So I currently have 15% portfolio exposure to pharma, chemicals and healthcare. I know that pharma and chemicals have delivered excellent earnings and have strong tailwinds for the next few years as well. However, to take large concentrated bets - I need to have an edge in these sectors in terms of my business understanding or actually working in that sector. I have neither at the moment and this would result in me feeling very vulnerable if there were some big shocks to any of these sectors and not allow me to sleep peacefully at night. Hence, I diversify across multiple sectors and I genuinely believe you can make money in almost every sector as there are 150-200 excellent businesses / managements in India across different sectors.
Here’s an example. A fintwit with more than 100k followers had recommended in April 2020 to stay away from 7 sectors which will suffer badly due to Corona. I questioned the wisdom by creating a model portfolio of some of the best market leaders from those very sectors. Here’s the result:
My objective is to build a diversified bullet-proof portfolio which lets me sleep peacefully by betting on the best Indian businesses across sectors. So basically, my portfolio should perform badly only if the future of India as a nation is in doubt or some global event / crash and not if 1-2 industries fall by the wayside.
Disc: Invested in 5 of the 7 - Kotak, Titan, APL Apollo, Eicher and IGL.
PS: There is 1 SME pharma company Beta Drugs on my radar which I sold last month and may buy back at a much higher premium. Management has guided for very strong growth for the next many years, you should go through the latest concall and transcript - full of distinguished VPers who could be behind the massive run up in the stock in last month.