Dream FIRE Portfolio

Q&A: Questions & Answers Portfolio Q&A
21

Thanks for writing on US/Tech stocks.

This is one of the screeners I use along with Yahoo screener -

  • Sticky revenue - I work in tech and noticed that enterprise tech decisions at $1B+ companies are taken after lot of deliberations (3-6 months cycle). A competitor would need to go through similar cycle and need to come with much better product spec to displace an existing offering. So revenue once booked is mostly sticky unless the product deteriorates.
  • Monday.com, Confluent are my big bets in US stocks. Decision taken based on P/S numbers at that time. Reading more on other stocks in this basket.
  • Snowflake seemed expensive to me while growth rates are awesome, couldn’t add to position yet because of it.
  • While these companies could be loss making, they have already established and in US lot of capital would be available to these players if they ever need more.
  • My typical investment horizon is 4+ years unless something materially changes. I rarely look to sell companies.

For FIRE, i’ve a simple calculation -

2L per month x 12 months = 24L
If a portfolio is doing 20%, 1.2 Cr should be good for FIRE :slight_smile:
Heard about a new term. FIRE & Work on your own terms
** One can always multiply these numbers with x :slight_smile:

22

Challenge is to find winners from all these SAAS stocks and hold on to them for a long term to generate generational wealth. High inflation era is a true acid test for all these companies and their products. Customers will continue to choose/stick with products that are mission critical and essential for their success. In a recent J P Morgan and Morgan Stanley CIO survey, Snowflake products (along with ServiceNow/UIPath/Crowdstrike/Atlassian) came out as top 5 list of products for fresh/additional investment consideration. It’s interesting to see how billing growth fairs for these companies in this tough environment. I also noticed that once the market realizes/anticipates a winner in products/business model of a company then it does not hesitate to assign high multiple valuation to respective stocks. That way I am fine with Snowflake commanding high valuation even in this crazy market.

23

Update after 2 months. Since the last update my portfolio stocks have suddenly started getting love from all over places:) The situation a couple of months back was exactly opposite when the same set of stocks were getting hammered mercilessly. Though business fundamentals did not change then and now. In fact, fundamentals have improved for a few businesses in my portfolio stocks. Portfolio big winners like Mold-tek packaging. PI Industries. Deepak Nitrite, Polycabs, Pidilite, Kajaria Ceramics, Bajaj twins keep on winning even in this tough market. Cherry on the cake is manageable/less beta/volatility which is unmatched within developing/developed markets.

I also invest in the US/International/Developed market. But I can say from my experience that it’s near impossible to make money in a developed market just buying and holding good stocks for the long term without bearing gut wrenching beta/volatility. Take for example businesses like Shopify/Zoom that were darling during pandemic (even before pandemic), now stock prices for these businesses are hitting new low (down approx. 80% from all time high) almost everyday though they are still growing topline/bottomline high teen percentage YOY. Whereas my India portfolio company like Deepak Nitrite/Apl Apollo tubes reported profit degrowth but stock price hardly moved in downside. To same analogy, pandemic darling like Vaibhav Global should now be trading as two digit stocks had it traded like US market valuation:)

All I am trying to convey is that if one can concentrate a portfolio around well established known businesses then it seems to be a little easier to make money with manageable volatility from the India market than the developed market. But one downside is that as these businesses remain pricey, value investors get a very rare chance to load up on good businesses in the Indian market, whereas such opportunities are abundant in the US market all the time. Just for sake of data, Apple’s 3 yrs beta is 1.23 whereas Asian Paints 3 yrs beta is just .60. But in the same period, Apple returned 230% whereas Asian Paints stock appreciated 120%. Obviously the Indian market should be embraced by investors who have already made money from their own profession and want to grow the pie with very little hassle with almost 18-20% CAGR just investing in quality and so called expensive stocks for the long term. Not bad if one is already a millionaire:)

Made a couple of changes since the last update. Sold Havells India (held it almost 3 yrs, with 75% gain, did not like severe margin compression in the latest quarter) and replaced it with Titan. Replaced Delta corp (flat gain) with Mas Financial which I bought again after selling it just before pandemic lockdown. Bought more Dr. Lal Pathlabs as well. Added Dixon Tech and Indiamart to portfolio. These stocks could be another great compounder in making.

Portfolio Performance:

1 year: 2% VS Nifty: 7%

3 Year CAGR: 28.1% VS Nifty: 17.6% (Return got significantly boosted when I only started buying expensive quality stocks since 2019:))

5 year CAGR: 18.1% VS Nifty: 12.73% (Return is affected due to bad bet on all sort of money loosing stocks/strategies like PSUs/Infra/Value/Low PE/Contra bet in 2016-18 period)

Stocks Buy Price Gain

APL Apollo 933 14% → Compounder

Asian Paints 2293.30 51.86% —> Compounder

Bajaj Finance 3840 90% —> Compounder

Bajaj Finserv 9583 70% —> Compounder

CarTrade Tech 1175 -46% —> Bet on new digital tech

Deepak Nitrite 334 511.11% —> Compounder

Dixon Tech 3966 1% → Compounder in making

Dr Lal Pathlab 2332 5% → Compounder

Granules India 85.90 264% → Compounder

Hdfc Life 651.66 -11.51% —> Compounder

Indiamart 4601 -6.60% —> Compounder in making

Intellect Design 676 -9.72% → Leader in IT Product Category

Jubilant Food 1945.26 53.32% —> Compounder

Kajaria Ceramics 586 102% —> Compounder

Mas Financial 534.80 22.58% —> Compounder

Mold-Tek Pack 259.26 275.59% —> Compounder + Div Growth

PI Industries 653 406.30% —> Compounder

Pidilite 328 729% —> Compounder

Polycab 999.87 142% —> Compounder

Relaxo Footwear 747 34% —> Compounder

TCS 1298 160.68% —> Compounder

Titan 2044.53 19.37% —> Compounder

Vaibhav Global 81.79 292% → Compounder, will add more

6 Likes
24

Update on my US portfolio.

Since the last update, the US portfolio has recovered a beat to the tune of overall market recovery. Portfolio is still down 23% from Nov, 2021 high. I am now experiencing the most devastating and painful bear market in my investing journey. Last two US bear markets (>20% fall) were sudden (2018 and 2020) and eventually recovered quickly. But this one is testing my nerves and sanity as days go by:) Till now I am able to keep my behavior rational and refrain from being my own enemy by not doing foolish activities with my portfolio stocks. Overall portfolio is still in green even after this carnage. I take it as a little consolation reward being invested in the market across cycles (good and bad time). Unlike in the 2020 bear market, in the present bear market portfolio dividend yield went up slightly (as companies are being pressured to reward shareholders with more dividends in absence of growth).

We casually vow to remain in the market even if portfolio value falls 50%. I had to fill up such a survey before opening my brokerage account. Now I am in such a real life situation where my portfolio fell 40% during peak bear market. No doubt it hurts, Then I realized the importance of asset allocation especially for novice retail investors like me. I have absolutely no idea on how long this bear market will last. But at the same time history suggests that the market will eventually recover. Now to remain in the market and gain solid staying power one must keep emergency/other conservstive liquid assets handy. Imagine a scenario where one’s equity portfolio is down 40%, is living life paycheck to paycheck and need a large chunk of money for some unforeseen emergency. It definitely invites trouble in the not too distant future and investors will be forced to sell shares at loss. I believe this is more painful than taking 50% paper loss. Sound but not so perfect asset allocation helps me to sleep in peace at night and this is the single most important reason behind keeping my cool even while remaining invested in this brutal market. Having said that, I still need to work on it and shore up my debt investment while the good time in the Indian market lasts.

Now coming to the company specific update, most of my cloud SaaS growth stocks have recovered and are in green.
The Trade Desk/Crowdstrike/Zscaler/Snowflake/MongoDB/Confluent have reported a blowout quarter. The Cyber Security sector is turning out to be recession proof business as customers are willing to invest in new cloud based zero trust products without hesitation. Crowdstrike/Zscaler unique products are actually saving money for customers as their solutions don’t require expensive firewall hardware to be installed and managed by customers on-premise. I am most bullish on the Snowflake and Trade Desk business. Snowflake is trying to create a platform to build apps which deal with data. History suggests that outsized return can be achieved by investing in such platform companies. I may be wrong here. Since my last update, renewable energy solution company Stem has already doubled my money. It got the much needed tailwind after the passage of the inflation reduction act in the US.

On the flip side, Zoom, Shopify, Nvidia and Upstart keep on reporting disappointing results. As I am a firm believer of AI/ML tech so I am willing to hold (adding more) these businesses for the long term. Upstart’s AI model is still performing superior to FICO’s model. This is enough for me to remain invested in this business.

US 5 year portfolio return : 9.7% vs 12.59% S&P

That’s all for now. Long bear market stinks. It could start any time and without giving notice. But retail investors can deal with such a market with proper asset allocation.

Happy investing!!!

3 Likes
25

That’s a nice portfolio!

26

You have got a nice portfolio. Keep up the good work!

27

Update after 3 months. All my portfolio companies except Relaxo and Intellect Design reported a good set of earnings. As a result I have reduced position in Relaxo and added more onto the Indiamart position. I have also replaced IDA (booked 25% loss) with Latent View Analytics which primarily operates in the Data Science/Analytics domain that IMO has huge potential for runaway growth. I have also added two new stocks in my portfolio, Ethos (may have Titan-like potential in the luxury watch segment) and Varun Beverage (compounder).

My portfolio companies are now going through much needed correction that started couple of days back. Not sure if any deeper correction is lurking along the way. In any case I don’t have any intention to sell these jewels anytime soon. In fact if opportunity arises will add more to existing position.

Portfolio Performance:

1 year: 1% VS Nifty: 3%

3 Year CAGR: 25.1% VS Nifty: 15.49%

5 year CAGR: 16.3% VS Nifty: 12.19%

1 Like
28

Recently, VBL has good run-up, in view of various events favoring it. As you added recently, what is underlying theme. Whether it has potential to compound in ensuing years. Also, there is news of Campa cola launch by RIL. Do you think it may affect the market share of Pepsi, hence VBL.

29

Good to see a few of my portfolio companies’ presence (15 out of 25 portfolio companies) in this year’s Motilal Oswal wealth creation study (2017-2022).

APL Apollo Tube

Asian Paint

Bajaj Finance

Bajaj Finserv

Deepak Nitrite → top 5 fastest wealth creator

Dr Lal Pathlabs

Jubilant Foodworks

Kajaria Ceramics → Volatile earning but still outperformed benchmark by wide margin

P I industries

Pidilite

Relaxo

TCS

Titan

Varun Beverage → Bought recently

Vaibhav Global (Mentioned in report, but did not make it as last 5 years CAGR is only 37%:slight_smile:

I am a bit lucky to have these multibaggers in my portfolio since the year 2019. And no wonder why my direct stock portfolio 4 year CAGR is north of 22%. No idea how long this dream run will continue, anyways I am hoping for the best:) Won’t be surprised if Polycab and Mold-tek packaging shows up in the next couple of years wealth creation study. Will continue to hold these companies as long as earning remains consistent, and does not show significant volatility. As per their study, volatile earnings is actually a recipe for major underperformance. This is the primary reason why I sold IDA recently.

As now financial and services are showing some growth so I am pinning my hope on Mas Financial/Bajaj Finance/Finserv for next year’s outperformance.

Happy investing…

2 Likes
30

No idea on how competition will pan out in the next few years in this space. Will hold it as long as earning growth remains consistent.

31

Above all, earning from these stocks helps me to keep churn in my portfolio under check. In the last 4 years, I hardly had to make 25 odd transactions in my brokerage account. As of now, these are meeting my criterions of so-called nirvana stocks where wealth gets compounded at a healthy market beating rate with minimum churn and hence the most tax efficient way. As a result, It helps me to keep my focus on other things/works that I am good at/passionate about.

1 Like
32

Its very nice that your churn is very low. This will turn out good for you in future also

33

Year end update for my India direct equity portfolio. I have not made any new transactions since the last update. Biggest Winners are Mold-Tek Packaging, PI Industries and Varun Beverages, whereas losers are Deepak Nitrite, Vaibhav Global and Kajaria Ceramics. Overall portfolio ended with negative to flat 1 year return against 4% 1 year Nifty return.

Taking cue from the US 2022 horrible bear market I am now convinced that the slim outperformance that I have over 3-5 year nifty returns in my India portfolio will disappear in a couple of months if and when the India market goes through similar long sustained bear market:) Long sustained bear market stinks, that time nothing seems to work for retail buy and hold kind investors like us. Life gets more difficult when both stocks and bonds prices fall in lockstep. That time one’s patience/resolve/conviction gets tested big time. More importantly asset allocation/diversification matters a lot, it determines one’s staying power in market in bad time like this. I pray that the Indian market should not experience it ever:)

I notice that since the US financial crisis the US market consistently outperformed the Indian market by a wide margin till 2021. If this year’s outperformance is any indicator then India should outperform the US market in the next several years to come. In that context I am more bullish on the India smallcap/microcap segment. Since the beginning. US smallcaps consistently outperformed US large cap stocks till US GDP reached approx $15TN. As the economy became more formalized and organized, large caps started outperforming smallcaps in subsequent years. If the US economy is of any guide then I expect a similar story to play out for a young economy like India. Instead of investing directly in small cap companies here I am looking for a good small cap ETF/Index fund (no Mutual fund) to park my surplus money for several years.

Let’s hope that good days for India market continues forever:) Wish everyone a very happy and prosperous new year. Happy investing…

3 Likes
34

The Indian market seems to be stuck in a range since the last 3 months. This is nothing like the pain that US investors are going through since Nov, 2021. I have made a couple of changes in my portfolio, sold Dixon tech (-20%), Relaxo Footwear (10%) and HDFC Life (-17%). Can’t hold shares of companies whose revenue is in perpetual downtrend in a growth market like India. I have made fresh investments in Paytm (I use Paytm almost for all transactions and fine with business performance) and Route Mobile(very much correlated to Twilio’s stock movement and I am bullish on Twilio for the long term). Somewhere I read that Indian HNIs like to collect/buy luxury watches (seems to be a unique hobby within global peers) beside real estates and jewelry. This takes me to invest more into Ethos. Need to see if it can create magic in the luxury watch segment like what Titan keeps on doing in the jewelry and affordable watch segments. Now technically speaking Ethos is building base before moving into either direction.

I have kept my investment intact with big winners in my portfolio. Big multibaggers are Polycab(3X), Deepak Nitrite(5X), Mold-Tek Packaging(4X), Vaibhav Global(4X). Granules India(3X), Kajaria Ceramics(2X). PI industries(5X) and TCS(3X). Among these shares, PI industries, Polycab, Pidilite and Mold-tek packaging seem to be all weather stocks. They always perform irrespective of market conditions. At present Polycab, PI industries, APL Apollo, Titan and Route mobile are outperforming the market by wide margin and giving my portfolio a nice boost/support even in this dull market.

As mentioned above, if anything new I have done is to cut my losses quickly and invest money into new emerging opportunities. This strategy (keeping winners/leaders for long term and getting rid of losers ASAP) seems to be helping me to find new multibaggers and beating market return in the long term.

Portfolio return vs Nifty

1 year: 2.3% VS Nifty: 3.7%

3 Year CAGR: 20.3% VS Nifty: 14.21%

4 Year CAGR: 21.1% VS Nifty: 13.96%

5 year CAGR: 17.7% VS Nifty: 11.57%

Disc. This is not a buy/sell recommendation. Biased as invested in all stocks discussed above. Not a SEBI registered advisor.

1 Like
35

Can’t say this for HDFC life. It’s growth in topline has been in double digits…VNB Embedded values and other metrics which define insurance topline have been growing well…why you feel it’s revenue has been in downtrend?

36

HDFC life insurance yearly revenue seems to have peaked in 2021. It’s yet to cross that number even after a couple of years. Even if it happens in Fy23 then the YoY growth will only be ~5%. It’s another debate if revenue growth will peak in the coming year. Additionally it also has an overhang of merger of HDFC groups. This shows why the market is not giving much respect to this exceptional franchise for the time being. But in the long run it may turn out to be a great compounder as it has all the hallmarks to become so.
So the game plan should be simple to follow. If someone is convinced/confident on its future growth potential then it’s a great time to average with specific position size in mind. Otherwise it’s better to move on and find other bargains from the market. Personally speaking I don’t have a good track record of making money from insurance companies (except Kinsale Capital in the US market), hence I preferred to bail out.

1 Like
37

How do you calculate CAGR of your portfolio?

38

I record all my transactions in valueresearchonline. It nicely keeps tracks of annualized return of my mutual fund and equity portfolio.

39

US dividend portfolio and FIRE update…

Bulk of my passive income comes from dividend income from US stocks. My US dividend portfolio is made up of REIT/BDC/ETF and Dividend growth stocks. US REIT/BDCs/Covered Calls ETFs are my hunting ground for searching for high dividend yield with prospect of good total return. Overall portfolio dividend is growing 11% CAGR since last 7 years. Here is the portfolio breakdown with allocation

SCHD 22% —> IMO it’s the best dividend growth/oriented ETF one can get in the entire world stock market as of today, primarily consists of Buffett-like stocks that have impeccable balance sheet, cash flow and dividend growth potential. Last 10 years total CAGR return even beats S&P 500 returns. Whenever possible I keep on averaging at steady clip since year 2016. I can clearly notice the so called snowball effect of dividend income from this investment.

SCHB 20% —> ETF tracks S&P 500, dividend growth 9% CAGR

SCHA 14% → ETF tracks US Small cap, dividend growth 8% CAGR

QYLD 6% → This is a unique ETF that is not available in the India market. This is a Covered call ETF whose underlying asset is made up of Nasdaq 100. It distributes monthly dividends as it earns premium by selling covered call options on its underlying asset. Dividend yield is high, close to 14%

MSFT 6% → Microsoft is Number 1 software company in the world. It has now created AI hype with chatGPT, an emerging AI app. My primary reason to stay invested in MSFT is for its dividend growth which is growing 10% CAGR since last 7 years.

NVDA 6% → Does not matter whether MSFT or Google or other companies win the AI race, the world needs NVIDIA’s GPUs to train AI models. I kept on investing in NVDA shares last year during the Nasdaq rout. Since then it has recovered nicely. Right now it’s a picks and shovels play during AI hype time, but one needs to be careful as it may very well turn out to be like another Cisco after the dotcom bust. It also pays and grows dividends – which is like Icing on the cake.

KNSL 6% → Kinsale Capital is Small cap US based specialty insurance company. It operates in a niche insurance segment. Though I had to sell HDFC life insurance in India at a loss but I recovered more from this investment in US.

NKE 4% → Nike is leader in its respective segment. Invested since 2016. Dividend growth CAGR is 10%

PSEC 4% —> Business development company, pays monthly dividend and total return beats S&P 500. Dividend yield is 9.8%

GAIN 4% → Another Business development company, pays monthly dividend with quarterly supplemental dividend and total return beats S&P 500. Dividend yield is 6.5%. Last year it increased its dividend when other BDCs either slashed/suspended their dividend due to tough macro condition.

ABR 4% → Arbor reality is the best REIT one can get from US market. This is the only REIT whose total return beats S&P 500 return by wide margin in last 9 years. It also increases its dividend almost each and every quarter. I am fortunate to find this company early and remain invested since last 4 years. Current dividend yield is 10%.

V 3% → All of us knows about fintech leader Visa, its dividend grows 10% CAGR

INTU 1% → Intuit is leader in tax software, now they are diversifying their business with Credit Karma/Mailchimp acquisition. Again it’s a 10% dividend grower.

I am holding most of these investments since 2016. Whenever possible I keep on averaging these stocks with specific dividend income target in mind. I also have separate growth portfolio made up of some crazy US small cap stocks which is bleeding badly after Nasdaq rout. I follow the plan where beside dividend re-investment, I sometime book profit from growth portfolio and invest more in these companies to utilize dividend snowball effect in long run. Since last 7 years portfolio has returned close to 14% CAGR VS 12% CAGR S&P 500 return.

Now dividend income from this portfolio is enough to cover 3X of my family yearly expenses. I plan to call it quits as soon as it covers 4X of my family expenses, hopefully by the year 2024:)

Disc. This is not a buy/sell recommendation. Biased as invested in all stocks discussed above. Not a SEBI registered advisor.

2 Likes
40

I read someone mentioned 20% CAGR. I believe if you are well diversified then one should not expect IRR of more than 15% in long term.