Investment journey of a late starter

The other stocks in my Longterm portfolio are …
IEX(Avg 135) : - Great business to have for long term. Can become a compounder plus dividend stock over the years as there is long runway and this one has the first movers moat. New exchanges may take some market share but I do not see any other exchange beating this one .Regulatory threat is a thing to keep an eye on but with so much focus from Gov on improving the volume of electricity trading ( reducing long term PPA)c, I do not foresee any regulatory move that will hobble the exchanges. Plus IGX may demerge someday but I am not expecting it in next 3 years .
Borosil Renewables(Avg 155) :- My first good smallcap pick. Started buying at 85 rupees and added till 220. I have booked some profit and taken out my actual capital so whatever is left is free. This is to ensure that I can stay on it till it reaches its 5 furnace target in 2025 . I will not go into the rationale of this one as the VP thread makes it abundantly clear and I had bought this back in Oct 2020 based on that thread.
Polycab(Avg 1215) : - Very good B2B company which has achieved scale, built up a good brand name , has ambition to scale up & out ,into the third generation of business with good succession planning in place . It meets my criteria of a company which can grow for a long time and still has not reached its true potential .
Polyplex(Avg 1561) : - Great dividend company , no debt as such, truly international, good promoter who may sell out to PE farm(Not sure if thats good or bad…seeing essel propack). While many may call this one a commodity company, its past 5-6 years performance does not say so. I am betting on the possibility of a longterm turning of fortunes in this sector. I had actually started buying at 1130 levels and have booked some at 70% profits so the avg. cost seems high.
Deepak Nitrite(Avg. 1863) : - Very experienced and dependable promoters. They are very good at what they do. They are one of those companies which gets stronger during downcycles .Import substitution , excellent backward and forward integration and good capital allocation are factors as well.
Laurus Labs(Avg. 410) : - Again good management ,ambition and proven ability to achieve in a sector where as a country good times are supposed to be ahead. This company is continuously moving towards higher margin business. As a pharma company it has its risks but I believe that this one can be a good long term bet .Again, booking a bit of profit has resulted in higher holding average .
Globus Spirits(Avg. 876) - Ethanol ,ENA play. This one has good capex plans(and assurance to sell its products), experienced promoters, predictable and easy to understand business model, lower PE than it deserves .The consumer facing business is in early stage and may become good later on. I had started buying this at below 600 and recent addition during this fall has added to the average holding price.
Chemplast Sanmar(Avg 605) :- Import substituion play as 40% of PVC demand is met domestically. Chinese cheap PVC production will reduce and stop by 2030 as those plants use the old carbide method and have to convert or close . Company is trading at a very low valuation . Its getting full commodity business valuation even after having specialty chem revenues . Old parent company sins making it harder to get good valuation. But frankly, its not the same company as the one listed in 2008 . It has Fairfax group with 25% holdings and has newer high margin businesses which was not there in 2012 .From the concalls management seems decent enough.

I also have Asian paints,Divis Labs,Pidilite in my portfolio but not sure yet whether to accumulate or play swing incase of a 40% return in a year .

Apart from these , I also have a handful of stocks I picked recently but since it takes me some months to build up conviction to hold, I am not sure how many of those I will be able to hold 6 months down the line .

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It was kind of a value trap, I started buying Rpower when it dropped to 10 rupees, never knew complex cross holding structure or ignored it, stock came to 1 rupee, as fas as intrinsic value is concerned, still holds 6300 MW power in its portfolio but it is blessed by cursed Anil Ambani​:smiley::smiley:

Yes Bank was a classic case where, even oot of banks and mutual funds remain invested till it dropped from 250 to 70. I may be biased but banking business is most complex to understanding, banks are most levered businesses and we take that very likely, If you compare advance to equity capital than ratio is huge. Even a little drawdown on advances can wipe out entire long term gains. Yes, RBL, classic examples,

I invested in PC jeweller when it dropped to 80, having large brand value, inventory value covering loan outstanding and promotor experience as jeweller, still unable to gulp it down why such a great business was let down to dust, answer lies in internal promotor fraud.

This is a major issue when you invest in small caps, need to keep a close watch on even a small change in promotor holding or any 3rd party transactions.

Avoiding hot sectors also has paid good dividend, i did not hold any chemical stock in 2021 when it was hot, pharma stock in 2020 when it was hot and avoided IT from Dec 21 as valuations were crazy, played on opening up theme, with retail sector creating 50% of my portfolio.

Sector rotation, selling stocks at euphoric valuations and buying the next uocoming theme could save me huge capital from loosing in this fall.

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Welcome onboard and thanks for starting this really good looking thread as most threads talk only stocks and I personally like those more which talk individual strategy and evolving thought process as in end, strategy matters a lot.

I think this is an age where you can invest meaningfully going forward and also know your financial status, obligations etc. better and hence can invest likevise and evolve likevise. I think everything has its plus and minus, you have to take things in your stride and I am sure you are and you will…

I think Peter Lynch is correct from US standpoint. Back there a person in any part or department is a master of trade. We dont have jack of all type people there but rather master of one…and hence core competency in that one area/part of business becomes sufficient to gain meaningful insight compared to the type of work environment we have in Indian context where we need to always move up the ladder in order to have salary increase meaningfully accompanied with role changes…

Can you elaborate what is so negative about Life Insurance industry that you find? Whats your take on private life insurance players, specially like HDFC Life & SBI Life?

And exactly for same reason I did not buy single IT share right from TCS IPO all the way till 2020. My thoughts are present in Tata Elxsi thread, how my thought evolved around 2020 onwards…thinking again on reason for this is probably the work enviornment in Indian context where many employees just do their task in order to climb up the ladder and not understand their own business better…they are not even needed to do that by their seniors who just want the current task done…

I think this is the quote of the day!! :slight_smile:

I think for this you need to follow very different strategy. If you invest in only equity and never sell, then what should matter most to you is Dividend income - Now here is the double edge sword and thin razor line difference - Never invest for dividend as you may end up picking wrong business but track the growth of dividend in your companies…for decades later they can grow meaningfully…and for growing dividends along decades, you need top notch companies with top notch valuations and buy them more when market gives you a chance…

Wow, this is a dream run for many, including me! If I got it right, you invested X when you started and it you booked out 7X once and 40X later and are currently at 15X (from 2007 till 2022) - Did you do any incremental capital addition to X or this was all done via profits? Also what percentage of your total networth was X (your initial investment amount)?

I think your journey is stupendous and it will be great to have a separate thread to learn and discuss on your amazing experience and accomplishments!

Curious, how do you do that? Btw I do visit your thread. Congratulations on the great run. We have very different styles, I wish I had even 1/10th of your style and I could have been financially free already :slight_smile:

Thanks @Ghonarbochon again for starting this thread, looking forward to your evolving thoughts here!

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@Investor_No_1 My reason for not investing in TCS was that I saw my company ramping down projects as clients businesses were shutdown due to Covid. I couldnot foresee the costsaving caused by WFH will compensate for it .Plus I did not think from the business perspective and gave more importance to my inside knowledge of useless old fools populating the lower and middle management ranks and the sleepy ad bumbling people who serve as the BRM on client side.That these companies do perform so well inspite of these guys is testament to the sectors scope and longevity.
I also think @Mudit.Kushalvardhan is correct. Atleast in IT, the business thats visible to the employee is clients business and that may be BFSI,T&H or whatever they do. The trajectory of the employer companies(TCS,infy) business is mostly invisible and obfuscated with jargons .Its simply not possible to judge the business trajectory of TCS or Infy unless you are in the top 5 layers of hirerarchy .Actually when Lynch talks about Oil executives in his book,he is not talking about the drill operator or the drum lifter.In IT sector ,95% people is in similar position .
Also, even Lynch did not have any AMC stocks during the MF boom.This same blindness affected him as well.

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Correcting a typo, started with 6X , reached 120X in 2017 end, took out 40X, remaining came down to 10X in 2020, reached a peak in March 2022 of 150X , current is 130 X. March was a different month as my 50% portfolio is in INOX Leisure, Shoppers stop, AB Fashion, Tata motors and Jubilant Ingrevia.

I am investing average 6X to my existing holdings per annum in last 2 years.

Current holdings

  1. Tata Motors
  2. AB Fashion
  3. AB Capital
  4. INOX Leisure
  5. Jubilant Ingrevia
  6. Thomas cook
  7. Globus Spirit
  8. Gulshan Poly
  9. AGI Green pack
  10. Shoppers stop
    11 Arvind Fashion
    12 Hindware Home appliances

Stocks booked

  1. Apollo Tyre 3X gains
  2. Phillip carbon 3X gain
  3. KPR Mills 4.5 X gains
  4. Rushil Decor 5X gains
  5. Varroc Eng 4X gains
    6 Hindware home booked 7X sold at 460, reentered with long term horizon at 310.

Stocks in watch

  1. LTTS ( might become large cap IT)
  2. KPIT ( good buy below 400)
  3. CSB Bank ( cheapest bank)
  4. Jubilant Pharmova ( cheap, good API, CDMO and radiology business)
  5. Arvind mills ( largest denim producer, turnaround case)

Drawdown, booked 8X losses due to leverage positions in June month severe fall,

Future expectation to double PF in next 12 months, looking for concentrated bets as lot of optimism is taken out and downward risks are limited

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About Portfolio construction and allocation
Now, I am still very liquid about this .Until now what I have been doing is …
I buy stocks after research via VP, screener, Trendlyne , Company website, Recent concalls, AR etc. I usually do not buy high debt stocks or very high PE stocks. But I do not have any fixed PE in mind after which I won’t buy . I had adani enterprise until a few months ago which doubled my money.Sometimes I buy with x% in mind if there is a some capex or operating leverage coming into play in a few months .
In general ,I try to not buy anything even for trading ,which I would not be ready to keep for a year or so. I do not try to buy hot fads . I can’t do momentum trading as I do not know technicals well enough .
Whatever profit I make with these trades ,I buy long term stocks with it .That way ,I get to satisfy my itch of stockpicking and profitbooking and still build my core portfolio.
Allocation is my weak point still. I am not even sure how people allocate 5% or10% of portfolio to a stock. Do they calculate it with present portfolio value or the starting portfolio value ?
Since I have 25 plus stocks, not many outside the core stocks has more than 5% allocation based on present portfolio value.
Circle of Incompetence
I do not buy stocks from certain sectors…
1.Banks and NBFC … I do not understand this industry . Too complex for me .
2. Capital goods and heavy Engineering : Too slow and asset heavy . I know a few good companies but will not be able to hold unless I buy them dirt cheap like 2020 prices.
3. New age BS like paytm, źomato and the likes which do not know how to make profit. I do not care what Goldman Sachs or JPMC says about them.
4. Insurance … do not know how to value them .The EV thing is not reliable as evidenced by LIC.
5. Metal stocks… unless I learn to interpret LME stocks & charts properly, its not possible to play metal shares correctly. My level of impatience won’t allow me to buy at extreme lows and wait 5 years for the metal cycle to return .

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Next I would like to write down my current ideas on a few items. The idea is to come back few years later and see how wrong I was …
EV adoption as an investment idea: IMHO, India lacks sufficient infra now and will take years to successfully implement it, in order to allow the common man to discard the ICE cars and take up EV. Even with battery swapping ,considering the congested roads and fuel stations, I do not really see easy adoption. Even from clean energy perspective, running EV is useless if the power generation is through traditional sources . No doubt it will happen sometime but the timeline may be much longer than the current euphoria or political posture suggests .
It is even more difficult to know which companies would really benefit for EV adoption .
As a sector for investments, I would better skip it . Because for any upcoming industry, there are lots of competitors and a very large percent of them dies out before the industry matures . How would I identify which one would win out of hundreds ? While picking the right one can make me a crorepati, picking the wrong ones would only result in loss of time and money . Its much better to focus on industries where consolidation is going to happen or surviving biggies are going to get bigger(As did Astral) . There it would be a much smaller field of choice and consequently higher chance of getting it right .
Currently a few companies are getting eyepopping valuations for this apparent visibility of future revenues but if one takes a look at the 2 wheeler battery saga and Ola etc. , he should be cautious .
In short… Lynch’s advise stands … Tech disrupts itself and its very difficult to get early mover advantage when its already a fad .
Green Hydrogen: This one is even greater fad . Luckily there is no green hydrogen stock in India (reliance excluded) but there are lots of hurdles to cross and its widespread adoption is even further away than EV . This link outlines some challenges and they are pretty substantial…
Green Hydrogen: Challenges for Commercialization - IEEE Smart Grid
The reason why these new fangled techs generate so much hype in stock market is pretty easy to guess — Very few people are from science background and its very easy to fool most people from other backgrounds by giving overambitious statements and bucketful of jargons . Example …
Urja Global: The Strange Case Of A Non-Existent Element And A Market Scam (cnbctv18.com)

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This post is about my dilemma about holding stocks for long term vs selling on a high when there are no further near term triggers . Having read a lot about benefits of long term holding, it is bemusing to see self proclaimed long-term investors cum evangelists selling out fearing near-term headwinds\margin pressure\Macros etc. etc. and justifying their prudence by pointing out to the high PE etc. when they sold. It appears to me , the very quick turning of bear to bull and back to bear market and better access to information has caused many newish long term investors to become confident about getting higher returns by finding new multi baggers regularly and in perpetuity. The old wisdom of the market does not agree with them .
I myself have a happy trigger finger and have tried selling high and buying low trades with my long term bets but they have not really worked out. Either I sell when it has already dropped or I get back onboard before it has dropped enough. This creates lots of FOMO & tension and I think , for me at least, its better to stay put and learn to live with the drawdowns. For sure how nice it would have been to sell IEX at 320 or BR at 830 and by them back now…
It seems to me , to do that one would need to be fairly knowledgeable in technical and trust it too. In my case, while I know some technical, I have not found the confidence to trade based on them, The paper trades seems to fail whenever there is some surprise in the air …like war or fed interest rate hike etc. While there is sound logic behind a caup and handle or a pennant pattern or support\resistance , none of them can stand their ground when Mr. Market gets manic or depressive,
It seems much easier to trust the companies that I have bet on for long term after research and building conviction, to ride the waves and sail forward .Some in person experience of power of compounding helps as well …
One of my close relatives had bought some GAEL when it was named something else at face value about 28 years ago. Agreed it has not become a 100 bagger but 40X in 30 years is not bad considering until 2020 it was a fairly obscure stock and a faltering business all along.
These relatives had very little access to info back then so I hope to have better outcomes with so much information at hand . Of course, nowadays nothing is available at face value and so I have to be extra cautious as well.

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Agree with you. In my case, I would like to give example of Abott India. I purchased it around price 20,000. And then it went down by almost 25% to 15500. It was my first bet in pharma after doing the analysis and reading AR. Also i heard some negative news about competitor coming out with a low cost product as well as some drugs coming under govt controlled pricing. I thought that it will go below 10,000. But I didnt take any action and stayed put. Now its around 19500. Sometimes ( or many times ) not taking any action also is advantageous.

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I highly agree with you on this but there is always opportunity cost gap left out for most of us.
I have personally tried different times making qucik exits and entry on basis of tailwinds but finally realised making no move is good for personal health and helps in avoiding extra stress.
Guys who are regular and are on toes maybe it can be helpful for them

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@Shikhar_Seth “Opportunity Cost” is applicable only when you see opportunities lying around.But if you are a value/cautious/long term investor ,you are unlikely to see too many opportunities ,unless in a deep bear market . Traders on the other hand see opportunity whenever a stock throws up a sought after pattern.
Suppose in this bear market, your present holding stock A faces margin pressure .You sell it and buy stock B which has upcoming capex fruits and operating leverage . Now bear market stays on for the whole time stock B shows better results and goes away just when company B starts going flat and company A turns around. Can anybody say whether selling A ,buying B was good decision or not ,except in hindsight ?? Here the switching cost can be more than the perceived opportunity cost.

I agree with you about the stress angle. Morgan Housels book explores that idea very well and gets it spot on.
@Mudit.Kushalvardhan I have some(IEX,Globus,Chemplast) which has rolled back 45% or more . Only time will tell whether I chose the right stocks or not .:grinning:

so when they are rolled back by 45%, then what are your views on them in general? Many a times, we start finding faults in their business models and justify selling them. And you know the saying goes…When you want to purchase Mercedes, you start seeing all mercedes on the road. Confirmation Bias kicks in. You will start finding the relevant proof of your blunders…Then how you handle this? In your case, its just rolled back, but in case of original capital erosion to that extent, things get more tricky

In case of Globus and IEX ,I am still in Green. But Chemplast is still 30% down from my cost price. I have read last 3 concalls, the company results have been just as I expected when I bought it before its Sept 21 results . I do not see anything wrong with the business itself and the management seems to be candid enough and so I continue to stay put ,till I start to doubt the management or the facts about its business environment changes.I have not been very long in markets but have booked 30% losses in past when those conditions came true.
Example. Valiant organics(Lost trust in promoter),Symphony(2nd Corona wave made things very difficult for the company).

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This post is about the small cap stocks that I have picked in last 6 months after due research expecting good outcome over next 1-2 years . In some of these I have hopes that they will turn out to be a stock worth keeping for long term. Based on my level of conviction these have 2-3% allocation to begin with…

Lux(3%) – Bought at around 17 PE. Fairly old and decent business which I hope will do well with its premiumization efforts .Present headwinds must go away sometime or other and even if its WC heavy business, the BS is strong enough. They have done very well in past few years and I expect them to do well once the Cotton prices come down . I am aware of the Insider trading accusation that brought about the price crash but the amounts involved are too small . At my entry price , I believe I have fair MoS to stick around for a while and wait for the tide to turn.

Sirca Paints(3%) – It seems like a good bet . 10 years track record is decent and the promoters seem efficient enough. While they have most of their sales in the North, the Italian products are available in Kolkata and of premium quality .They have expansion plans and its mostly how they expand their sales & distribution network. I will need to keep an eye on the execution and follow the concalls. The AR had impressed me for such a small company.

Shivalik Bi-metals(2.5%) – Capex ahead. Technological moat and indirect play on BMS & smart meters .Again the promoters have 30+ years experience and the business seems to have turned for better ever since they went into the shunt resistors business .Its not easy for anybody to start competing with them. Bought at around 400 .

HBL Power(2%) – Again a very technical business but they have clear ability to do R&D and produce hi-grade stuff . Problem is they were not very good businessmen before. Since 2014 they have cleaned up their book , letting go of low margin stuff and have strong tailwind because of the TCAS . If they are able to get their Lithium ion battery factory going on time, this can re-rate .Considering their long history of expertise in varied types of batteries , I believe they can pull it off. TCAS and Tin-Lead batteries will provide some extra profit anyway.

Meghmani Organics(2%) – Agrochemical capex in a couple of quarters, Import substitution , good pigments business augmented by the upcoming TiO2 business . While a lot can go wrong as well, at < 10 PE , I have some margin of safety or so I think .I am aware of the dubious deal a few years ago but I believe the management has matured and will not go down that path again.

Satia Industries (1.5%) – The most backward integrated paper business and hence I expect them to achieve better than average margins . Capex is done and sooner or later the operating leverage will come into play. The Zume tie up may or may not prove materially beneficial . If it does, this can become a long term stock else I should still see a couple of years increasing revenue and profits anyway.

AllCargo Logistics(2%) – Very good business that is undervalued because of its complex structure. Demergers are in the horizon and can unlock considerable value (price increase) . At 7.5 PE I believe I have bought it at fair or less than fair price .

Apart form those I have two more where the risks are considerably high because there is no comfort of past steady performance . I picked these because the promoters are old hands at their business and have more skin in the game than most. Whether they can execute or not will make or break the story. These are those stocks where one can lose the capital or get a 10 bagger .

Cineline (1.5%)

Optiemus Infracom (1.5%)

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Does continuous learning mean continuous churning?
Well… looking at a few VP threads and twitter handles I follow avidly , it certainly seems so . Even I am facing this problem. Being exposed to N number of company names via these sources results in researching quite a few of them and while I manage to reject some out of hand, in many cases I like too many companies . Even after doing in depth research and building conviction enough to buy a stock, it has happened so that I have not been able to hold them since I came across some other stock which seemed more hopeful . For example, I had Prince Pipes and Adani ports . I expected them to be good bets for long term and knew that they would not be showing incrementally better results immediately and the story would take years to fructify. I still think so but I have already sold them after holding for about 9 months each.
This would not have happened if I had not been looking out for better opportunities and thought that I had found them .While at the moment I am still confident about these better opportunities, I might again switch if these stay low for 9 months and I find something else .
I am not really sure how to or even whether to stop this continuous churning as PP or AP has not done anything yet to prove me wrong. What is the correct approach in case I do not have incremental capital to deploy ….
A. Buy, Hold and stop looking for other stocks if the bag is full
Or
B. Continue as I have been doing and be more choosy while selling or buying

You are very welcome to provide your opinions on this dilemma …Does continuous learning mean continuous churning?
Well… looking at a few VP threads and twitter handles I follow avidly , it certainly seems so . Even I am facing this problem. Being exposed to N number of company names via these sources results in researching quite a few of them and while I manage to reject some out of hand, in many cases I like too many companies . Even after doing in depth research and building conviction enough to buy a stock, it has happened so that I have not been able to hold them since I came across some other stock which seemed more hopeful . For example, I had Prince Pipes and Adani ports . I expected them to be good bets for long term and knew that they would not be showing incrementally better results immediately and the story would take years to fructify. I still think so but I have already sold them after holding for about 9 months each.
This would not have happened if I had not been looking out for better opportunities and thought that I had found them .While at the moment I am still confident about these better opportunities, I might again switch if these stay low for 9 months and I find something else .
I am not really sure how to or even whether to stop this continuous churning as PP or AP has not done anything yet to prove me wrong. What is the correct approach in case I do not have incremental capital to deploy ….
A. Buy, Hold and stop looking for other stocks if the bag is full
Or
B. Continue as I have been doing and be more choosy while selling or buying

You are very welcome to provide your opinions on this dilemma …

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B.
As mohnish pabrai says… consider the stock you hold as your wife and the stock you like (but not holding) is your GF. Don’t change for slight incremental like; change only if you are convinced that GF is 40-50 better than W…

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Have you explored the concept of core and satellite portfolios?

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I think, this is why the returns in the long run deteriorates for equity investors compared to Index investors. If we just find some 20-25 good ideas, then we are settled. Now there is no need for futher search to replace them. Any good stock, will give sufficient returns in the long run compared to debt products as well as index, provided we stick to it in its thick and thin. This is just like marriage. Just because you are married, doesnt mean that more prettier and more attractive girls are not there . We need to feel satisfied with our choices and be done with it. Otherwise there is no end to it. You will always find some or the other more good.looking, more earning and.more educated girl somewhere, …but you cant keep on changing it every day.

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Yes but its only in my mental accounting.The conundrum is about those stocks in which I have not yet grown enough conviction to hold long or consider as part of core holdings. Once I have moved it to the core,they are already in too deep to be popped out by a new stock.