ValuePickr Forum

Devansh's Portfolio - Advice needed for the long term

Hello everyone,
Long time lurker here.I was introduced to the idea of compounding in 2017 when I was just giving my 11th Grade exams.I started reading more about the markets and investing in general and fell in love with the idea.
I opened a account in late 2019 and bought my first ever stock just after the Corona induced market fall had begun.

My aims with investing are 3 primarily :

  1. Compound my capital at a rate of 18-22% to be able to double it every 3-4 years in a sustained manner.
  2. Valuations are of utmost importance so that I don’t end up paying a lot in the market.
  3. Long term wealth creation with the outlook of 15-20 years from now.

My current portfolio :

Investment Thesis :
Kotak Bank & HDFC Bank : These investments are a bet on India’s growth story rather than the Banking Sector.According to me these are the most well managed banks in India as of now.They are industry leaders with a very strong franchise and financials and have a long way to go.One concern I have is that HDFC Bank’s succession plans are not very clear as Mr Aditya Puri is due to retire in October 2020.

Titan : Industry leader.It is a very good way to ride the discretionary spending theme.Nicely managed company and has strong financials.The Jewellery business is the main driver but I will have to keep tracking the other segments.

ITC : Largest Cigarette manufacturer in India and has a very good distribution network.Is a Cash generating machine and as a result pays dividends consistently.Although the FMCG Business isnt as good as the Cigarette division it still has a strong brand presence.At the time I bought ITC,its valuation was favourable.

Reliance : This investment for me is a Debt Pay Down theme.Reliance has been emphasizing that they want to reduce their overall debt.At a P/E multiple of 16 it looked very cheap to me and hence I bought it.The recent investments in Jio also feel positive.I am not sure about the period I am willing to hold Reliance for - 1,5 or 10 years.This may very well be a situational investment.

I am looking at investing atleast 50% more cash now and was tracking Dr Reddys,Divis Labs and DMart among other stocks but I seem to have missed the bus on valuation front.

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Your portfolio looks solid and these are some of the best names in their respective industry. With the age by your side you have a long way to go and you have tremendous advantage.

You can buy in staggered manner and also try to add some more names as of now only 5 stocks is little too less. If you have solid conviction in these then try to add it.All the best

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Try not to increase your exposure to banks more when deploying cash. I feel that you have bought all these companies at reasonable price. If you get allocation right you will be able to get good returns in long term. Consider slowly siping-in without waiting for the market to fall down.

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Thank you for the advice.Yes I am looking at SIPing in the market gradually but the valuations of most the companies I am currently tracking feel overstretched.A stock like DMart/Divis Labs which I am tracking since January hasnt really given me a good opportunity to go and allocate a chunk of my capital.Coming to my current holdings I am content with the allocation so far.Are there any other opportunities I can look at in the current market?

Few large-caps that I feel as reasonably valued are Hero Motors, L&T, Bajaj Auto, SBI, HCL, Airtel, and Marico. You can look into them

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Great to see someone so young think about investment and compounding. All the best to you on that journey.

Coming to your picks, all these companies listed are survivors with a long track record. So barring valuations, no other concerns on longevity or business quality or management quality.

If I were to add to the list, I would select Asian paints, Pidilite, Bata. All these three have a dominant position in their respective areas and are not too likely to suffer from disruptions in the near future.

Divis again barring valuations seems a good choice. With capex in place, growth should start in a few quarters.

I wish I had the same maturity and zeal for compounding when I was your age.:grinning: For someone who buys for very long term, time is their best friend and even expensive valuations are taken care of. And what better time to start a portfolio than now, when the whole world is reeling in an unprecedented crisis.

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Thank you for the suggestions and comments Sir.Its always great when a Veteran like yourself is guiding us.
I will surely enter Asian Paints,Bata and Divis Labs if I can get a decent price and will buy more on declines. Its not really clear whether the Markets have bottomed out because of the uncertain situation India is going through.
As for starting early,I would thank platforms like YouTube which can be leveraged and used to learn some useful concepts.I watched a video where Mr Ramesh Damani was speaking about Compounding at 20% and that idea just shook me.
Hence I decided to start investing early to increase my chances at succeeding and for a large timeframe.

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What’s the best method of buying a stock? Unless a high conviction stock is available below my average price,should I average up the way if I am confident enough of it and feel that I won’t get a cheaper price in the future?

When buying a stock from your portfolio, avoid seeing the average buy price. You can take a fresh call whether this stock fulfills the buying criteria (fundamental or technical). This will avoid any attachment bias.

You can average up (preferably) or down depending upon your conviction level.

I prefer to use a technical indicator after a fall to prevent catching falling knives. For averaging up, I would prefer buying when the results are favorable and pe reduce due to increased earnings.

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Hey, the only thought I have is that you mentioned you missed the bus on divis, Reddy and dmart. generally when you feel like that they turn out to be the best stocks that one should have owned in the hind sight. Value is the biggest trap. if you have true patience of years even decades, never stay out of a great franchise. overall you are making a good start.

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Well done!
About missing the bus… there is always an opportunity, always a 52 W low…
Screen for ROCE… and try to get the MO report from 2012 or so.
All the best!

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Thank you.I am yet to learn a load of stuff about the markets and businesses in general but yes I have realised that a great franchise will never command cheap valuations in any market unless growth has come to a standstill or there is a economic crisis and everyone is in a frenzy.Keeping that in mind I have entered a few businesses where I think the valuations are reasonable and I will add them if they fall severely.

Portfolio Update : 11/7/2020

Initiated a position in DMart,VST Industries,Asian Paints and Bata.
DMart according to me is a great franchise,although I am a bit wary of the price I have got in.The performance will be impacted as the economy is gradually opening up right now. Q4 results were decent although the impact is visible due to the lockdown and sales restrictions imposed by the Govt.
Their expansion plans have also come to a standstill due to the pandemic.

VST Industries is a pure dividend play for me.The valuation I got is quite favourable so I am not too worried.

Bata and Asian Paints are proven,low stress,consistent compounders so not very worried here although like every consumer company Bata will face various challenges this year as footfalls will be low.

I also added to my positions in ITC and Reliance Industries.

Takeaways in the last 4 months :
1.Price is very very important in most cases and a market crash should be utilized efficiently.In order to do so one’s homework should be to the point.

2.Proper allocation is essential to a portfolios health.I bought into Reliance although my allocation was just 4.5%.It gave me 100% returns in 3 months but due to low allocation its overall impact on my portfolio wasnt very significant.

3.Maintaning emotional stability in a crash is very hard.Although I am a complete newbie,I was checking my portfolio everyday in April and May.

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