Almost 3 years since my last portfolio update and wowie what a ride it has been! From the highs of Jan 2018 to the depths of Mar 2020 - gotten some first hand lessons of
- How a market frenzy and bubbles are getting formed (Bitcoin, SME IPOs at 30-40x valuations)
- Perils of micro and small-cap investing wrt valuations
- Extremely dangerous sectors for investment without enough research and knowledge (read Financials - ILFS default, liquidity crunch, NBFCs blow up terminating with Yes Bank reconstruction)
- Completing graduation with market crashes - what it feels like psychologically and emotionally to see day after day of waterfall like plunging markets - March lower circuits anyone?
As Ian Cassel says - Investing is a lifelong education and its teacher is loss.
And talking about loss, I’ve had my fair share of participation in all the above market lessons (Lasa Supergenerics, Secur Credentials, Yes Bank amongst my biggest losses along with few other financials Piramal, MOFSL, etc. with somewhat bearable pain).
And somewhere along the journey, this happened last year to significantly change my style of investing
Reading Saurabh’s book also helped me think a lot more about keeping in mind specific financial objectives and goals investing with. The book provides access to Ambit’s financial planning tool, where you can put in your/wife income (along with expected annual increments), annual category wise expenses (adjust for future inflation), recurring / non-recurring life goals (house, car, vacation etc etc.), secondary sources of income, etc and then calculates what CAGR% you need to generate to achieve those financial goals.
And for me the magic number was 13.4% compounding for the next 10-15 years.
So from November till now - I’ve been busy trying to build a Coffee Can Portfolio to achieve those returns at least from the next 10 year perspective as per the Coffee Can Method. I’ve actually got a mental target CAGR of 15% for 10 years which makes the initial x capital into 4x.
So sharing my Coffee Can Portfolio from 10 year perspective (I don’t plan on selling any of these stocks for the next 10 years. However planning to add wherever allocation is low/conviction changes) unless:
- Unfavourable management change (could be HDFC Bank)
- Consistently deteriorating fundamentals over 3 year period or rapidly changing business model / environment
- Stock runs much much ahead of fundamentals 100+ P/E for <5-10% growth
- Achieve 4x target before 10 years (Ex: If stock goes 4x in 8 years - sell and put in fixed income to generate 15%+ returns over 10 year period)
| # | Symbol | Buy Avg | P/L % | Allocated % | Current % |
|---|---|---|---|---|---|
| 1 | NSE:BANDHANBNK | 424.9 | -41.6% | 10.60% | 6.38% |
| 2 | NSE:INOXLEISUR | 300.5 | -22.1% | 7.84% | 6.29% |
| 3 | NSE:ICICIBANK | 285.9 | 25.0% | 4.60% | 5.94% |
| 4 | NSE:ICICIPRULI | 335.0 | 15.2% | 4.56% | 5.41% |
| 5 | NSE:HESTERBIO | 1503.5 | -19.5% | 5.25% | 4.36% |
| 6 | NSE:KOTAKBANK | 1193.0 | 16.1% | 3.52% | 4.21% |
| 7 | NSE:VMART | 1678.1 | -0.2% | 4.00% | 4.11% |
| 8 | NSE:HDFC | 1830.8 | 0.1% | 3.94% | 4.07% |
| 9 | NSE:BERGEPAINT | 430.8 | 20.5% | 3.13% | 3.88% |
| 10 | NSE:PAGEIND | 18719.2 | 6.7% | 3.40% | 3.74% |
| 11 | NSE:HDFCLIFE | 447.1 | 12.3% | 3.14% | 3.64% |
| 12 | NSE:HDFCBANK | 990.2 | 3.3% | 3.37% | 3.59% |
| 13 | NSE:ICICIGI | 1062.0 | 19.8% | 2.89% | 3.57% |
| 14 | NSE:DIAMONDYD | 452.8 | 37.2% | 2.49% | 3.51% |
| 15 | NSE:POLYCAB | 864.8 | -12.7% | 3.63% | 3.27% |
| 16 | NSE:BAJFINANCE | 1874.9 | 29.1% | 2.34% | 3.11% |
| 17 | NSE:ALKYLAMINE | 1154.3 | 76.7% | 1.44% | 2.62% |
| 18 | NSE:TCIEXP | 581.0 | 13.3% | 2.24% | 2.62% |
| 19 | NSE:MASFIN | 702.5 | -9.4% | 2.79% | 2.60% |
| 20 | NSE:SIS | 356.0 | 11.0% | 2.14% | 2.45% |
| 21 | NSE:HEXAWARE | 239.0 | 11.3% | 1.92% | 2.21% |
| 22 | NSE:POLYMED | 220.4 | 33.4% | 1.57% | 2.17% |
| 23 | NSE:TITAN | 888.7 | 10.7% | 1.87% | 2.14% |
| 24 | NSE:INDUSINDBK | 1297.9 | -67.0% | 5.89% | 2.00% |
| 25 | NSE:MARICO | 262.8 | 27.6% | 1.46% | 1.92% |
| 26 | NSE:HDFCAMC | 2218.6 | 18.6% | 1.51% | 1.85% |
| 27 | NSE:MINDTREE | 757.3 | 19.9% | 1.37% | 1.70% |
| 28 | NSE:CHOLAFIN | 292.5 | -46.3% | 2.82% | 1.56% |
| 29 | NSE:ITC | 165.6 | 19.2% | 1.26% | 1.55% |
| 30 | NSE:SYMPHONY | 787.7 | 13.9% | 1.07% | 1.26% |
| 31 | NSE:PIDILITIND | 1231.9 | 22.8% | 0.67% | 0.85% |
| 32 | NSE:LALPATHLAB | 1401.9 | 8.8% | 0.70% | 0.78% |
| 33 | NSE:GODREJAGRO | 350.8 | 5.8% | 0.60% | 0.65% |
| Coffee Can Portfolio | -3.0% | 71.16% | 77.56% |
I know that the first comment someone will make looking at this portfolio is OVERDIVERSIFIED! Too many companies, too difficult to track. However, given the opportunities thrown by market post Covid - I wanted to dipboth my hands in and not just a few fingers. I want to play dumb with markets and having been taught some harsh lessons over the last few years I want to reduce individual company risk on my portfolio as much as possible.
For the non-financials - all of them tick boxes on 10%+ CAGR revenue growth (barring 2-3 companies which I picked up post market crash in March with much more valuation / div yield comfort) for last 8-10 years (if listing less than 8-10 years), ROCEs of more than 15% avg every year. Apart from these metrics - also have a small investment thesis written for most of these companies (should have done for all - maybe an exercise for later) which I plan to share later.
For the financials - tried to stick to 15%+ loan book growth over 10 years and ROEs of 15%+ over 10 years. This is also where I’ve got the majority of my pain (Bandhan, Indusind, Chola Fin) - however, most of these businesses have reasonably strong liability franchise, no ALM, reasonably good asset quality and should be amongst the survivors in post Covid world.
However, my learning seeing few of my high allocation stocks causing lots of grief has been I must try to stick to an equal weight portfolio. And even if I have high conviction - any leveraged financial to not be allocated more than 5% no matter how high the conviction.
Now you see the numbers at the bottom of 71% and 77% - this is my overall allocation to this Coffee Can Portfolio increased by 6% due to some past pre-Covid investments (part of satellite portfolio) going down much more. I believe Covid has resulted in some moderately good quality businesses being beaten black and blue where I see an opportunity to generate significant alpha through a satellite portfolio. I plan to reduce and run down that portfolio significantly over the next few years. Will share that in the next post.
I plan on being a lot more regular on this thread from now onwards - especially to record my own thought process of buying / selling different businesses and hope to get advice from all the wonderful people here to correct some of my biases. I would just like to iterate that the objective of investing for me is purely to achieve financial freedom and not necessarily become an expert investor with terrific accounting knowledge / business cycle acumen bla bla (although I hope I’m able to achieve that as well).