Gaurina Portfolio Review

[Gaurina1803]

Hello everyone, I joined this forum last year & until now have been a silent spectator and was trying to learn from all the valued contributors & improving my learning curve.

This is my first post on this great forum. I hope further to improve my knowledge & would be able to contribute to this forum.

A little introduction about me

I Am HR professional and who off late had been an avid believer in mutual funds. My investing journey started in 2005 but that was only limited to NSC & FDs. It was then year 2013 when one of my friends suggested investing in MFs; and started investing based on his suggestions.

It was year 2015 while headhunting a candidate for a senior position as my prospective candidate for GM position shared about his ESOP holding. He was interested in a job change but was looking for his ESOP compensation. This intrigued me to learn more about ESOP and eventually diverted towards stocks & thus started my equity investment journey.

My philosophy of Investment

This may look like a stupid idea to most people in the group coz being in HR I understand people very well. For me, the success of a company depends on it people & people practise which are reflection of the company’s culture. Hence developed a belief that invest in companies that have strong & stable Human Resource function, rational being – Strong HR function would be only possible when companies are:

1. Religiously follow the Vision & Mission of their company
2. Companies that are Ethically Strong hence are Compliant, have Enterprise Management & are Responsible.
3. Companies that focus on employee development hence better organisational performance & Innovation.
4. Companies that have Transparent Management hence attain Leadership & become market leader.

Otherwise, in most companies, HR is just an administrative function.

With this belief system, I started my investment journey which was further drilled down to:

1. The tenure of their HR heads.

2. Employee Engagement Scores

3. LinkedIn profile of the key personnel’s – Qualification & Experience.

So based on my belief system I first invested in HUL, HDFC, ITC & ICICI Bank all in very small quantities at the same time being super cautious also.

I would not take much more time to explain this but in short, this has been my investing philosophy.

My portfolio which has been built over the last 5+ years is based on the above premise. Further, I have divided my portfolio into 4 parts. While constructing this portfolio I might have bought some shares based on family & friends’ advice but largely it is built on my belief system.

1. Core portfolio – For Retirement
2. Satellite portfolio – For Kids
3. Dividend Folio – Building corpus through reinvesting.
4. Requires Realignment

I generally buy and keep; I do not trade coz I do not understand when to exit.

I am sharing my current portfolio for review and critical feedback from all stalwarts of the group. Any kind of suggestions on my belief system & portfolio are welcome. I do not have competence like most of the board members here, but I have built it on the above premise and somehow this has yielded me good results.

I am open to learning (especially the numbers and balance sheets) to realign my portfolio.

Please feel free to comment, criticize my thought process, blind spots. It will help me greatly improve myself.

Thank you.

[d.investor]

Hello Ma’am, you have build an absolute envious stock portfolio. Both Core and satellite portfolio have very good quality companies and there is a lot we can learn about portfolio building from an experienced person like you. The only company that I don’t like in your satellite portfolio is JSW steel as it is a cyclical play. As far as your realignment portfolio is considered I don’t like any of the companies and has performed much worse than the other 2 portfolios.
For your dividend portfolio you can consider REIT’s or InVIT’s, they have lesser price volatility and a part of their dividends are tax free. VP has a very good thread on Embassy Reit please do check it out.

[sameernics]

@Gaurina1803. Before I could comment on your post, I am bit confused with the sheet, particularly purchase price column and annual returns. Just an example, take IRCTC, you mentioned Rs 1592 purchase price and annual return of 141%. Just wondering how did you arrive at this return number? Likewise there are several cases in the same sheet. Is it an error or am I missing something?

[Gaurina1803]

Hi Sameernics, Thanks for your feedback & observation. As I mentioned I am not very good with numbers hence I just used the formula for calculated annualized returns from one of the excel sheet in google.

The formula is
Annualized Return = (Absolute Return x 365/No. of Days)
Absolute Return = (Profit/Investment x 100)

Hope I am correct. Pls guide.

[Gaurina1803]

Hi d.investor, JSW was birthday gift from my uncle to my daughter.

[sameernics]

IMO, Absolute returns is the right way to track the performance of your portfolio.

Looking at your stocks list, glad to notice, you have learnt how to pick one, which is a most difficult part. As regards to your portfolio, here are my comments.

1. Too many stocks and practically impossible to track them.
2. Core part looks good, but I must say very heavy with financial stocks, so its a key risk to me. Many people may argue, but I am not a great fan of ITC, as the stock failed to perform for last 8-9 years. Instead I would rather pump ITC money into Nestle. Likewise, your pick of Jubilant foodworks. do you really think pizzas would continue to be healthy choice for the next generation? Co is sitting on high debt on the books too. Interesting that there is no Pharma name in the core ?
3. Kids part looks okay except JSW steel, sitting on huge debt. I understand the sentiments of gift to your daughter (But, emotions do not work in the stock market).
4. Nothing special about Realign part. I would rather get out from all.
5. Dividend part, do you really need this? I think your returns would be much higher even if you park your funds in core part.

Once again I repeat you have too many stocks to really follow them. The thumb rule of equity markets is, you need to keep a track of each company in which you have investments, no matter how good company it is. All the best.

[Shankar]

Core and kids portfolio are very good. Some observations are - JSW Steel adds cyclicality to the portfolio. the business is capital intensive / leveraged /

[Saurabh2]

@Gaurina1803 Are you investing in all via sip regularly?or? Whats the way of your investment?

[Gaurina1803]

@sameernics, I do agree with your feedback on the number of stocks on the list and I do understand the practical problem of tracking so many stocks. I do plan to trim down the list in a phased manner.

Screenshot attached for reference.

Well with regards to ITC I consider it as one of the best company which invests heavily on employee development and I know some of the instances where ITC agreed to pay fine and legal dues rather than paying 1/4 the cost of the fine to Government officials to clear the cases.

Based on what I have read maybe tomorrow when ITC decides to demerge its tobacco & FMCG business It will reap better valuation, hence holding it. On the other hand, it has been giving good dividend too.

With regards to Domino’s, I personally feel that it will still remain a popular food category among the age group of 10 -16 years and with both working parents in most of the urban family it is one of the most popular fast food. At the same time, I understand the capital involved, high rentals & high employee turnover & shrinkage make the retail company not so profitable business hence kept my investment on the lower side.

I am not emotional on JSW but was unsure of the exit point hence kept holding it.

Requesting feedback. Thanks @sameernics.

[Gaurina1803]

Hi @saurabh2, I do not invest through SIP, I buy regularly and possibly when market is down. Again depends on the cash in hand. Any specific reason for asking this question? Please do let me know. Thanks.

[Investor_No_1]

@Gaurina1803

This may look like a stupid idea to most people in the group coz being in HR I understand people very well. For me, the success of a company depends on it people & people practise which are reflection of the company’s culture.

I think no strategy and no thought process is stupid if it works for you. The fact that one has a unique thought process is his/her edge over others in this long term game. Good to know this unique strategy of yours…however, I am surprised to see so many companies that have all such excellent HR frameworks & execution and pass your test! Personally I dont think so many would and should pass your test…as your points are very strict and rightly so!

I am not looking much into your realign & dividend part as you would eventually come out of them as rightly mentioned by others above…

Regarding your core, I see most would pass your test specially - HUL, Tata group, HDFC, Asian, Infy, Colgate, Pidilite, ITC…not sure about ICICI group, Bajaj Finance, SBI, RIL, Jubilant & Dmart (not heard much about Jubilant & Dmart on HR perspective…although personally I like these two firms).

Regarding your Kid’s portfolio - This is what is intriguing that on what basis have you seperated core from Kids part - Dr Lal, ICICI Pru, Havells etc ar epretty much established large caps… for eg. I dont see a reason why ICICI Pru should be part of Kids and not core while ICICI Lombard part of core and not Kids…

Second point about your kids portfolio - do all companies there pass your stringent HR tests and deserve an entry there? - Indiamart, Deepak nitrite, Laurus, JSW, IRCTC, Sonata, Relaxo?

Also, the HR tests, how would you find out the truth for smaller relatively unknown or upcoming companies?

Pls note why I ask above questions is to ensure that you are following your own principles or not or are slowly but surely getting swayed away in the noise around…I keep asking such questions to myself as well!

[vjf_0907]

Nice portfolio…how do u decide the allocation between core and kids’ portfolio? Is there a monthly amount allocated to each or do you focus on core with ad hoc to the kids’ portfolio as u build conviction on the companies?

[sameernics]

@Gaurina1803 , Good to note that, at least you have a plan to trim your long list. I see the list and on absolute returns basis, some of the stocks either gave negative returns or barely in positive (unless, you bought them very recently). So keep a track and have strict stop loss for these stocks, should markets fall.

Coming to ITC, The stock has not performed since 2013, so imagine the frustration of shareholders. Isn’t it so long wait?? And do not get misled by divided yield of ITC, it is bound to be high as the stock price is low. Also keep in mind FY21 onwards all dividends are taxable so check your post tax returns. Well, ITC may be an employee friendly company, but for me (as an investor) I expect it to be a shareholder friendly company too. Looking at its sever underperformance for years, I do not understand why the management is so lazy to take a call on demerger to unlock the value for shareholders? Well, for me the bigger issue is promoter holding in ITC, which is “0”. So where is the promoter skin in the game?? I hate companies having no or low promoter holding. Rest is your call.

I fully agree to your original post, your belief, quoting success of a company depends on its people etc. etc…but there are several other business dynamics which are critical for the success of the company. Hence, in stock selection, HR is just one measure amongst several others. For me, parameters beyond HR (management quality) are ROE, ROCE, debt, promoter holding, dividend paying, last 5 years top line & bottom line growth, monopoly / duopoly, any entry barriers etc. and finally whether the company (sector) has all the tailwinds to do well in next one decade?.

Coming to Domino’s pizzas, more than my conviction, its your conviction and your call matters the most. In a highly competitive food market, one will have to wait and see how the management executes their future growth plans. For now, just keep an eye on few red flags…dramatic high borrowings (debt) on the books since 2020 and negative cash flows in 2021.

Well, JSW in a way they came free and you have nothing to lose and today you are sitting on 8-9X profits. At the minute, all metal stocks are in super cycle owing to good demand from the large economies and hence good rally in all metal stocks irrespective of their fundamentals. So exit, when the party is over in them and get few high quality (mid/small cap) stocks in kids portfolio, which might turn into multibaggers by the time your kids grow up.