Hitesh portfolio

[hitesh2710]

@mayank_raghuwanshi

I have not looked at the companies in question but a cursory look at them on screener tells me that these trade at very expensive valuations. Managements can guide all they want, its for us to be sure that these guidances will be met. Only if the promised growth materialises in these names can these kind of valuations be justified. On the contrary if something goes wrong, or the market fancy for small and micro caps reverse, even exits can be extremely difficult. The question I ask while evaluating these types of smaller companies is whether I would pay 40-45 PE for these names or go for HDFC Bank like company which is available at sub 20 PE and I have visibility of near 20% growth for next 5-10 years. And in the latter names I can allocate even upto 25-30% of my capital and sleep in peace.

Bull markets induce mistakes from investors. Price action often induces complacency in investors and they get carried away by momentum. In my own portfolio, some of the stocks ( I don’t want to name them) post the run up appear to be expensive as of now. I keep evaluating them critically from time to time, and will take action when needed. ( atleast that’s the thought process as of now. )

@harmeshthakker I don’t track Petronet.

[nileshKumar]

Hello Hitesh ji,
I hope you are doing well!!

I have been in the markets for about two years now. I have considerably improved my stock pickings, based on momentum and fundamentals. But there is still an issue of exits. How do you identify when a particular stock’s story has shifted? both fundamentally and technically. There are some instances where I have cut positions but the scrip has continued to give a runup, whereas there have been cases where I hold the scrip only for it to fall considerably from there. Are there any books or posts you can refer me to?

tldr; when to exit? how much is enough?

[Kuldeepjadeja]

I dont understand why people are running behind stocks at 50+PEs. Even if everything happenes as per plan what small investors gets , just fairytail ride.
Prices goes up and something wrong happens it corrects 50 ,60% or more.
Than why one should not looking at companies like PSU banking portfolios or Some state run NBFCs like REC ,PFC or many more.
For instance Canara bank available at <5 pe. If india story grows then this bank will definitely grows. And next dividend cycle will be much more than previous ones. Due to govt policy on psu’s.
And if u checks technically its also at the hotspot. Its moving above 3yr highs.
Many such stocks available with very safe and extremely lucrative story.
I am now trying to follow both fundamentals and technicals. Hitesh bhai is true guide thanks

[hitesh2710]

@nileshKumar

Selling is always a tricky issue. Not any specific book on how and when to sell stocks. We can learn from our own mistakes. And keep observing stocks that have made major tops and reversed and see how things have changed for the company at that period of time. Read comments on VP thread on that particular company, particularly at the time of the stock price topping out. Often it provides important learnings.

An important aspect to selling is to know which kind of company you are holding.

If it is a high growth stock, then it might make sense to keep holding on, even in the face of a strong run up. If these correct at all, these will go for some sideways consolidation before resuming their upmoves again. You can see a lot of such examples in current markets. Most of the times these kind of stocks do not fall more than 20-25% from their latest tops.

If you are holding a flavour of the season kind of stock, then it makes sense to exit when there is a lot of extrapolation related to its future prospects. We have seen these things happen in the past in chemicals, pharma, etc. Defence, railways etc sectors seem to have heated up a lot and there are a lot of expectations related to their growth built only on their order books. The party still seems to be on and could last much beyond anyone’s expectations , but I feel that sector needs watching for any signs of topping out.

Technically it is a bit easy to figure out short term and major tops. Short term tops are often seen by smallish double top patterns after sharp run ups. Or at times, a doji candlestick after a breathtaking rally. Or other bearish candlesticks. Or a gap down fall with huge volumes.

If someone wants to sell on the way up , then one can use RSI over bought indication on weekly and monthly charts to start lightening up positions. Usually when weekly or monthly rsi tends to go beyond 90, or if there is some divergence in RSI and price, it’s often a signal for trimming positions and then gradually plan total exits. In many instances, definitive breach of the 10 week moving average in stocks which have rallied hard and correct gives early indication of a top.

If someone is a long term investor holding consistent compounders like HUL, Pidilite, PI Inds, Nestle, HDFC Bank, Kotak bank etc, then there is no urgency to sell. There idea should be buy when there is big correction and then sit back.

[Mayank.mail]

@hitesh2710 ji, thanks for your inputs on Banco earlier. It has given decent run up to around 480 levels now, however i am concerned with the built up in inventory in the firm to the extent that Operating cash flows have turned negative. Also management has borrowed (it seems on the strength of their inventory, since amounts are similar 274, 272Cr) and paid dividends(200Cr) this year. Also valuation wise it seems to be trading at the higher end now (EV 9+) however on the positive sales have grown at a healthy 12%+ for last 5 years and OPMs have also trended higherto 16%. Also FIIs have started buying into the stock. What would you advice for existing investors.

[avneesh]

@hitesh2710 sir,
Do you feel it’s possible to achieve financial independence if we neither use leverage nor have family wealth?

I am realizing that trading/investing is one of the toughest jobs. Even if I get 20% returns on 1 cr. It’s hardly 20 lakhs a year. One can easily earn more than this if we have a full-time job. I guess William O’Neill also said something like, “The real money is in managing other people’s money”.

Since you have been doing this for so many years. What’s your take on this dilemma considering your own experience? Is it worth the effort to chase 20% returns when smallcap mutual funds can easily offer us much more? Or the only solution to level up in wealth is highly concentrated investing and use of leverage?

[hitesh2710]

@avneesh

I know a lot of fellow investors who have become financially independent by investing on their own and without using leverage. So the answer to your first question is a yes.

Personally speaking, I started my proper investment journey in 2009 and by 2018, I felt that I was financially independent. I never used leverage. I had a good govt job which allowed me to invest without worrying about regular cashflows. Hence I never had to get money from my investment account to run day to day expenses. I have been lucky enough to land a few big winners in my early investing career and these helped in initial capital growth and more importantly in confidence growth.

Few steps which I think are important are:

1. Learning-- through books, forums, youtube videos, mentors, any or all of these.

2. Know a style of investing suitable to yourself. And get better and better at it.

3. Start investing, initially with small amounts, and once confidence and results follow, increase amount.

4. Have a firm belief that wealth creation is possible through equity investments. For me, reading Snowball ( Warren buffett’s autobiography) made me realise that creating wealth was possible through equity investing. I don’t follow his style in totality , but the fact that he became one of the richest persons in the world only by equity investing was inspiration enough for me.

5. Once you have learned stock picking, work hard on allocation. Here there are two types of allocations. First is percentage of your own networth in equities. Second is portfolio allocation to individual stocks. ( I have been aggressive in both aspects. Nearly 90% of my networth has been in equities and individual stock allocation also have been quite aggressive. But I have seen diversified investors also do equally well. So you can take your pick)

And aim for more than 25-30% CAGR returns over longer period. Atleast in initial years. It’s quite possible. I know a few friends who have done north of 40-50% CAGR returns over many years. And its possible without leverage. Idea should be to make the most of your winners and bull markets.
And most important is to enjoy the whole process of investing. It should induce a sense of happiness and achievement in you. Doing what you love is happiness. For me its investing.

[Puneet31]

Wisdom unlimited
You just put and gave belief to what I think overall for equity investments
Avoid leverage (dont know why many investors try to take that path at all)

yes Financial independence is possible through equity investing

[LarryWink]

Hello Hitesh Sir,

Greetings! I deeply appreciate your selfless work here. I hope you continue guiding us for a very very long time.

My journey in stock starts in may-22 by trying to catch falling knives…my pack went -30%…it made me read more…Stumbled across doctor’s Kaveri seeds story. Thats how I found VP & your portfolio thread…I keep that news story & your PF thread bookmarked…I consider it to be the best thing happened to me in my investment journey so far.

Currently, about 90% of my investments are in small-caps, focusing on what you call “flavors of the season” such as defense, government, and electrical capital goods (with financials, materials, and industrial making up 75%, and IT at 15%). I have None in chemicals, pharma, textile, and packaging, which I tried to chase in 2H 2022.

My queries:

1. In terms of “flavors of the season,” how can i identify when a sector is losing its appeal or becoming more favorable, especially if I am not adept at reading charts or financials? (I am asking because I feel this is what made me stay afloat and this could be the right approach for non-number fellas like me who expect more than 20% return, I was lucky to somehow get hitched to the flavorful wagon…my pack today is +30% from -30% in May-22. I feel luck would not be always on same side)

2. I wish to have more clarity if the growth in the electrical capital goods sector might continue until 2025 due to India’s 2030 renewable apirations, which require more capital goods in electricals? I’ve traded multiple times with successes into HBL, TRIL and Technoe in the past. Today I hold two of them as the top two in my portfolio.

3. My investment approach has been “jump on good names when market takes deeper cut ". I found myself to be adding more and more every time market dives. This approach brings me to about 35 stocks in my pack. I wish to have guidence on this and if its okay to have such nos in the pack. ?

4. As someone who works full-time and has limited time for in-depth research, would you recommend, following ValuePickr senior members, the 52-week high thread, or the Bull Therapy thread as a suitable approach to learn and invest?

That’s all for now. I have more questions, and I would greatly appreciate your guidance. Would it be okay to come back with more questions in the future?

Thank you.

[PavanM]

The Power of Investment Journals

As a minor addition to these excellent points by Hitesh ji.
A recent blog entry capturing some of the idle-time itches which affect a full time investor.

Thoughts. Actions. Results. These three need not be always related.

[rahil_sayta]

Dear Hitesh bhai thanks for the wisdom . I have a few questions on point you mentioned

1. With regards to concentration of bets on stocks where you have conviction and growth looks convincing. Whats is a good allocation at one point 7 % was good for me today i feel going north of 10 % upto 20 % . I know it depends on person to person but what is a good allocation considering risk of blow up is low and portfolio can grow @ high Cagr with mediocre risk

2. In a concentrated portfolio of say 10 stocks how many should be high allocation bets ( assume we have 5 high convincing idea )

a) 3 stock 20 % allocation each rest 5 % each
b) 3 stock with 10 % allocation rest with 5-7 %
c) 5 stock with 10 % each balance 5 -7 %

I intend to follow option a) wanted to understand your view and also which one of above looks good or any staryegy that you follow which works for you.

Concentration does give excitement of higher double digit growth in portfolio but also comes with risk of portfolio moving in either direction.

[hitesh2710]

@rahil_sayta

Regarding allocation in a particular portfolio, there is an endless debate. There is no holy grail.

Allocation style depends upon an individual’s comfort levels. I have a close friend, ( don’t want to name him) who is scared to go beyond 10-12% allocation in his highest conviction bets. For me it is often the minimum starting position in my highest conviction bets. And both of us have near identical records.

But there are certain situations where there is confirmation of a good story from multiple vantage points. For someone like me, having knowledge of technicals also is an added advantage. If I find a good company with improving fundamentals crossing key 52 week, or multi year high levels, I feel added conviction and find it easy to increase allocations.

I know of some investor friends, who dig deep into fundamentals ( not my forte), often attend management concalls, AGMs, have a close eye on the industry scenario, track competitors etc, and they too have their own ways of getting added parameters in a high conviction story. I know for a fact that they do not indulge in chart reading. But they have found and sharpened their own methods of getting conviction, and tracking company on a regular basis.

I am not good at statistical models, I am more of a feel based investor, more intuitive, more instinctive, when it comes to allocation part in my portfolio. So I would have no answers to the different scenarios you have put up. You will have to make your own peace with those problems with experience and trial and error.

But highly concentrated positions have often worked for me. The most important attribute for a concentrated investor is to be nimble and decisive. If any of my high concentration bets seem to be on shaky grounds, I am very quick and decisive in reducing/totally exiting my positions. Post this actions, even if my call has gone wrong, in cutting my positions, I don’t suffer from any regrets.

[hitesh2710]

@LarryWink

A lot of selling aspect of whatever I feel and have learned is shared a few posts back in following post. Nothing more to add.

Hitesh portfolio

@nileshKumar Selling is always a tricky issue. Not any specific book on how and when to sell stocks. We can learn from our own mistakes. And keep observing stocks that have made major tops and reversed and see how things have changed for the company at that period of time. Read comments on VP thread on that particular company, particularly at the time of the stock price topping out. Often it provides important learnings. An important aspect to selling is to know which kind of company you…

Regarding which thread to follow, it’s your own call. These are threads put up more to share learnings and understanding technicals, including different easy to understand patterns. Looking at 52 week highs, multi year highs, simple trendline breakouts, etc should not involve too much complicated learning. These are practical, mostly live examples in the Indian context. These are not recommendations, and hence need to be read for learning purposes.

@Mayank.mail I do not track Banco as of now.

[amishra]

Doing what you love is happiness and for me its investing ! What a message Sir !

Sir, I have been doing Asset Allocation & aggressive rebalancing since last 22 months and have been managing 23-24% XIRR consistently. Majorly its ETF & Index Funds rotation (Large, Mid, Small, Nasdaq, IT & Goldbees). Its peaceful , easy to track and let me be honest- keeps me happy.

Now that I have completed 1 bear and 1 bull cycle ( Bull is still on though), I am thinking of leverage in the next bear cycle. Obviously not a huge amount, but thinking of taking OD on FD or other safe instruments whereby interest rate shall be less than 10%. Overall leverage would be 30-40% and own funds would be 70-60%. Ability to hold for 5 years as have regular salaried income.

What would be your advise on the above strategy.

[A_shah]

Thank you so much and my deep gratitude to you for always handholding investors so that their learning curve is fast with less mistakes. Am amazed and wonderstruck with the regularity with which you have been replying to learning investors like me over a long period, with practical solutions. Practical suggestions like you give are never found anywhere else in any book.

@hitesh2710

The most important attribute for a concentrated investor is to be nimble and decisive. If any of my high concentration bets seem to be on shaky grounds, I am very quick and decisive in reducing/totally exiting my positions. Post this actions, even if my call has gone wrong, in cutting my positions, I don’t suffer from any regrets.

Have followed averaging on the up rather than down after your suggestion long time back and have found it to be comfortable now though initially it was uncomfortable as it was going against the instinct.
I have often found myself unable to cut losses when it goes down.
How does one be nimble and decisive without being regretful ? How to change this instinct ?

[hitesh2710]

@amishra

Leverage is a double edged sword. If you know how to use it, it can win you wars, and if you don’t it can hurt you.

While using leverage, the key remains to control greed. A definite level ( as you mention 30-40% ) of leverage has to be fixed beyond which no matter what, you will not go. If there is this kind of discipline, then maybe there can be a case of leverage. Other aspect is that if markets turns in the direction opposite to your anticipation, you will have to take quick decisions.

I do not have any experience of leverage except in my early days when for a brief spell I used to dabble in F&O, but was lucky enough to exit with minimal scars. Those days luckily I did not have enough money to lose. I have heard some friends use leverage on their own holdings to buy other holdings, but this thing has never appealed to me.

[hitesh2710]

@A_shah

Cutting losses, and that too as quickly as possible is a learning on investment journey. I used to be slow to take losses and often took hits of nearly 20-40% on my positions. But during Covid crash, I somehow managed to exit extremely quickly during the first phase of fall itself and that helped me get over the mental block of booking losses quickly

Usually whenever you are attempting something new, first couple of times, its difficult, but once you start doing it regularly and start seeing the results, it becomes second nature.

The only drawback to this strategy is that sometimes after your quick exit in any position, the stock price will start moving up and often with vengeance. We have to learn to make peace with this kind of scenario. That too comes with experience. This kind of stuff has to be taken philosophically. You cannot win them all. You win some, you lose some. But whenever you are in a winning position, make sure to make the most of it.

[Siddharth_Krishna]

Hello @hitesh2710,

Wondering if Dr. Reddy’s is currently a cup and handle pattern?

My style of investing was buying compounders on dips. However after reading through your posts and multiple other books - I am very intrigued by ‘techno funda’

In that light, would a company like Dr. Reddy’s qualify for this style given the cyclical nature of Pharma?

[hitesh2710]

Dr Reddys stock price crossed its previous all time high of 4380 in July 2020 in the Covid pharma rally. It then went on to hit a fresh all time high of 5600 in July 2021 and went into consolidation, and posted a swing low of 3660 in March 2022. Since then it has had a good upmove, and it crossed the highs posted in July 2021 in July 2023 ( highs posted and crossed all in July? ) and went on to high a swing high of 5989 and came down to retest previous highs. Now seems to be consolidating.

The move from July 2021 to July 2023 is a rounding structure. It does not have a typical cup and handle structure, but overall chart looks good.

Regarding techno funda, any company qualifies for techno funda. We have discussed so many ideas in the 52 weeks high thread.

[ChaitanyaC]

@hitesh2710

Usually whenever you are attempting something new, first couple of times, its difficult, but once you start doing it regularly and start seeing the results, it becomes second nature.

The only drawback to this strategy is that sometimes after your quick exit in any position, the stock price will start moving up and often with vengeance. We have to learn to make peace with this kind of scenario. That too comes with experience. This kind of stuff has to be taken philosophically. You cannot win them all. You win some, you lose some. But whenever you are in a winning position, make sure to make the most of it.

When people despite knowing but haven’t experienced talk about things, there could be an element of doubt, that they might not know in full, and that their suggestion should be taken with a pinch of salt, but not with your sir.

Personally, I don’t think there isn’t a thing that you cannot provide an answer to.

I haven’t come across anyone mentioning about second nature, a nature that is the result of deliberate practice. And being philosophical too, with the outcomes. Probability with a touch of philosophy. Couldn’t agree more.

You are a great teacher, a teacher with knowledge, experience and wisdom, with an approach, and answers that are succinct and comprehensible to all of us. Even your one liners come with a lot of weight and profound meaning.

Keep them nuggets of wisdom coming dear sir.