Gurjot Portfolio

[Mudit.Kushalvardhan]

dear Chaitanya Ji,
I am not against

1. Getting more returns than Index
2. allotting time in the market to understand benefits, disadvantages and pitfalls.
3. maximizing returns in legal ways
4. tweaking and tinkering products in personal finance
5. aspiring for mercedes
6. introduction of unheard companies and finding multibaggers
   But if you notice all these efforts does not come under “Passive Index Investing”
   Value picker Tag line " Separating the Wheat from the Chaff"
   inspire us to able to distinguish “Separating The Active Investing from Passive Index Investing”
   If we are following Passive Index Funds, what must be the purpose of introduction of ETF funds? If we ponder on this , we can easily gauge that, its merely for motivating trading behaviour of investing communities.
   The basic tenet of Index Investing is to believe in the Indian Economy and its long term prosperity. It completely disregards, market levels, market entry and exit and individual stock selection. In ETF index, we are violating the basic principle of market level agnosticism. Thats why John Bogle will cry in heaven because, this is not distinct and multiple use, which he could not think about , but its blatant opposite of what he meant by Indexing. But I understand that this would happen , because market players need this. What we are currently seeing in Indian Mutual funds industry, alpha startegies, Smart Beta, Low volatility Index , Equal weighted index…All these variations are not refinements and improvements of basic indexing. These are just back door entry of active investing in the disguise of index investing. And their financial welfare is at stake. They benefit from misguiding us. This is not meant by John (Jack) Bogle…

[ChaitanyaC]

It all boil downs to individual choices and preferences. What seem foolish to us may not be the same for others. And it is good to have some choices, we can educated ourselves and choose what suits us. And if we all think the same way, I guess the market does not exist this way.

We can be active with passive investing too with ETFs, some want to take advantage of the volatility in the market hours. You don’t have a positive view regarding this, but many do, hence the availability of many ETFs, some with good liquidity. Although for longer frame investments with sizable corpus, ETFs are the wrong choice, index funds are the best. And people trade in ETFs too, just like any other stock, hence the liquidity.

Time is precious to some, they would not do this. But some along with some passion, understanding, and time will try out some things. To each his own.

As far as factor based indices are concerned, the criteria of selection is subjective, and they have short history compared to market cap weighted indices.

Absolute things don’t change, rest all take different shapes and forms, finance is one among them. New products come into existence, old wine will be presented in new bottles, it happens. So the onus is on the investor to choose what suits him.

Someone who looks at the name VP and thinks that only value investing discussions happen here will be surprised. The name Valuepickr may have been chosen correctly when the forum was started, but I guess it does not reflect the current state of the forum, as VP has grown by leaps and bounds, catering to members from many continents from different professions, with different perspectives, different styles of investing. Today’s VP also has technical analysis threads, techno-funda threads, threads on books from different disciplines etc, so change has happened here too. And some members have even changed their investing philosophies, styles, it is surprising. Even a complete newbie like me got a bit matured.

You have got your strong views, I understand that, and I have got mine which I believe are getting better with time, knowledge and experience, and in part due to VP, so I participate in discussions where I have a view, but I guess there is nothing to add more from both of us.

Gurjota, don’t mind, this stops here.

[gurjota]

Good observation and that’s why I don’t invest via the FoF because it will just invest in the day’s closing price of the ETF itself .

The MAFANG ETF Unit value is calculated as 1/10000th value of the NYSE FANG+ Total Return Index close (converted to INR).

So as of yesterday’s close NYSE FANG+ TRI = 5018.52 (9 May 2022)
USD INR = 77.29
So currently MAFANG ETF unit fair value = Rs. 38.79

But it closed today at Rs. 40 which is a 3%+ premium to the fair value. So I always put a limit order at or below the fair value and it often gets executed. I suppose the premium can also be because people start tracking the after market individual stock prices of constituents in the FANG+ index which can influence the MAFANG ETF price during India market hours.

PS: I’ve also created a thread on this ETF today and covered the unit value calculation there.

Gurjot Ahluwalia

[Gaurav_Bhandari]

Thanks for sharing this calculation Gurjot and the sheet. It is really helpful. Wanted to know that whether the same methodology is being used in calculating MON100 price or if you have a relevant link maybe you can redirect me there. Thanks again for the efforts.

[Investor_No_1]

Hey would be good to know how has May/June worked for you, what strategy you followed in may/June correction and now what are your strategy on these recession/bear possibility…thanks

Are you holding on to your picks, buying the dips or coming/already come in substantial cash?

[gurjota]

1. Overall portfolio is down -16% YTD similar to MidCap and SmallCap indices

2. I have been consistently getting out of all high P/E names as you can see from my April PF Update (Titan, Dr Lal, Britannia, Syngene, etc. - most of which are further down up to 20% from my sell price). Soon after I was out of Divis Labs and managed to get out JIT without any loss or PF hit, it has also seen 20% further drawdown from those levels. All of this mainly due to the expected derating of these high P/E companies with higher interest rate cycle.

3. I have also exited 50% position in Mirza (120% profit in less than 6 months) to reallocate mainly to financials such as Banks and General Insurance.

4. I’m currently looking at high but stable dividend yield of 4-5% plays with a 10%+ kind of growth and if growth doesn’t materialize, it’ll be like FD in the bank.

5. Almost all the cash raised has been redeployed into existing holdings and ETFs shared in April update.

Hope this helps.

[Investor_No_1]

@gurjota

Hope this helps

Yes it does, i see your strategy to rotate capital from high PE to div yield and BFSI has been working well over last few months…

[moneyeyed]

Hi Gurjot ,

have you looked at INVITS/REITS ?

[gurjota]

I’ve discussed REITs many times on this thread and across this forum. I was invested in all 3 - however I moved out of them as I did not see myself making 15%+ XIRR on those, so re-deployed to more attractive growth opportunities. I currently don’t hold any REITs.

Sharing some of the old posts on REITs

Embassy REIT: Is this "Blackstone" promoted REIT is real diamond?

Thanks for starting the thread @dd1474. I’m also fairly bullish on the long term investment prospects for REITs at current valuations given the hugely favorable demographics (young population, 5-10 million joining the workforce each year for the next decade at least, etc.), cost arbitrage (outsourcing - India has approx. 50% market share of all global captives, 10-20% office rentals compared to west/APAC and cheaper labour) and market share consolidation towards grade A office suppliers. Anywa…

@gurjota

I actually like both the REITs and I’m not averse to investing in both. However, there are a few reasons I’ve chosen Embassy for now:

1. Valuation - Trading 8% discount to fair value where as Mindspace is at par or higher than fair value
2. Cash Distribution - Embassy has been very good in more than 99%+ distributions. Mindspace has not yet started the cash distribution, expected from Q3 onwards - so a little uncertain on what the yield will come out to
3. Mindspace is a relatively new listing and while it’s income growth appears a little better in RHP, would really like to see it continue as a listed REIT before taking the plunge
4. Bangalore market and personal bias - Bangalore is the tech hub of India which is still growing at 7-9% CAGR in commercial office space. Also I’ve personally stayed inside Embassy Tech Village for many months while working on a project in Bangalore. Have seen first hand the quality of offices and tenants occupying their offices.

Will relook at Mindspace as they come out with Q3 numbers and may also invest in it.

@gurjota

Embassy Office Parks REIT - 3.5% allocation at Rs. 349.5. Read quite a lot about REITs over the weekend and I think this is a great way to diversify the investment portfolio along with exposure to the growing commercial real estate market (especially Bangalore). Embassy Office Parks has close to 50% rentals from companies in technology sector and 40% from Fortune 500. Even during the worst phase of the Pandemic Q1 FY21, it collected 99% of rentals. 10 year Investment objective - Expect yearly cash distribution at 6-7% yield along with 10-12% CAGR capital appreciation as investors and markets get more familiar with REITs. Can expect more and more REITs to hit markets over the next few years and potentially have a REIT bubble few years from now (happened in USA in mid 1990s). Interesting fact - REITs form 96% of the total Real Estate market cap in USA.

[gurjota]

Portfolio Update - H12022

First half of CY2022 is done and dusted, a bit like most investors’ portfolios to be honest. The past couple of months (May and June) have been quite bruising for all, they’ve brought a lot more pain with Nifty almost going into bear market and Mid/Small Caps decisively plunging into bear markets.

The market is completely dominated by macro events (multi-year/decade high inflation, weakening currency, rising crude and commodity prices, Fed/RBI rate hikes, etc.) currently and would be interesting to see how long this phase of the market lasts. With Nifty at ~17x forward (FY23) multiple, this market is definitely not overvalued. But neither is it dirt cheap IMO. It would be interesting to note if the macro events of last few months start suppressing FY23 earnings. This is the biggest risk to the market i.e. FY23 earnings growth getting dented because of inflation, commodity prices and rate hikes. However, even if that were to happen I don’t see a material downside to this market from 15,000-15,500 levels.

The biggest learning for me over the past 8 months has been the fallacy of “buy on dips”. Irrespective of business or management quality, large cap or bhangaar cap, almost everything has fallen and corrected substantially barring select few. This shows the virtues of patiently accumulating / sitting on cash till your favorite businesses come to your buy price levels and not just buying every dip no matter the quality of business. In 2021, I could have never believed that just 1 year later the texture of the market would be 180 degree opposite (from everything going up to everything going down). Hence, it’s always prudent to not chase stock price but let your favorite businesses come to you. Thankfully, I’ve mainly done buy on dips in well established relatively good quality businesses where I don’t lose much peace of mind at night even if they fall 10/20% from buy price.

@gurjota

Before anyone has to count, this is a combined 75 stock portfolio. Let me be the first to admit - yes, managing this is not so easy! However, I have talked about the portfolio strategies in my posts above over the last few months and you can go through that. However, I definitely plan on cutting down to 50-60 positions at max over time.

My portfolio has taken a 60% haircut in the past 18 months! Not in value but number of holdings. Bull market of 2021 was extremely kind for me to keep on exiting most of positions with handsome profits. From a 75 stock portfolio to just 32 holdings as of date, this is the most concentrated I’ve been in the past 2 years.

Portfolio Holdings

Name	Current %
RPPL	7.47%
HCLTECH	7.19%
HDFC	6.93%
BETA	6.64%
ISEC	5.27%
ICICIGI	4.75%
MACPOWER	4.56%
ICICIPRULI	4.10%
KOTAKBANK	3.88%
GOLDIAM	3.53%
MOMOMENTUM	3.53%
ICICIBANK	3.47%
HDFCLIFE	3.20%
TIPSINDLTD	3.05%
MASFIN	2.89%
RADIOCITY	2.78%
GLS	2.59%
MAFANG+ ETF	2.55%
VAIBHAVGBL	2.11%
INOXLEISUR	1.99%
POLYCAB	1.94%
MUTHOOTFIN	1.86%
APOLLOPIPE	1.81%
NEULANDLAB	1.73%
VALIANTORG	1.71%
DIAMONDYD	1.57%
JUBLINGREA	1.56%
VMART	1.46%
ACRYSIL	1.19%
SWARAJENG	1.17%
CERA	0.85%
SOLARA	0.67%

Portfolio Sectoral Break-Up and Market Cap Distribution

With 30% of PF in Financials which have massively underperformed in the past 2 years, I’ve been able to manage the PF performance / downside at par with the market. If this sector were to lead the next bull run, I’m pretty confident the portfolio would end up handsomely outperforming the market.

Portfolio Exits

Mirza International - In a market where major indices have given negative returns, making 110% return in 6 months is phenomenal going. I’ve exited based on technical factors and I also feel I don’t need to make all my returns from a single stock. If I want to make 20% CAGR over 10 years and I make 110% in 6 months, I only need to re-invest this capital at 12% for the remaining 9.5 years to get 20% CAGR over 10 years.

HDFC Bank - converted into HDFC to capture 4-5% arbitrage.
IEX, Indiamart, Whirlpool - High P/E, re-allocated to better attractive growth/dividend plays at more reasonable valuations
Nazara Tech - Don’t feel comfortable owning these cash burn businesses in the current market environment although Nazara is profitable but I want cash spewing machines in the current market
Associated Alcohols - Potential corporate governance issues, high promoter salary, do not want to get stuck with any bad managements even in good businesses

[sougataG]

Hello Gurjot, thank you for sharing your experiences. This is really helpful. Wanted to check with you how do you track your PF performance. Have you made an excel template for tracking the PF? If so, would be able to share it.

[Mudit.Kushalvardhan]

Hi …Thanks for updating. Now , will you stick to 30 odd stocks or planning to reduce it further?

[Investor_No_1]

@gurjota

|RPPL|7.47%|
|HCLTECH|7.19%|
|HDFC|6.93%|
|BETA|6.64%|

Good to see a tech as one of your largest holdings. Is maximum part of this allocation added in recent crash? Or is the result of buy the dips? You do not have any midcap IT…Any reasons?

Also, very small caps RPPL & BETA also have top allocation. Must be very high conviction bets for you…can you share your brief thoughts on them, their business - specially the promoters, management & corporate governance parts?

@gurjota

|ISEC|5.27%|
|ICICIGI|4.75%|
|MACPOWER|4.56%|
|ICICIPRULI|4.10%|

I see you have big exposure to ICICI group = 14% + This is just an observation…

[Dinesh-kumar_89]

In recent communication, Mukul Mahaveer Agarwal is entering RPPL, with 100000 preferential issue of shares at 193 price. Around 1.5 Lakh shares to promoter too. Looks like company is getting visible for big investors.

[gurjota]

Apologies everyone for the delayed response - July was a very busy month for me on the professional front and in August I was traveling abroad for majority of the time.

@sougataG

Hello Gurjot, thank you for sharing your experiences. This is really helpful. Wanted to check with you how do you track your PF performance. Have you made an excel template for tracking the PF? If so, would be able to share it.

@sougataG have answered this question here . Regarding sharing the template - I would have to spend a lot of time to scrub the data as I have multiple sheets with Equity, Mutual Funds, NPS, etc. details in it. Not sure that would be so easy for me.

Gurjot Portfolio

I use Google sheets and unfortunately this needs to be done manually. It’s not too difficult to be honest - you just need to enter the cash flow amounts and dates and the XIRR formula will automatically generate your XIRR. So you don’t really need to track individual stocks, you only need to track the cash flow going in and out of the portfolio. Sharing a few sample entries from my personal portfolio tracker [image] I actually don’t track my monthly returns, I track YTD returns for the curr…

@Mudit.Kushalvardhan

Now , will you stick to 30 odd stocks or planning to reduce it further?

@Mudit.Kushalvardhan - I’m currently holding 30 scrips, with 95% allocation in the top 25. I will likely always hold more than 20 stocks. I believe in adequate diversification as I’m not the promoter managing the business, no matter how much I deep-dive/analyze/study any company - a business can face various unseen and unimaginable risks. Diversification is your only free lunch in the market.

Also I recently posted here - the number of stocks in your portfolio has no correlation with your portfolio returns.

@Investor_No_1

Good to see a tech as one of your largest holdings. Is maximum part of this allocation added in recent crash? Or is the result of buy the dips? You do not have any midcap IT…Any reasons?

@Investor_No_1 - I’ve been adding HCL Tech aggressively throughout 2022 - avg buy price ~1010. Recent correction seems to be offering another good opportunity. I’d love to buy midcap IT but they are either at quite stretched valuations (anything above 30x P/E is relatively high multiple) or not as robust business model as the large cap IT plays.

Both Rajshree Polypack and Beta Drugs have their threads (RPPL quite a detailed one) on VP. I think most of the information about these companies is covered there.

The management of Rajshree has a great execution track record in my view. All the planned capex over the past 2-3 years is now bearing fruit along the lines of management guidance. The last quarter had the highest ever quarterly sales in the company’s history. Management has also done a preferential issue at a price of 193 for the next phase of company’s growth.

Beta Drugs is a branded generics oncology play with the main advantage of it being a pea sized fish in an ocean. There is massive opportunity/runway for growth and the management has delivered fabulously so far. With Indian pharma companies, I think scale becomes a big challenge and I don’t like any large sized pharma companies given the intense competition, regulatory hurdles and challenges. In pharma, being small in size is a massive advantage in my view. The management / corporate governance of Beta Drugs is average in my view - they just about meet expectation. Promoters have taken considerable salary increase with exponential growth in profits (not a red flag but obviously not the best corporate governance).

[gurjota]

Portfolio Update - September 2022

Much water has flown under the bridge since my last portfolio update 3 months back and yet not much has changed if I look at the markets/PF from a YTD perspective. 2022 is the year of no returns and getting through to the end of 2022 without being badly bruised or damaged could be counted as the success of an investor this year.

“India shining” was a political campaign at the start of a multi-year bull market from 2004. 18 years later, despite the extremely dark grey macroeconomic clouds in US and Europe - I can confidently say India is truly shining on the global stage with strong economic growth reflected in the equity market outperformance and currency markets. However, no magnitude of economic growth will salvage us if the US economy were to tailspin into a severe recession. We will all be hit by it, but just to a lesser extent because of a strong domestic economy.

Overall, it has been interesting to observe the strength in the broader markets. With Nifty near a ~10% correction from ATH, the Mid and Small Cap indices are also only down by that much . Generally, they have a multiplier effect both on the upside and downside. But given their resilience so far, I don’t think there are too many cheap throwaway valuation companies in the current market.

From a portfolio standpoint, there has been a strong recovery in Q3CY22 similar to the market, however it has only brought us close to parity for the year. Stocks like ICICI Bank, Polycab, Prataap Snacks, Macpower which are near all-time high / 52wk high have helped protect the downside along with a decent recovery in the financials. In recent times, I have mainly been adding high dividend yielding companies (4-5% yields) with a reasonably strong growth outlook. If there is any sharp decline or adverse news, the div yields should protect the downside and also act to minimize opportunity cost of cash in the bank at 4-5%.

Portfolio Updates

I’m now down to exactly 30 stocks in the PF. I have made 2 changes - exited Tips Industries and Jubilant Ingrevia.

The exit in Tips Industries at 1900 (doubler in 1 year for me) was explained here and seems like a decent decision with stock having corrected 20% from there

The exit in Jubilant Ingrevia was due to the multiple negative publicity of various chemical companies plant fires/incidents (Valiant Organics, Deepak Nitrite, etc.) and Jubilant Ingrevia already has a bad track record of environmental compliance, very well covered in that thread.

Portfolio Holdings

Name	Current %
HCLTECH	8.28%
RPPL	7.62%
MACPOWER	7.37%
HDFC	6.47%
BETA	6.33%
ISEC	6.10%
ICICIGI	4.31%
GLS	3.94%
MASFIN	3.83%
ICICIPRULI	3.78%
ICICIBANK	3.74%
KOTAKBANK	3.74%
MOMOMENTUM	3.61%
GOLDIAM	2.81%
HDFCLIFE	2.72%
RADIOCITY	2.50%
MAFANG+ ETF	2.23%
VAIBHAVGBL	2.18%
VALIANTORG	2.10%
APOLLOPIPE	2.03%
POLYCAB	1.97%
DIAMONDYD	1.95%
NEULANDLAB	1.76%
MUTHOOTFIN	1.74%
INOXLEISUR	1.70%
VMART	1.46%
SWARAJENG	1.07%
ACRYSIL	1.03%
CERA	0.97%
SOLARA	0.70%

On a side note, I’m seriously toying with the idea of starting a small momentum portfolio. The back test results are quite conclusive in terms of the outperformance vs indices both in up and down markets. I’m actually looking for app/ways on how to execute trades automatically on Zerodha or ICICI Direct to completely take out the manual / emotional element of investing.

Festive season’s greetings to all VPers

[nirvana_laha]

Hi Gurjot,

Thanks for the regular updates on your portfolio, I really enjoy going through them and through your thought process. Keep them coming!

I wanted to understand more about how you picked a micro cap like Macpower so early in Aug 20 when its market cap was barely 100Cr! You seem to have gone through the entire cycle with it too - start small in satellite portfolio and then build the position as conviction got higher and now its the 3rd highest allocation in your portfolio. Incredible journey for me!

Can you please share the following details about your journey with Macpower? Lots to learn from this as a fellow investor who has started dabbling in small and micro caps.

1. How did you come across the company?
2. What made you take the first stab at it?
3. Did you meet Management face to face or over calls?
4. How did you build your conviction over time to turn this into an 8% position?

Greetings of the festive season to you as well

[gurjota]

Thanks for the kind words @nirvana_laha

Macpower is just one of the many SME (soon after migrated to main board) companies I had invested in 2020, the recent price action may be bringing this into focus but I think highly of the other SME companies I’ve invested as well. Anyway, thanks for the good set of questions which also helps me structure the response as well, so here goes

1. Around late 2019, I had discovered Saurabh Mukherjea’s Coffee Can Investing and I had started investing by applying those filters on Screener and weeding out any commodity companies. However, I was mainly focusing on large/mid/small cap companies at that time with at least 10 years of operating history. Then Covid struck and everything crashed. In the first Covid decline (Mar-2020), I was mainly buying the CCP / LCP type businesses (Divis, Titan, Page, Marico, Berger Paints, HDFC Bank, Kotak, Alkyl Amines, etc.). Most of these businesses seemed to be no-brainers after a 30-50% market cap erosion and they all recovered in April and never saw their March lows again.
   However, next month i.e. May 2020 there was another correction (not to the March lows) and this has turned out to be the real Covid bottom for a lot of the broader market mid/small caps. If I remember correctly ~18 May was the 2nd lowest bottom and markets have never gone back to those levels again. Now it was at this time around May/June that I started looking at really small / micro cap companies as well because I saw many small / micro cap companies at absolutely throwaway valuations of 3/4/5 P/E and some even had 5-6% dividend yield. I downloaded the entire list of BSE SME platform and NSE SME platform companies and put screeners on them for profitable growth, low debt and ROE/ROCE (>20%) over the last 3/5 years, whatever data was available. It was then that I landed upon Macpower and few other SME companies which I invested in. I would do the exact same exercise again if we are in a similar market situation. Buying decent businesses with real cashflows for 3-5x earnings multiple is the actual time to load up as an investor because you have such a strong MoS in your buy price. I sincerely doubt that time will come again soon.

2. I bought Macpower as a 50cr company at Rs 50, not even a 100cr company. A few things about Macpower’s business & management immediately struck me (apart from basics such as debt free company quoting extremely cheap)

• Import substitution play - Based on my research, there was a genuine need for it’s products. Indian Machine Tools Association - FY19 consumption of machines in India was worth 23,500 cr out of which only 11,000 cr worth machines were developed in India. Remaining 13k were still reliant on imports. Machine tool industry overall CAGR in the last 10 years was 35% CAGR. Few players present in this industry - only 7-8 key players are present in this industry and Macpower was amongst top 5 players already despite operating at such a small scale

• Capex - Company had undertaken capex to double it’s capacity around 2019-20. I had seen videos of the company’s manufacturing facilities on YouTube

• Genuine honest promoter - he didn’t take dividend in both 2018 and 2019 when it was paid out and promoter had 75% holding so a huge sum of money was waived off by the promoter
  All this was enough for me to take a small 1% PF position

3. No, I didn’t meet them. In fact, I’ve never met any company’s management. One thing I remember watching was one of the interviews of the promoter in 2018/19 where he talked about strong growth potential of the company. By the way, promoter is no fancy English speaking professional sounding management if you ever listen to him on concalls / interviews. But all a shareholder should be interested in is the clarity of thought, vision for the company and execution!

4. As Peter Lynch said “water the flowers and cut out the weeds” - I’ve averaged up on Macpower from Rs 50 to Rs 200 after seeing the management execution and them walking the talk. At Rs 200 also, the business was around 10x earnings multiple which was fairly cheap IMO if they did successfully grow at 25-30% as per their guidance. However, my allocation was only 3.5% - it’s just the strong appreciation which has made it a 7.5% position currently.

As a note of caution for my previous post, the stock % is the current % of PF in that stock. However, you can not guess how much is allocated to which stock - some are in loss, some are in minor profits and some are in big profits like Macpower.

Please keep in mind, I invested in about 5 SME companies around that time in May-Aug 2020 and most of them gave stupendous returns in 1 year or less. That in itself should tell you the state of the markets at that time. Currently, we are a lot closer to EUPHORIA rather than DESPAIR and I’d be extremely selective in investing in any SME businesses today.

1. Beta Drugs (13x from original price, although I’m making less - refer to my posts from Apr 2021)
2. Macpower CNC (7x from original price)
3. Worth Peripheral (exited at 3x)
4. RKEC (exited at 2.5x)
5. MP Today (exited at -20% loss)

I also looked at Chemcrux Enterprises (15x since Jun-Jul’20) and missed it only because it required a big lot size of investment that time

PS: I like the business of my other 2 SME companies more - Beta Drugs and Rajshree Polypack. But then, I’m not complaining if Macpower decides to take all the attention

[Mudit.Kushalvardhan]

Thanks for your valuable thread. Really awesome journey and your honesty.
In last 7 years you have achieved around 15% CAGR. If we dwelve about LTCG and STCG taxes as your churn has been very high, may be around 2% can be subtracted by way of taxes, so net returns are around 13%.
My questions are :

1. Many active funds in flexicap category like HDFC flexicap, SBI focused equity have given more returns than that.
2. Small cap category funds like SBI small cap, Nippon India small cap have given very high returns compared to above returns.
   So does it make sense to handover our funds to them, instead of we doing it?
3. Also above active funds return goes on to show that there is lot of steam left in active fund management compared to passive indexing.
4. i saw your interview on Shankar Nath You tube channel about coffee can investing. Its very good. But what i have watched your entire journey is basic paradigm of coffee can investing is select 15 companies and hold them for 10 years, no in between churn, adding, or removing, nothing. After 10 years, you will open your coffee can and see out of those 15 companies which one has survived and which have been multibagger and which have gone bust. But i m confused here that i see your constant buying and selling, which may be for right reasons, but this doesnot follow coffee can portfolio principles…Am.i.missing something here? Kindly help.

[gurjota]

Hi Mudit,

Thanks for the questions. Below is my latest portfolio performance (Jan 2015 - Nov 2022) which becomes 17.5-18% CAGR over ~8 years including dividends. All MFs publish their returns pre-tax so if you subtract 1-2% returns from my PF, then you must subtract the same for all mutual funds as well.

1. My portfolio XIRR has comfortably beaten both the funds mentioned by you over the same time period (1 Jan 2015 - 30 Nov 2022)

• SBI Focused Equity DR-Growth - 14.3%

• HDFC Flexicap Fund DR-Growth - 13.4%

2. I’m already invested in Nippon Small Cap mutual fund and that has been one of the best performing funds indeed, infact I created a video on that as well recently. However, it’s not wise to invest 100% of your PF in a very volatile small cap fund. It comes with very high risk-reward and NAV volatility which is not suitable for majority of investors.
   Why Time in the Market beats Timing the Market! From -20% CAGR to +18% CAGR - YouTube

3. Not necessarily, there are umpteen studies to show actively managed funds are fast losing ground to index funds and how difficult it is becoming for active fund managers to beat broad indices. Yes, there are still many actively managed funds which have done really well and there is some juice left as India is not yet fully discovered but indexing will likely be the best choice for most people in a few years.

4. I shared 2 more clippings from that interview on my [Twitter handle] where I mentioned that I use multiple investing strategies in my portfolio and Coffee Can is just one way of identifying good businesses. (https://twitter.com/gurjota/status/1592844732161732608?s=20&t=XvDC9hAowVUJS5oLzhqm2Q)

My answer on the high portfolio churn -

None of what I do or have done is perfect. It has worked out well for me so far. I hope this is helpful and please take everything I say with tablespoon full salt.