Long term investment strategy (Buy, hold but don't forget)

Investing Strategies
22

You are right, it is always on risk appetite however do you think selling your winner and buying other stock at same time will reduce your risk, i used to to do this 3 years back however stopped it completely. Kalyan jeweller was 15% holding when traded at 110 entry point, its 30% now at 330, contribution from single stock is 40% in my annualized return of 95%.
Decided not to sell it for next 3 years at least as story is intact.

Fallouts of trimming, PG Elctroplast bought at 350 and exited at 900, current running 2400.

Fallout of conviction, ABFRL came down from 360 to 228. Bought at 140, holding it as i believe in long term business moat.

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23

Main reason why switching doesn’t work is our psychology as stock rises in Bull Market and trade at fundamental valuation plus public exuberance. Adding a new stock is a marathon exercise for me hence now looking for new only if existing stock is too too expensive or some fundamental change happened.

All investors to clear their home loans and car loans if they have before putting more allocation to stocks.

I used 2017 bull run and this bull run to clear of my 2 property and one car loan. Zero liability rightnow hence my perspective towards market is only financial freedom hence bets might be accordingly as risk appetite is high.

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24

Trimming a very big position down to your comfort level is very important, before all the gains are vanished.

I have seen this with SUN PHARMA in 2015, when the stock suddenly corrected from 1200 to 800 and then to 600 within 6-9 months. Hence trimming the position is required from time to time.

Stories of 10-20-30 baggers all look good, but an individual investor is not interested in the stories but want to achieve her financial goals. For that, booking profits from time to time is also an important part of the process. Many people will learn this over a period.

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25

I invest regularly whenever i have cash.

Since sept 2017 till today, i have invested e.g. X amount every weekly whether Sensex was 27000, 45000 or 65000.Only requirement is good company should be available at reasonable P/E.

Uptil now, i had not reshuffled portfolio.
Since last one and half yrs, i had put cash in my own stocks and tried to put same amount in each stock.

E.g. I had first bought carysil at 150 and then reinvested at 250, 350 and even 600.

Lt foods , First time i bought at Rs 65 then at Rs 30 ,Rs 20 and even Rs 95.

Kei, first time at Rs 380 then 500, Rs 1000 and even at Rs 1700.Only thing i watch at the time of reinvestment is

1…P/E should be less than 35 at the time of reinvestment
2…Mcap at the time of reinvestment should be <5000 cr .

I had reinvested in almost 60% stocks.

I think, this strategy helps in building concentrated portfolio (10-25 stocks)

As per me ,there are 2 ways for creating concentrated portfolio

A…For long term investor, buying own stocks
B…For medium term investor, switching over other stocks and making concentrated portfolio

If i am long term investor, only way to make concentrated portfolio is to buy own stocks.Otherwise how can i make concentrated portfolio without high churning.

If anyone has any other idea, how to make concentrated portfoilio, please share.

Thanks

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26

Your two criteria for re-investment specially market cap <5000 cr…when you invested in KEI at the level of 1700, that time market cap must be around 15,000 crore…or am i missing something?

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27

For concentration of portfolio, first thing u need to do is avoid duplicity. What I mean is, if you want to.invest in private bank, dont invest in HDFC bank, ICICI bank, kotak bank all three , instead invest only in may be HDFC bank, as all three banks have same products and same customers they are serving. So avoid having more than 1 company having similar products or serving same.type of customers. And keep adding only to existing companies , dont add new companies to portfolio…

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28

I find this correct strategy for long term wealth creation. Additional thing i am doing is leverage to generate capital for accumulating stocks, this is high risk and work in bull cycles with associated risk. Could multiply PF by 28X in last 4 years with leveraged portfolio.

Pitfall of leverage is booked 6% loss on PF due to heavy selling in Jan to Mar 2023 however in last three years it has worked well for me.

Till now rotation was key as i could find cheaper bets while rotating. Now there is change in strategy as all valuations look at extreme euphoric levels hence keeping in my own circle of competence and stocks with strong moat or cash flow with PE is teen range.

Now i have started cutting down leverage and will make it zero by Maximum Jan 2024 as general election is a big binary event for indian markets, will not even hesitate to liquidate everything in case of a worst outcome.

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29

Yes, when the story is intact, one can stay invested for years. But if a stock becomes not just a multibagger but a heavyweight in the PF, may be we might think differently. I have read about members having got triple digit baggers, I cannot possibly imagine what would I do if I have such a stock, and it falls by 30%.

So, while completely exiting might be correct or wrong, which will be proved later, I guess trimming will give some psychological comfort at least. No wonder selling is hard even for seasoned investors.

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30

To create a significant alpha, diff strategies can be adopted at different cycle of market. In Bull market, I have adopted investment & trading in same stock and strategy worked very well.

Out of total corpus, while i have selected stocks with allocation of ~3-5% in each one and I kept ~25% of corpus as cash which I wanted to allocate to 3-4 very high conviction stocks with short term view of 2-4 months in two/three tranches (to reduce the probability of loss in any unforeseen event). If I get 30-40% or more returns during this short time from these select stocks, I book the profit in such a way that remaining quantity is around ~5% allocation to portfolio (after this run up, here onwards my expectation is nominal growth of 20-25% per annum). Booked profit can again be deployed another 3-4 stocks high conviction stocks on rotational basis which are part of thematic flows and part of our investment portfolio.
I could implement above since May’23 in BSE, Jupiter wagon, Picadilly Agro, Prestige Estates, Pitti Engineering, KIMS Hospitals, Shakti Pumps and Peral Global. Presently, I am invested in PDS, Shalby Hospital, CDSL and KFIN Tech under this strategy.

Disclaimer: Its just a thought sharing and no way of any sort of recommendation

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31

This is short term trading you are talking about?

What bets are these, FA/TA or technofunda?

32

Ok, sorry

Kei or was exception.

Basically i had made mistake in paushak.
During repeat buy , I had bought it at around 10000 and p/e of around 90.I was thinking that after buying at around 10000, my average will be just 3000 .So i made rule that during repeat buy also, pe should be less than 35.

33

Interesting discussion. I am facing a similar dilemma where one of my portfolio stocks is approx 25% of the portfolio in the recent run up. I recently watched a talk by investor Mr. Atul Raval where he says he tends to take out his initial investment when the stock has run up a lot to preserve capital. Having said that it’s not an easy call to take. The counter argument is that you should water your plants and cut your weeds. As some participants said in this discussion from a peace of mind perspective and to avoid portfolio high beta it makes sense to trim a little bit , where lies the goldilocks point is anybody’s guess.

34

Largely, Fundamental Analysis with medium to long view (3-5 years). Stock selection for short term trading is from the select stocks of portfolio. Rationale to choose from the portfolio is having high conviction basis FA so that even if short term correction comes or stock does not move for sometime, one does not get scared or impatient.

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35

Absolute no need of sorry. I was just curious to know. Frankly i fail to understand the rationale of putting market cap restriction as then how can you travel the journey of lets say Titan from 5000 cr to 3,00,000 cr ?
also one thing is whenever a stock becomes a multibagger, then that obviously means, its well discovered and hence many FII, DII have got into it…So it will definately get PE re-rated on higher side…So if you entered at lets say at PE of 20 then it might move to PE of 40…
During 2019 Polycab PE was around 20 …now its average PE is around 35 and current PE is 50…So if Polycab had been your that high position stock, what would you do?

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36

so as per Atul Raval if you withdraw your initial capital for just your psychological satisfaction that in case it goes down, your capital is not involved…where will you put your initial capital? If you just keep it in cash , it will reduce your overall return on capital…And i have one basic question, why not keep invested into the best performing stock , if there is no fundamental deterioration in that company? You have put your capital in the best return stocks, why would you want to disturb the capital allocation and put it into something inferior?

37

In case of business owners and promoters, their most of the networth is in their own company. They may have control over many internal decision making but still they dont have control over external factors affecting their company, also competitive scenario etc. When i read concalls, many promoters dont have much idea beyond 3 to 6 months even in their own business segments and trends of their sectors…global factors affecting their businesses…Still more than 90-95% networth they hold in just 1 company, their own…What must be their thought process?

38

Because i prefer small cap companies having <35 PE whether it is my first buy or repeat buy.

When we buy compies after 2-3 yrs, mcap and PE are usually higher than your first buy but i keep these 2 criteria in my mind during repeat buy also.

Thanks

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39

I liked this simple concept i.e. Buy when P/E < 35. Most of the pain which is incurred in terms of losses are when we buy at higher valuations whether it is P/E or P/B.
I have experienced this recently after buying IEX and HDFC AMC at marginally higher valuations than my criteria.

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40

I agree with your point that the capital has to be deployed in the best performing option. However its also important to have right position sizing of your portfolio. If a particular stock is contributing to 25%+ of your portfolio , then risk associated with it is also higher. Having said that it all depends on the individuals risk appetite and also on your conviction of the said position. I have seen some investors in this forum having a super concentrated portfolio of 3-4 stocks with 1 position upwards of 60% etc and doing extremely well.

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41

You can calculate this by importing your portfolio into Value Research - https://www.valueresearchonline.com/my-investments/ . It’s easy and this keeps tracks of dividends as well.

@Pragnesh Your XIRR returns will be much much bigger if you include dividends. Congratulations on your portfolio and thanks for the post.

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