Hitesh portfolio

[hitesh2710]

@ram1984

Auto and auto ancillary space has been a pocket of strength in the overall markets. However the moves are more stock specific. While TVS Motors and Eicher and even M&M have moved well, Hero and Bajaj Auto have been laggards. So in this sector its not as if everything is moving.

Auto ancillary is an even more interesting space with a wide variety of stocks to choose from. Barring a few, there has been strength across the board in most auto ancillary companies. And the commentary from most of them is strong in concalls.

But in stocks where run up has happened, say in Eicher, TVS etc, it has happened a lot and we could be halfway or more in the rally as of now. So while entering at current levels, one has to keep that in mind.

[Paxrxxthi]

Hitesh bhai, would like to know what is a defense portfolio and how do a 25yr old can built it with? coz they say that a portfolio must consists of 10 to 15 stocks only. But as theme changes sector varies and also stocks right?. 2020-pharma/IT was performing. Now chemicals are performing and in futuristic perspective EV will be performing. Inspite of all this how an individual can build a defense portfolio and how it should be diversified. Ok with either growth or value investor perspective
.

[hitesh2710]

@Paxrxxthi

I think you are referring to a defensive portfolio. Usually it is meant as a capital preservation tool for investors who have already amassed enormous wealth and do not want to take too much risk. It will broadly consist of stalwart kind of companies which are sector leaders and the sectors will consist of evergreen businesses. Things like Asian Paint, Pidilite, Nestle, Hind Unilever, Bata, Havells, CG Consumer (or any other similar company), Bajaj finance, HDFC Bank (or similar bank) , so on and so forth. Idea here is not to lose too much money even during big market drawdowns and if portfolio value does go down due to market condition, it recovers (and more) when the markets recover.

For a 25 year old, who wants to invest on his own, its better to first think of building up capital, so that the question of preservation comes around. If there is not enough capital, there will be no question of preservation. So better focus on growth stocks and try to compound the portfolio at healthy rates and then think about defensive PF.

First you must learn the ropes of investing by reading appropriate books and observing how markets work and how wealth is created.

[Paxrxxthi]

Thank you very much for the insightful comment, sir. Could you recommend any books that I should read to begin understanding the ins and outs of investing and the market?

[hitesh2710]

@Paxrxxthi

This is a perennial question most new investors pose. Please go back a few posts, or search this thread to get a list of books. Or we have a special thread on VP on which books are best to learn investing. You can do some hard yards and use search option in VP .

[Vijayalakshmi]

Hello Hitesh,
Balance sheets are clean , India is somewhat insulated but geopolitics is the mainstay. That seems to drive the market up and down. Corona , yes made sense but now it seems that the politicians make all the decisions and we just respond to them. Our valuations are also on the expensive side. Is the valuation justified? The world markets are way cheaper ! Does this not seem scary or it is part of growth that can happen in India? Do you even consider these things or it is more clinical where you look at sector and charts irrespective of what is happening around? With the above , is this inference correct - the US markets need to stop falling for the India markets to do well?

[hitesh2710]

@Vijayalakshmi

As mentioned before a couple posts back along with charts of nifty, we have had three major falls and three major rallies since last October. i.e within last 11 months. Each time there is a different narrative as to the reason of the fall. And similarly with rallies, there is a different narrative each time. The sectors that rally within these nifty rallies keep changing, barring a few names which seem strong enough to ride all corrections with minimal damage.

Few weeks back there was the theory of de-coupling from rest of the markets because “India was a shining example of growth” and once this correction from 18 k began, all this de-coupling theory got punctured.

So for someone who wants to worry, markets will provide enough reasons at any given point of time to worry. For those who want to go stock specific, things cannot be better. Each correction provides very good opportunities to find winners and ride them. The other option is to do investment in compounders in an SIP mode.

For me, the guru mantra of cutting the weeds and watering the winners has always worked all throughout these corrections. And as long as that continues, there is no reason to give up a strategy that has worked.

Some day we might have a bigger correction or a bigger rally, which might surprise us, but the basic idea is to make hay while the sun shines. Make as many hundreds as possible against weaker bowling attacks, so that when good bowling attacks get you out cheaply, your average does not suffer.

[amishra]

Hitesh Sir,

From a value investing perspective- would you recommend lumpsum investment in MON100 ETF (Nasdaq100). Its 34% down from ATH.

[JSN]

Thank you. This is very good share for me.

[ram1984]

Hitesh bhai,

Do you take position in a company which is doing good business wise and also the stock price follows it but where the public information about the company is very limited.

Example is Shivalik Bimetal. Limited info in annual reports, no quarterly concalls, no management meets by analysts except in AGMs including the recent one, where they have been very candid and lot is written in social media. Otherwise nothing much.

Do you take any positions in these sort of cos or generally avoid.

[Chandragupta]

Dear Hiteshji,

Do you have any views on Cantabil Retail? There is no thread for the company on Valuepickr but I saw a 12-year-old post (click here) where you mentioned Cantabil as “…stocks I would outright avoid…”. Any specific reason for this such as governance issues?

The stock got listed in 2010 and I have gone through the DRHP & all its Annual Reports till date but could not find anything glaringly wrong, except high promoter remuneration & some related party purchases which is fairly common among many other companies as well. What I am curious about is why the institutional holding is almost zero despite several positives. Any current views on this company?

Thanks in advance.

[hitesh2710]

@ram1984

Regarding relatively unknown companies with limited information available, I do take position, but position size is usually not too aggressive. Because in absence of enough information or data points, its difficult to have the conviction to bet big… And I usually want options where I can bet big and hence my portfolio is usually filled with high conviction bets.

[hitesh2710]

@amishra

Value investing is a term often misused to suit a view point. A stock or an index may not be a value buy even if it has corrected 30-50% from its all time high. Because in the first place, the stock or index might be highly overvalued at peak and might not have achieved even fair value (let alone value buying zone) after correcting 30-35%… For someone convinced about the story and wanting to buy, SIP might be the way to go as the buying will continue on its way down and cost averaging can continue.

But even in these situations, we do not know how long the downmove is going to continue. We have to remain solvent by the time correction completes.

You might make some money by these kind of antics, but wealth creation is a serious business and one needs to learn investing properly and implement these learnings with discipline.

[hitesh2710]

@Chandragupta

Stocks I would outright avoid would be diamond power, sunil hitech, cantabil, etc.

Above was the sentence I wrote in the quote you mentioned. The context of this was that all these three businesses were peripheral businesses with no dominance in their field.

If you look at the prices of these, two of these three have gone bust, and Cantabil has done well. But looking at the margins of Cantabil at 35% and if I compare them with say ABFRL, or KKCL, they are at around 18-20%. I don’t know what they are doing to get these kind of margins and whether they will be able to sustain them going forward.

I think retail garmenting business in India is highly crowded market and unless we can figure out any reason for such high margins, its difficult to be able to invest in such businesses at such lofty valuations. 40 PE and nearly 5 times sales.

[preetkaran]

@hitesh2710 ji

One questions here.
In 52 week high strategy, you wait for consolidation and put the trigger at right time.

I just want to understand when you get off the trade when its moving at opposite direction.

In Mark minervini theory, he generally put stop loss at 5-8% loss depending on the technical setup and risk 1-2% of total capital in one trade.

He rightly said that losses work geometrically against us and want to get off trade if price moves below pivot low ( 5 - 8 %loss)

Since you bet heavily (that goes above 25% of your portfolio),
(i) How much you risk in particular trade
(ii) How much %below you put the stop loss.

Just trying to understand your risk management process.
Thanks in Advance

[hitesh2710]

@preetkaran

I prefer techno funda approach in my investing style, where many a times fundamentals assume higher significance, and other times technicals assume higher importance. But the main theme is that both technicals and fundamentals have to be in unison and be pointing in same direction. Usually it takes me in the direction of strong charts in companies with good tailwinds.

In my core portfolio bets, where the time frame is longer, usually from 6 months to 2-3 years, above is the theme. In rest of my picks, where technical picture is usually very good and fundamental triggers are not as yet visible, I try to be conservative in allocating lower percentages and if trade goes in my favour and fundamental triggers unfold, I increase my allocation gradually.

I like MM style, but do not copy him totally as I cannot do the kind of churns he does. He usually applies 1-2% capital on a trade and keeps appropriate stop losses.

I usually have my own methods of applying technical analysis which is a combination of a lot of things, one of them being MM style.

I do not have an absolute percentage stop loss in mind when I enter a trade. Usually its a level of a recent swing low, or a specific moving average, or if I am trailing it on winning trades, previous consolidation levels, so on and so forth.

When I find that a trade is going in opposite direction, I often get out very early because I am usually very averse to carry losing trades. I give my core bets more leeway, but in bets where technicals have precedence, I have very aggressive stop losses.

I look at different time frames using my technical analysis and sometimes these time frames vary from daily time frames to, weekly, monthly and even quarterly time frames. So the holding period varies accordingly and since in longer term time frames the movements are also much more, I often keep deeper stop losses. In shorter term patterns where time frame for trade is shorter, stop losses are much tighter.

I usually put put up charts where I find interesting patterns on the 52 week high threads, with all my readings and observations and wherever I have taken positions, I usually put a disclaimer.

[Shakti_Srivastava]

@hitesh2710 Sir, how much importance do you give to P/B ratio…what P/B ratio do you consider in your range…

For example : Easy Trip Planners has a P/B of 51.5 …will you ever consider such stock for investing…

[hitesh2710]

@Shakti_Srivastava

Price to book ratio has importance in financials. In other businesses if the business generates high ROE/ROCE, price to book is likely to be higher.

Deep value investors often use it as one of the parameters to assess cheapness of the stock…

Read the chapter on Book value in One up on wall street and you won’t need to ask these questions. In fact if you read the whole book (preferably multiple times, say 5-10 times) you will not need to ask too many questions.

[sahil_bagaria]

Hello Hitesh sir,

I just wanted to understand your view on techno funda picks. Like in Gujarat Fluorochem it has touched the target today for the Cup & Handle pattern which it broke at 3680 level approx. What do you do in such cases where the underlying story is super strong and still a huge capex pending to go live. Do you book some portion in such instances or in such cases the fundamental supersedes the technical target?

Your view on this will be much appreciated.

Thanks in advance!

[hitesh2710]

@sahil_bagaria

When short term technical targets are achieved in fundamentally strong (with impending triggers) businesses, I usually consider two major factors.

First is the allocation the stock has in my portfolio. If because of the run up it has gone up too much, I might trim some holding…

Secondly I would consider an alternative opportunity as compared to the one I am planning to exit. If either fundamental or technical (or preferably both) triggers are clearly visible, I would consider trimming the position.

Besides I would look at other signs of weakness once the stock reaches its pattern target… Either some candlestick pattern, or divergence, or overbought indicators etc.

Considering all these factors I would take a call, and hope for the best outcome.

My usual problem is that I am always loaded with new ideas, and because of concentrated portfolio, short of capital. So whenever above situation arises, if the most attractive opportunity is still available at a price I want to buy it, I would consider some trimming and converting to the alternate opportunity. Trimmed a little bit of flurochem to add more to KRBL which I already bought earlier, and which seems well poised to make a move once its overhead resistance of 390-405 is overcome. Swing high of 384 was recently taken out only to face resistance at around 398 and now stock has come down to retest previous swing high zone.