what do you do with core stocks which are undergoing short term headwinds and hence doesn’t participate in this rally and might hit 52 week low as well. And the management confident of sales picking up 2 quarters down the line? Something like RACL.
2 Likes
I usually look at weekly charts for positional medium to long term buys. If there is any visible bullish formation, I try to go one period lower, i.e daily chart and look at it. With these kind of workings, I have a list of around 30-40 stocks which remain in my watchlist. (this is based on charts and fundamentals. )
For investment purpose, I have around 8-10 stocks in my portfolio and remaining 25-30 remain in watchlist. If something from the watchlist appears better and if the picture and investment merits are much more clearer, then I often replace something from my portfolio or add it as an additional stock.
I do not have any formula based approach to portfolio allocation. It depends upon the conviction levels and market mood.
About booking partial profits and taking money out, I usually do not do it except in some cases to pay taxes. Usually I keep the full portfolio running and try to enjoy the benefits of compounding. It has worked well till now over all these years.
36 Likes
For my core portfolio stocks I usually don’t wait till stock hits 52 week lows. Usually two lines in the sand for me are the 30 week exponential moving average and below that 200 dema.
One stock which I gave a long long rope to in recent past has been Usha martin. It briefly went below 200 dema intraday, but did not close much below that level. Two things helped. First is the fundamental conviction. Especially after listening to concall. And second thing was understanding the reason for pressure on the stock. Which was constant selling by the Prashant Jhawar group and entities.
32 Likes
Sir, I would like to know your thoughts about retail liquidity in the Indian market. How do you see investments from retail in mutual funds or direct equity in the market? And to be more specific, is there any connection between the returns that are being generated in the past 3-4 years and the liquidity that is coming from retail, and if there is a connection, does that mean that the returns will reduce if these retail leave?
I read comments of retail sir, to some extent, it appears educated people have at least some idea about how things work, so I am guessing these folk will remain at least with mutual funds, but I see a lot of people who don’t have much idea about what is what but are enthusiastic about just buying something, it appears they are in good numbers and are putting in good money, mostly in lesser known small names, beyond Nifty 500. I have no idea about what percentage these kind of participants constitute in the overall liquidity, and what would be the impact w.r.t returns if they leave?
I am participating right with these retail sir, with somewhat better idea, but I don’t know what portion of my return should I attribute to liquidity in the overall market? I am getting profit with my shorter term trades only because someone exists on the other side and is willing to buy from me at a higher price, and if that someone disappears, I would be holding the bag, as there is no greater fool.
Have you felt this way too, in the sense that, you have always had good returns in tandem with your knowledge and experience, but in the past 3-4 years, you have had stellar returns, returns beyond your expectations, which are quick too, that even you got the feeling of ‘this should not happen’.
I know that you take bigger bets, with both fundamentals and technicals in place, having a holistic view of the market, you identify froth, you go where the puck is, you know which sectors to not look at, all of which we get to know as you post about them from time to time, but have you had the feeling in the past few years that things have become too easy, or do you feel liquidity from retail is not that powerful to move the needle and you are reaping what you had sown, so even if retail flush disappears, you will continue to do good, and to some extent, it applies to us as well.
Or is it that bull markets constitute all kinds of participants, nothing surprising here, then does this mean, bear markets constitute only learned participants, so no one is in a hurry to buy, and as such, momentum essentially does not exist in bear market?
Thank you.
10 Likes
The retail liquidity in the form of SIP money has been on a constant upward trajectory since past few years. And now it has attained a sizable mass. This has made a big difference in the last couple of years wherein the FIIs were selling consistently in Indian markets, and still Indian markets were able to weather the storm mainly due to constant inflows into mutual funds.
What I have seen in the behavior pattern of SIP investors is that they do not keep checking their NAVs on a regular daily basis and hence do not panic and withdraw. ( If the markets were to fall consistently in future this scenario can change too, but as of now its a very steady flow into SIPs.) Whereas the retail folks who invest in markets directly (barring the knowledgeable investor group) tend to panic at the earliest sign of trouble. But this class of investors hardly matter in the overall scheme of things if we consider the whole market. The size of their total funds is quite small on an overall basis. A lot of retail guys have joined the option writing bandwagon and there are some folks training them and making them believe that there are guaranteed returns of around 2% per month to be made. But we all know that there are no free lunches in the markets. Risk often comes from an entirely unexpected direction. So we see some cracks off and on in the small and midcaps on some days… Part of that is due to routine corrections and part of it is due to margin calls being triggered on such F&O positions of retail guys.
Regarding returns coming big and fast recently in last 2-3 years, that is usually the case in strong bull markets. I have heard smart folks making huge money in the 2003-2007 bull market. ( I was not an active participant in that period) In the 2014-2017 period also a lot of smart folks made big money. I too enjoyed my share of success during that period. There are some such periods of strong bull markets and in those times, if you select your stocks wisely and allocate properly, these are times which can take you towards big wealth creation.
A rising tide lifts all boats. So a lot of participants who do invest even with half baked knowledge end up doing well. Those who are more enlightened have a ball. It’s only the leaky boats that find problems in such great times also. This is akin to a portfolio filled to the brim with stocks like chemical stocks in current phase of bull market.
During sideways markets, or bear markets too there will be stocks that will outperform. But these will be few and difficult to find. And the kind of returns in these times are much less than those enjoyed during bull markets. So expectations have to be tempered down and safety of capital has to be the main focus.
Biggest problem is retaining the returns generated during these kind of bull markets. Bear markets that usually follow are brutal by nature and often come with little warning and do not give enough time to act or react.
42 Likes
Hi @hitesh2710 bhai, being a doctor yourself, do you have a view on Vaidya Sane Ayurved Laboratories? The company is providing research based modern Ayurveda treatment to its patients via its Madhvbaug clinics and hospitals with an aim to reverse ailments like diabetes, heart diseases, BP, obesity etc.
They’ve also developed food kits which along with their panchakarma treatments help patients reverse their ailments via proper dietary plans. Recently, they’ve also launched an OTC product called Madhvprash and are looking to launch more such ayurveda products. You can find more about the company and its growth plans on VP itself.
It will be super interesting to get your POV on the company as an allopathy doctor. I’ve recently invested in the company and for the time being, I’m quite bullish on it (although a lot will depend on how the management executes its plans). Keen to hear your views about it, thanks.
3 Likes
Thank you very much for the answer sir, as always.
What kind of change have you seen since your investment journey has started, or at least in the last few years, w.r.t to the returns being generated?
If we take the case of large cap mutual funds, they are struggling to beat Nifty. Is it the opposite with mid cap and small cap stocks that you participate in, there are more returns here now, reasons being portions of SIPs which are directed towards mid and small caps, some direct participation from the retail because of social media, FOMO, IPO frenzy, network effect bringing in more people, so all in all, liquidity is growing, and this has a direct impact on the returns?
Are you finding it easy to do what you are doing, not only because you have grown and matured as an investor and have gained great knowledge and wisdom, but also because of the growth of our market with Indian participation, what was once considered a cushion is now strong and growing, so returns from mid and small caps is more?
Or is it that, even at your level, you don’t consider liquidity as a factor, unless you are buying illiquid names, so I, who is small, should not even bother about liquidity, and concentrate on learning.
I ask this sir, because, many times I wonder who is buying what I am buying and why are they buying, I know that these are companies and these companies do something, but price momentum does not necessarily mean a tailwind always, it could just be an intermittent sprout which may subside quickly, and as such, I try to be agile and sell into strength. How else could I define a 15% return in a month, if not for the liquidity?
I am finding my place, but I want to be confirmed that the ground is stable, so my question.
Thank you.
5 Likes
My investment journey has two distinct bull phases and one bear phase. First lasted from around 2009 to 2017. During this phase although the initial capital was not big, the returns were quite good and hence by end of 2017, corpus had grown to a decent amount. This was contributed to by some big winners like Ajanta, Kaveri, Mayur, Atul Auto, Canfin, PI Inds, Avanti feeds etc. And in many of these starting allocation was decent to begin with and that helped a lot.
Next was bear phase from 2018-2020 during which time portfolio at one point of time was down 40% from peak value and rest of the times meandered along without crossing peak value posted in Jan 2018. This was because of the overall bearish sentiments in small and midcaps. And I did not recognise that that time was not the right time to be in these kind of stocks. That was the phase where quality at any price worked like a charm. ( If you check Saurabh Mukherjea kind of portfolio, it might have done very well during that time. ) It was the time to buy quality companies at high PE and sell at higher PEs. And I had mental blocks about paying high unjustifiable PE and hence suffered.
That period of agony ended in the bull market that followed Covid crash. And since then things have been going well. Big winners with very aggressive allocations in stocks like Laurus, Usha, HBL, Time techno, PSU names etc have helped in this phase. Here too I was able to identify the PSU rally in its very early phase based on charts. I had gotten into a lot of PSU names early on , but never had the conviction to allocate big. And I exited quite early because I was never too convinced about the fundamentals of the PSU rally. But other stock picks like Usha, HBL, Time techno, JK bank etc took care of things.
The reason small and midcaps have outperformed big time is that they were neglected from 2018-2020 during routine markets. And during the Covid correction the bottom fell off for these small and micaps, thus making them highly attractively valued and highly underowned. This is usually a fertile ground for multibaggers. Now after such a massive rally in these segments of companies, most of the juice seems to have been squeezed. Pendulum gradually seems to be swinging towards overoptimism and over ownership. There still might be some more way to go, but low hanging fruits have already been plucked.
Regarding the conundrum about why someone is buying stuff at 2-3 times my buying price, I usually attribute this thing to market situation. In Gujarati, there is a saying " Bhaav bhagwan chhe" ( Price is supreme) No use questioning the ticker tape. Sometimes we tend to complicate a simple procedure by too much reasoning.
Liquidity remains the backbone of any bull market. And we have ample liquidity in our markets thanks to good economic conditions and overall global liquidity overflow. Here too there is the principle of reflexivity working. Bull markets attract liquidity and liquidity keep propelling bull markets higher.
Coming to liquidity in individual stocks, many a times during early phase of bull markets, liquidity is very low. Once it catches market fancy, big volumes start getting generated. There are very few stocks that keep going up on low volumes all the time. Usually this is seen in manipulated stocks or stocks with smallish circuit filters. I tend to stay away from these names as far as possible.
@amangoklani I don’t have any idea about Vaidya Sane Ayurvedic labs.
52 Likes
Hi Hitesh bhai good to know your journey. I am sure last 2-3 years have been great years as investors in equity market .
My question is on how are you looking at 2024 to play out (stock) . Most of stocks that we / you in genral are holding have done well and may be we may not see 3-4 bagger in most names that one holds which has already done well ( as PE has expanded ) and scope of earning growth will play a role in return
Would you prefer exploring new names / themes in hunt for high growth high return ( multibaggers) or would prefer to hold to known devil to generate compounding returns.
Should one digest the gains and look to grow @ double digit or should one still be agressive to make the most of this bull run. As we may be in a prolonged bull market.
1 Like
Thank you for the detailed answer sir. Your answers to questions also comprises of past, along with what we are asking, as you have rich experience, not just in terms of years but w.r.t participation too, thereby providing us with a broader perspective, as you talk about a lot of names, and this list expands.
I am certain you have many memories of your big winners, right from their origination of thoughts to their exits, which is more than enough to write a book, a book, which will be a compelling case study of multibaggers in Indian context.
‘Diamonds in the mist’ - How to identify future multibaggers, dovetail the journey, and exit before the avalanche.
As always, couldn’t just leave with a like, when you have allotted your time more than everything else, explaining things in detail, which gives a lot clarity.
Thank you very much.
8 Likes
@hitesh2710 Sir If a company Receivable and Payable both increase at same rate i.e 120% than it is red flag or not ?
And sir please help me out what does mean if Receivable or payable or inventory is negative? @hitesh2710
Just a question, during the bear phase of 2018-2020 in small and midcaps, were there a few handful of companies that did multiply 3-4x showing earnings growth?
Wanted to know if the saying “There’s always a bull market somewhere, find it and ride it” actually holds true during such phases of the market and if yes, then should we ride them on technicals maybe with lesser allocation considering market sentiment?
Regards,
Dhruv
1 Like
How things pan out in the future is always a million dollar question. Hardly anyone has the correct answer to this.
But there is no harm in looking out for next set of winning stocks constantly. You keep turning over a lot of stones to uncover diamonds.
It’s a tough choice between holding stocks which have proved to be winners over the past 1-2-3 years versus replacing them with new ideas. Personally I try to be aggressive during bull markets and try to make the most of them. So idea is always to be on the lookout for the next big winner.
@hitesh97 You can read Pat Dorsey’s Five rules for successful stock investing . All the issues related to balance sheets, return ratios, inventories, receivable days, payable days, working capital cycle etc have been discussed in details.
14 Likes
2018-2020 was not in a real sense a bear market, if you take out the Covid crash which lasted a few weeks. INifty ndex managed to remain within a range of around 12000 on higher side and around 10000 on the lower side. But the bear market happened in small and midcaps space.
During the aforementioned period, stocks like Bajaj finance went up nearly 2.5 fold from 1800 to 4800, Page Inds went up from 18k to 36k, Titan nearly doubled, Bata, Relaxo etc also nearly doubled or more, etc. So the so called consumer facing businesses which were supposed to have a long runway for growth ( the theme was growth forever in companies like the chaddi-banyan companies and others too, and the oft repeated argument was per capita use in US vs per capita use in India and so on) were the big winners.
Most of them had negative working capital ( or very favourable working capital) cycles, decent or better than decent ROEs, debt free or cash rich balance sheets, free cash flow generating business models. That was the theme at that point of time, and valuations had reached crazy levels because of these kind of justifications.
Each bull phase has its own flag bearer sectors and stocks and the narrative around them is always compelling enough to justify the valuations accorded to these sectors and stocks.
Who knows a few years from now, we might be talking about currently fancied sectors and stocks in the same vein, once the fancy has subsided and stock prices have corrected.
Market participants always tend to confuse flavour of the season ( which last for a few quarters to a few years ) with perennial winning stocks. There are only a few companies which merit a buy and hold for decades tag. And there too there will be periods of underperformance.
Recently after looking at fantastic results of PI inds during last quarter, I was looking at the wealth created by it. If price is adjusted for splits, etc, stock price went up from around 100 in 2012 to current levels of 3600 in 2024. In fact it hit 3500 in 2021 and has been going above and below that level. So we can consider a rally from 100 in 2012 to 3500 in 2021, which provides 35 times returns in 9 years.
Against that consider Laurus labs which went up from 125 ( crossing its previous ATH in 2020) to 720. And lets consider that someone could not buy near bottom and could not sell near top. Even adjusting for that it went up nearly 5 times within 2 years. And recently HBL went up from levels of 80 in June 2022 (after having crossed previous ATH) to 600 in Feb 2024, which is nearly 6-7 times in less than 2 years. If someone had bought Laurus, and HBL back to back, then money would have gone up nearly 30-35 times in less than 4 years.
So someone who kept on doing stock research to uncover future winners, made nearly same amount of money within 4 years that PI made for its investors in 9 years. But those who held PI were unworried about thinking about exits, and bear markets that came through in between. But these kind of stuff has a lot to do with investor mindset.
73 Likes
This was a great listen, so many different mental models in 1 place. Thanks for sharing.
Hitesh Bhai [@hitesh2710]: How do you put valuation in perspective while acting on techofunda bets? Any situation where you sensed a compelling trading/investing opportunity but did not participate due to overvaluation as the main hinderance? TIA. Much Appreciated.
@hitesh2710 ji - with current market scenario, how does your portfolio allocation look like in terms of % for small, mid and large caps?
Also can you share how one can start learning, understanding and finding own techno-funda bets, understanding charts? Thanks
1 Like
Hitesh ji ,How many stocks should you recommend a 21 Y/O investor/trader to have in his pf to generate alpha returns with standardized risk or what would you do if you were back at this age bracket . Currently i hold 18 stocks with most of the allocation to top 7.
1 Like
I’ll answer on Hitesh bhai’s behalf. Hitesh bhai keeps concentrated bets and at max recommends to keep 15-20 stocks. He has video recording, you can look just above. He has talked briefly about no. of stocks, entry and exit criteria there.
1 Like