Dhruv's Portfolio: Comments Appriciated

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

Hey Everyone!

I’m Dhruv Age 24, Software developer based in North America. Here is my portfolio breakup. I would love to get updates or insights on this.

  • Real Estate - India - 24% (Will be around 50% over 3 years (under construction property))
  • Stock Investment - India - 20% - (XIRR of 16.5% over 3 years)
  • Cash FD’s - India - 13% (AU Bank 8% + Lien for IPO)
  • Liquid Cash (savings + emergency) - 12.3%
  • Stock Investment - USA - 5% (HDFC ADR)
  • Retirement Investment - USA/CA - 18% (US Index + Bank Share(ESOP)) (Active Investing 1L/month)

More Insight of Stock Holdings in India

  • Finance - 65% (Aavas 26%, HDFC 19%, Kotak+BajajFin 10%, HDFCLife+SBICard < 5%)
  • Consumer - 12% (Indigo Paints + Berger Paints + Asian paints 10%, Rajesh Expo 4%)
  • Consumer Food - 9% (HindUni 7%, TataConsumers 2%)
  • HealthCare - 2% (Concord 2%)
  • Metal - 2% (NMDC 2%)
  • Chemical - 6% (Archeam Chem 1%, Clean Science 2%, Fine Organics 3%) (Actively Increasing Holdings)
  • Helios Flexicap (3%)

According to me I’m over invested in HDFC Bank, aggregating to total exposure to 30-35% (Adding ADR) of portfolio. Same with Aavas Finance. I tried to add position in Kotak Mahindra and Bajaj Finance to reduce over reliance on HDFC Bank.

I use to have exposure to Tech (mainly HCLTECH) of 10-12% in portfolio but looking to current market and me being in software, I have exited in Dec '23. I also exited Godrej Properties few weeks back when valuations did not comforted me.

I also think, I have over exposure to largecaps and need some midcaps and smallcaps but that is not my style of investing. I feel they are overvalued and there is uncertanity. Still I have started exposing myself to small cap chemical stocks in current market as they are beaten down and I feel the cycle would start in next 2 quarters.

I’m looking to get some feedback on my current spread and exposure to equity. I’m also looking to invest fresh capital, what sector or stocks should I look more into. Eyeing myself to Finance and Chemicals but also looking more into consumer durables and wherever valuations comfort me.

Thanks for your time and reading it!

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2

You’re too much concentrated in finance sector which is 65% of your entire portfolio which is a negative point perse.

The simple reason of not investing in a single sector is keeping our capital safe, not even the smartest investor would put 7 out of 10 eggs in a single basket.

Your investment in single sector shouldn’t be more than 1/10 or 1/6 of your portfolio which comes down to 17% max.

Also a particular stock shouldn’t be more than 10%.

Other than stocks you have diversified in some safe investments which is a healthy long term perspective.

Also would you tell me your rationale for investing in Rajesh exports ? Have you followed the stock and what do you have to say about it’s recent downtrend following some mis governance issues ?

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Thanks Rishab, for the reply

  1. I’ll start to make sure that concentration in finance is lowered gradually. Although I’m trying to find sectors where I could diversify but current valuation there is limited options to me but for sure would lower weight i finance. More of I have started increasing exposure to Kotak and Bajaj Finance which would reduce HDFC and AAVAS exposure.

  2. Rational for Rajesh Exports: I try to put around 5% of portfolio in risky companies, where if it works then would give me great returns or I’ll okay discarding that investment. The reational, I started investing around 450 and downward averaged till 400. The BV was 500 which gave me sense of a bit safety along with reserves, although I was aware of the corporate governance issues but I also believed that it was fortune 500 company with one of the biggest gold producer/refiner in the world. Yes the corporate governance issues are there but when I entered I had not expected this much pain, currently sitting with 30% loss.

Questions:
What sectors whould you suggest me to study for reducing my exposure to finance, as mentioned currently looking in consumer durables and chemicals. I’m afraid as chemicals, realestate and all these sectors are cyclical, and here the goal is completely longterm with active reshuffling of capital.

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I also am invested in Rajesh and was sitting at good returns 5 months back, but my goal was slightly higher which I think costed me here.

Also I recently forrayed into Paper- JK paper, Power-GIPCl, and pharma-Sanofi, thermoplast-styrenix and cyrogenic equipmens - Inox india along with few others.

I reshuffled my portfolio in last 2 months.

Currently I am okay with slightly higher risk but i am looking at them with 2-3 years perspective.

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Study the following :-

  1. Recycling Sector and companies around it

  2. Ancillary to companies related with power generation such as transformers, power transmission, etc.

  3. I am bullish on Paushak and Alkyl Amines as they are niche

6

Financial heavy portfolio.
What’s your investment goals/expectations?
Also I would love to see your thought process behind investing/holding each of these stocks.
Wondering, why would you have 3 different paint companies in a consumer bucket?

Note that the markets are at all time highs. Froth has built up in mid, small, micro stocks. Expect huge volatility heading into elections. IMO, it is not the best time to buy. I think more pain is ahead for mid, small, and SME stocks.

Better to take profits off the table and sit on cash for now. Stick to leaders that to only fundamentally sound stocks.

7

Thanks @ca.rishab, for all the suggestions, I’ll make sure to go through them. Currently looking macroeconomic situations, I’ll be a low risk investor for next 2 years, would keep myself to low risk sectors, I’ll start reducing exposure to finance following the FED and RBI rate cuts, expecting them by end of Q2(Just my thing!). But would surely look into your recent investment and whenever valuations comfort me, would take positions. Cheers!

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Thanks, @Shashank_Mohan for the message.

  1. Recycling sector - I have tried looking for all the relevant players, the issues I find is, either they are expensive for my risk tolerance or they are small and don’t have enough information, most of them are SME. I would surely appreciate some suggestions.
  2. Ancillary to companies related with power generation - Same as Recycling and other hype sectors, i feel high valuation and not great players. Or it is my inexperience in the market that I don’t value it over the aspects I should. Here also I would appreciate some suggestions.
  3. Paushak and Alkyl Amines - They are currently under my observations, I feel the valuation comfort in Paushak and will start building positions soon but for Alkyl Amines still need a bit more valuation comfort for me.

Thanks for the message, will wait for the follow up!

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Hey @sameernics, for the reply!

You got me completely right :sweat_smile: I believe that with GDP growth in longer horizon, there would be outperformance from finance sector. Adding on top of that interest rate reversal is a macroeconomic aspect I would like to play, with decrease in interest rates the spread for banks would become favourable. So that’s my style of investing I guess, additionally I find them in sweet spot regarding valuations, HDFC Banks (for sure going through issues LCR, LDR, NIMS and what not) at lifetime low P/BV, I’ll buy that, same for Kotak Mahindra Bank too. Bajaj Finance (Yes, RBI is strict on NBFC but 30% growth is something which can not be taken for granted at this base), I believe that the culture in india is changing from saving first to buy first on loan. BF would be the biggest beneficiary for this. Aavas is my proxy play to Home Loans, I downward averaged a lot but would make sure it comes down in the weightage. Everyone is using cards so SBI Cards and the Life Insurance exposure would increase, the biggest story in next 10 years (whenever a persom would get job and get out of poverty, it would be the first finance instrument they would buy) hence HDFCLife

Well, this is my proxy to realestate and with paints being stuff on which families would spent for premium. The rationale, I had IndigoPaints and Berger as core holdings, one small cap for growth and another large/mid for stability in consumer durables, with recent slump in Asian Paints (getting under 10 years average PE, I mean 20% cheaper then it’s median price), started increasing my position, might exit from Berger and move completely to Asian but would definately hold Indigo Paints as it’s growing in some pace.

Yes Sir, I completely align to that, currently my portfolio is 65% in Large Caps and another 20% is stock which is trading at bare bottom, with maximum fall if can get of 10-15% (Aavas - SBIMF brought at current price, approx 8% of equity).

Yes, I have recently shuffled and booked profits, IT and RealEstate were the sectors I booked from. Currently sitting on considerable amount of cash. Can deploy around 10-15L if 15-20% fall is there in Large caps. Which I’m not expecting, having elections in India and USA.

Thanks, I would love to get some suggestions from your end on what sectors and companies are you targeting or watching to build positions.

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Check portfolio of Nalanda and following names

Ganesha ecosphere
TRIL
ACE
ADOR

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Sitting on cash at the minute. My eyes are on the market fall/correction. As it happens, I am keen to investing in 3 themes.

  • Renewable energy
  • Digital India
  • Defense
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Please provide link to Nalanda portfolio,
Thank you.

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https://www.moneycontrol.com/india-investors-portfolio/

Search on this link

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Sir, gone through that, can you please guide on pro and cons of Nalanda fund. Thank you, please.

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I am not able to understand your question?. Well, in order to understand, Nalanda’s investment thesis, suggest read a book written by Pulak Prasad, Founder , Nalanda “What I learnt about investing from Darwin” or listen a summary of it on YouTube. You will get an idea about Nalanda’s style of investment.

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16

I am not yet experienced enough to tell someone whether they have the right portfolio. If I did, probably I’ll be having the most ideal portfolio myself. But would like to offer a few thoughts for your considerations.

In constructing a portfolio there are primarily the following choices an investor is faced with:
1- What stocks to buy
2- What should be ideal allocation of capital among stocks
3- What is the best time to enter a stock
4- How long one should hold a stock

Scores of books, opinions and research are out there that offer contradictory viewpoints on these factors with strong empirical evidences to substantiate their arguments. There are equal number of proponents of concentration and diversification and equal number for “buy and hold forever” and rotation and so on. There is just no singe answer to these questions that has been universally accepted to hold true for every one.

As the cliché goes, time in market is what matters more than timing the market. Since you are still very young, you have time to experiment with different investing styles and see what works for you. Once you have been through couple of market cycles over the next few years, you will eventually figure out what style works for you. (Trust me that what you think works for you will change in next 3 years.) Many successful investors have self-admittedly gone through similar journey of this self-discovery.

One key thing you have to take care of is protecting your capital. To quote another well worn cliché, risk management is backbone of investing. If you can go through this learning period without losing a lot of your capital or even better make some decent returns, you are set to do well with all that experience and knowledge in the long run. To protect capital it’s important to choose the right companies and not worry too much about whether you are in the right sector or not. You can always allocate part of your capital to try some risky ideas in small or micro caps space but important to stay vigilant there.

Good luck with your investing journey.

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17

Dhruv,
it’s very encouraging to see that you are considering and initiated investment in your 20’s and since you have very long time available with you my advice would be contrary as follows:

  1. Start index investing in SIP mode
  2. Include one or two good mutual fund in SIP mode.
  3. Direct stock investing requires lot of time, energy, patience and hard work. I am afraid you being in software that too in North America, will it be feasible for you to do the justice in two fronts which is equally challenging and time consuming. You can in the mean time over a period of 5 to 7 years gather some investing skills, reading skills, understand market depth and breath and then take a plunge. Not to dishearten but 99% chance is that beginner in stock market will fail to earn return beating index. It is not a question on anybody’s intelligence but it tests extreme patience and decision making ability in always tough and volatile scenarios.

Hope it helps. All the best!
VK

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HI Vijay,

Thanks for the reply and good words.

I really want to start SIP, I have a bit of exposure in US EQUITIES ETF, It’s in my Retirement Portfolio, and I actively put in 2000$ a month into that. The major issue is I don’t believe in SIP or Mutual Funds currently.

I don’t know but I love to spend time understanding more about investing and finding companies, yes I understand this is not a thing which anyone can do partime, but still I would try to play around with 20% of my capital, although I’m pretty safe investor with 70% in more of largecaps. I think I’ll give myself more 2 years with the ideas I have explored and learning with the mistakes I made choosing wrong. If I fell that I’ll pretty much move everything to index funds rightaway. Currently I’m still underperforming Nifty100 as my XIRR is 17% over 3 years (I know it’s bull market and everyone is making profits), not taking bull market for my skills.

But would surely take this in the consideration.

Thanks Again!

19

Can you plz explain why asian paints down

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Hey @Ghanshyam_Singh, Thanks for asking. I have currently started monitoring Asian Paints, this is new investment for me. I have exposure to Indigo Paints and Berger Previously.

Please take it with hint of salt this is my understanding. My initial thoughts!

  • It is biggest decorative paints company and all good things marketshare, management, data and everything but my reason for investing is I believe paints as segment would continue to grow as india becomes richer and there is higher spending power
  • Additionally I own the basket of paint companies as I expect all to do well in long term.

Why I stated investing in Asian pains

  • Because it is falling !!
  • Yes I know this should not be the reason for investment but for me, Asian paints is fundamentally strong company with good promoters. It has been trading at premium compared to other peers in consumer durables. But now the permium is eroded and I cot get at decent valuation. Yet not the cheap or extremely cheap. I don’t expect asian paints to fall in my cheap category anytime!!
  • P/E or P/B ratios are comfortable for me now. Additionally there is moderate sales growth but the uncertanity in oil prices have came down, which would allow it to be stable

The biggest threat !!

  • Birla and JSW group has started coming into decorative paint business, this could potentially harm the marketshare asian paints command, there would be price war between these giants. But I believe that asian paints would be able to overcome this with previous experience and data which it has. More of my entry is at moderate valaution, even if there is P/E derating, with sales and profit growth, I would still be safe.

Disc: This is just my view and I’m invested in Asian Paints (currently 1% of PF will be adding and bring around 5-7% in 6 months)

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