossible Metaverse requires huge amounts of investment, moat is severely bruised with apple’s moves for privacy, and further ire from governments as well as general society on privacy

All the above stocks add up to nearly 80% of my stocks the remaining stocks are really small positions on which haven’t yet had a coherent thesis or am simply squeamish to sell (do suggest how one can get over this aversion to selling) but anyway the above stocks are the ones I am very bullish on and would be buying slowly in this present market situation. I would be very much happy to see your feedback please do point out flaws in my thought process, reasoning, etc. and if you have read this far I am really grateful to you for your patience.

Thank you,
Debadree

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Your portfolio mostly consists of largecap stocks. You can cover also invest in these stocks through ETFs. Your direct equity portfolio should help ypu generate alpha over the largecap stocks. Since you are young you don’t need to invest your majority portfolio in largecaps. Just buy an ETF for the same. Yes, if you bought these stocks at very low levels during the corona crash then it’s different. Focus on identifying quality midcap and Smallcap for long-term. This will help your portfolio to generate more than average market returns.

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Hii
Which app do you use to purchase US stocks?

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Thank you for so much your response! I admit I am a little risk averse that’s why you see mostly largecaps, I am trying to expand my knowledge to find investible small caps. Most of the stocks I bought were during the covid crash or in this ongoing crash so I believe the discounts would add to alpha and also India’s opportunity size I do believe today’s large caps could also deliver alpha maybe.

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Hi I have been using the indmoney app for US investments

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I have been tracking the semi-conductor industry two stocks have been of interest to me TSMC and Texas Instruments

Hello Debadree,

Your portfolio looks good to me.

Your analysis of technology stocks like Amazon, Microsoft, Alphabet along with Infosys & HCL Tech is logical, and there is no reason why these technology companies can not beat NIFTY in the long term. If one can buy such good businesses at low valuations, you can see your portfolio beating Index by about 2% to 6% as well. I have done this in the past. I never had courage to hold US stocks simply because I used to believe that, it exposes you to currency risk in addition to equity risk. But considering that, INR will keep depreciating further, having exposure to large US companies seems logical to me.

Also, having exposure to IEX and ICICI Lombard looks logical, as they are operating in under penetrated sector, and opportunity size is huge. IEX may face competition in future, but still it may able to grow at good pace.

All other stocks - ITC, MARICO, HDFC BANK, BERKSHIRE HATHWAY, FACEBOOK has potential to give you steady returns. ITC will test your patience from time to time like it did from 2015 to 2020.

I believe, in large cap investing, you will not find multi-baggers in 2-3 years like in Small Cap & Mid Caps, but in the long term, risk adjusted returns would be good, provided you have bought them at low valuations. Imagine that, if you had bought TCS at P/E of 16-18 during 2017 and hold it for 10 years, I am sure that, it can compound your money at 15% percent which is more than Index.

Personally I also hold some of your stocks, but I generally hold all stocks for 3-4 years and sell those if the stock becomes overvalued as per my analysis. With this strategy, your churning is high but you can generate 2% to 6% more returns from time to time. Another advantage of investing in stocks directly is that, you can find an individual stock undervalued easily as compared to NIFTY or Index, and you can invest lump sum with more confidence than in Index.

Disc : Holding IEX, ICICI LOMBARD, HCL TECH, HDFC BANK (since 10 years), MARICO. I may hold some of these for more than 3-4 years depending their valuations.

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Yeah so if you have accumulated largecap stocks during the corona crash now might be a good time to book your profits and invest then in quality midcap and Smallcap. Since largecap won’t be able to generate alpha as much as the small and midcap stocks, it seems a better decision to start allocation there are book some profits.

Also if I may suggest a way for you to pick small or mid cap stocks. Download the portfolios of big Midcap and Smallcap AMCs. Now filter out the small positions and check which stocks have higher frequency in all the portfolios. So for example if 7 out 10 AMCs invest in one particular stock, it might be a quality bet in the long term. Since you are not investing in a stock which has been researched by a single analyst, your chances of loosing go down. Also make sure the mid and Smallcap funds are not of the same AMC, it may lead to overlapping.

I hope this helps. Best wishes for your investment journey.

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Thank you very much for you kind advice will definitely try to use this strategy to find some smallcaps! will also update on thread of changes!

Thank you so much for your kind feedback

Indeed my primary attraction towards US tech rn is their cheapness google msft available at such insane valuations of close to <20 ev/ebit will probably not be seen again and inr depreciation seems to be a constant.

IEX indeed I am looking into upcoming competition closely and ITC no doubt test patience very hard :slight_smile:

Regarding your churning strategy, what are the tax implications how much of the returns are eaten up by LTCG? my aversion to selling comes from having to deal with taxation mess

and finally, kudos to holding hdfcbank for 10 years rewards of patience must be fruitful now!!

My strategy is that, if the stock is overvalued, then book the profit and pay LTCG tax as required. Even if an investor holds MF units of large cap index fund and sell those for specific financial goals, you need to pay LTCG tax.

This strategy also helps me to do automatic asset balancing. If few stocks become overvalued in financial year and if I book profits, I can shift some funds to Debt (FD, RD, Debt Fund etc.) for few financial goals, since my Direct Equity Portfolio is allocated to few financial goals. I do not have to do any thing to this asset balancing (equity & debt balancing) forcefully. There will be few years, when I may not sell any stock or book loss. For those years, there will be no LTCG tax to be paid.

Generally I do not re-invest dividends since I use those for monthly regular expenses, as per my requirement or use those for few recurring financial goals. Ideally, an investor should re-invest dividends so that compounding can happen. I have done that in the past.

These strategies will vary from an investor to investor, since every one may use Direct Equity for different purposes. One can remain invested in the stock for long term (> 10 years) as well if that is your requirement.

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Understood sir, Thank you very much for your response! :smile: