It is impossible to time sector
Best thing is to stay invested until fundaments change(5-10-15 yrs)
On the contrary, parag parikh advises to invest in sector which is out of favour and stay away from hot sectors and dont follow crowd.
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Can you provide some article or video of parag parikh advising that?
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I have to concise from my summary of parag parikh book.
I will share it asap.
Meanwhile i am sharing notes from peter lynch book
āOne upon wall streetā
Following is from One upon wall street.
INVEST IN COMPANIES THAT HAVE NOT CAUGHT THE FANCY OF WALL STREET
Aā¦Invest in simple companies that appear dull ,mundane and out of favour
Bā¦I like negative/no growth/slow growth industry because they do not attract competitiors and are not well researched by wallstreet
Cā¦Some recommand contrarian approach .But true contrarian is not investor who takes opposite of popular hot issue but true contrarian buys stocks that nobody cares about.
Dā¦I like companies having little or no
institutional owenership.
=If you invest in such companies before institutional investors, entry of such institutions in future will make stock multibagger.
There are many reasons why small good companies have little or no insttutional owenership.
The reasons are
ā¦Some funds have rules that they can not invest below predefined mcap(e.g below 1000 crcap)
ā¦Some mutual funds does not allow >10% holding in any single company so this will miss small fast growing companies
ā¦Mutual fund managers are answerable if small company doesnot perform
ā¦Some funds have rule of four.
That means that mutual fund can only invest if company is selected by all (4) fund managers
Eā¦ If you find company having no institutional investor, you have found potential winner but if there is no analyst following company , you have found double winner.
=I am equally enthusiastic about once popular stocks the professionals have abandoned
IF I HAVE TO AVOID ONE STOCK,
IT WILL BE HOTTTEST STOCK IN HOTTEST INDUSTRY.
=These stocks get most attention and everywhere these stocks are discussed
=Why i will never invest in hot stocks?
Reasons are
Aā¦Hot stocks are usually expensive to their true valuation because everyone want them in their portfolio
Bā¦Thatās where promoters and shysters go because
thatās where they can get the biggest bang for the buck. The sector is rife
with fraud.
Cā¦High growth and Hot industry attract smart crowd that awake day and night to get into buisness.If you dont have niche/patent ,profit margin will be shrunken by huge competition.
=When analyst expect double digit growth forever, the industry(so called hot industry) go into decline
=I like no growth/ low growth industry
=There is nothing thrilling about high growth industry,only to watch stock going down because for any single product ,there are thousands of companies to make it cheaper
=e.g. disk drive
Experts said industry will grow at 52%.
Industry did it, but 35 companies in competition, no one made profit
=e.g. Carpet was once a hottest industry and every american want it.
Huge competition occured and only few of thousands companies made profit
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Came across this thread on X from Harsh. Very insightful in the context of this thread.
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Requesting suggestion from all Value Pickers any Company with high ROE and is scalable? Please suggest.
Hi @Cshar
Have you made any modification to your portfolio by taking advantage of this correction? How is the portfolio composition now?
Thanks
Hi @Amit_Paul
Added wockhardt as new entry, development on two molecules is very interesting. Trimmed Some force motors as it has gone 6 X in an year. No other changes, booked some loss making positions to cut short term gains, below is current PF rightnow
Kalyan Jeweller ( 30%) 300% gains
Force motors ( 12%) 500% gains
Aditya Birla Fashion ( 12%) - 40% gains
Aditya Birla Capital ( 9%) 10% gains
Tata power ( 6%) 25% gains
AGI Green ( 6%) 225% gains
Arvind Fashion ( 6%) 50% gains
Sanghvi Mover ( 7%) 60% gains
Narayana Hrudayala (4%, accumulation mode)
LT Food (3%) 20% gains
Thomas Cook (2.5) 20% gains
Wockhardt (2) new entry
Brand Concepts (2.5) 100% gains
Overall PF gains 250% March 23-24.
Trading positions
- Swelect Energy
- Jubilant Pharmova
- PVRINOX
- Rushil Decor
5 Jash Engineering
6 LIC Housing
7 Suzlon
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Correction overall PF gains are 155% March 23-24.
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Good data analysis may be, but would one invest on the basis of these cycles?
Yes, if a company is cheap, has good financials and was down because the sector was ignored, may be a cycle may give it a new opportunity. For example, great for many investors of reality now. But would I dip my hand in the boiling cauldron? No.
In fact, what I did was, I bought auto when there was semi-conductor crisis.
I had to buy Rail, Infra, because they were in upcycle and I was suffering from a serious bout of FOMO.
So, may be there is no The Rule?
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Very nicely summed up. I have read the book and its full of insights that I try to implement myself. Thanks for sharing this summry
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There are many investors who are almost afraid of profits. 25% profits make them nervous. They will then ābook their profitsā. I ask many of them, if you book profits in them at 25% higher, how will any of them double? I have now realised we are wired differently.
Some investors are always worried about fall in the price of their shares. If it has risen by 25%, sell it because who knows about tomorrow?
If it has fallen by 5%, earth below their feet starts shaking, 'aur neeche chala gaya to (if it goes down further)?
In fact, tell me honestly, if you had bought at Waaree Renewable at ā¹260 around a year ago, or (I find it unbelievable as I write) at ā¹2 in 2020, would you be still holding it? Wouldnāt there be a feeling of being in a dream, and a fear of waking up come over you? (By you, I mean, I and others of course). When IREDA, RVNL, and SJVN catapulted like that in the early part of 2024, I sold the entire lot fearing a bubble.
But in fact, we keep hearing of investors whose stocks have gone up 16000 times. They are my gods. Kediaās investment in Cera for example.
Finding such a share is hardwork, intuitive and it has to be a miracle.
May be we donāt find them because we are not willing to work hard enough for them?
Atul Ravalās hypthesis is, he buys undiscovered prospects. Once the market knows about it, he assumes that there isnot much prospect of it multiplying thereon.
I canāt argue with Atul Ravalji. I have heard him.He is exceptional.
But would I follow him blindly in this strategy? Of course not. I sell if I find better prospects for that money.
I also look back and regret selling prematurely. But then where else would I have found money for other successful investments I made. So, you decide according to your understanding of the moment. I have also discovered my mistake later and bought them again, even at a higher price. Where is the question of ego? Perhaps it is important to keep an eye on the basic purpose behind our initial investment?
To me, nothing is written in stone, specially for a learner investor like me. I learn a new way daily, find a new theme to follow, and kick myself for my silly ways earlier.
I am sure we all do that and will continue to do that.
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I tend to fall in this category especially for companies which I entered without studying properly or lack the conviction and sometimes out of sheer vanity attempting to time my re-entry 
Missed many a multibaggers due to the disease of market timing & poor conviction (dodged few bullets too). I lack faith/discipline in Technical Analysis so I try to avoid them.
To mitigate this, I started practicing classic value investing where Iād study and value the companies which I buy conservatively and put the target valuation on a excel sheet, now the irony was I would sell these companies the moment my intrinsic value target hits or slight above/below and these companies would continue rallying and make me laugh.
There have been companies which I have sold prematurely, re-entered and sold again, they still continue to pumpā¦such is the strength of bull market.
Nowadays I simply try to use my valuation models only for entering a stock, and stop looking at them. The goal is to buy quality companies with long runway so that I donāt have to trade frequently and to hold on to them. Not to use price as the criteria to exit a stock but focus on fundamental/business/growth deterioration. Keeping a lean portfolio really helps.
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I hope one day I would be diligent enough to have that sort of confidence. I understand my studies of companies are often half-cooked, so I am unable to shake off self-doubts.
Often the stocks that rise exponentially are a pleasant surprise to me, whereas a good analysis should enable one to look at them smugly with the feeling of , āYe to hona hi tha (The result could not have been different)!ā
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Thank you for putting in words what many of us do.
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Decisions also depend on a few other things. Age, affordability of loss, even entire capital, the weight of such stocks in the portfolio, even in net worth, the ultimate end purpose of such stocks, the ability to not think of past mistakes w.r.t. price and focusing on current things in hand and making the process better, and to add a couple of psychological aspects - knowing oneās self, practicing a bit of equanimity etc.
Some decisions are cognitive based, sometimes there could be some hurdles in reaching the correct decision. Reasons which are not cognitive are emotional, these are not hurdles, but are strong enough to make people question themselves in the future, happened even to the greats. Buffett bought more shares of Berkshire Hathaway because he was angry.
Most of this is personal. If we look back and are satisfied with our performance, I think it is fine.
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Decisions in investing are influenced by various factors such as age, risk tolerance, portfolio weight, and psychological aspects like equanimity and self-awareness. Daniel Kahnemanās work in behavioral finance highlights how human biases can affect our decisions, often leading to suboptimal choices.
A systematic, rule-based approach can address many of these issues by relying on transparent, fundamental rules rather than emotional reactions. For instance, rules like investing only in companies with a debt-to-equity ratio below 0.5 or a consistent ROE above 15% help maintain discipline and focus on quality. This reduces the impact of cognitive biases and emotional decisions. Best part is we donāt need to reply on subjectivity to create such rules. We can validate effectiveness of rules by analyzing across markets / cycles.
Even Warren Buffett is not immune to emotional decisions, as seen when he bought more shares of Berkshire Hathaway out of anger. By sticking to predefined rules, we can minimize such impulsive actions and improve long-term performance. Ultimately, a rule-based approach helps in making more objective decisions, leading to greater satisfaction with our investing outcomes.
Also, the sheer width of opportunities expands using a rule-based approach.
For more detailed rules and examples, check out this thread on investment rules where we discuss best investment-rules in India tested across market cycles over the last 25 years.
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Hi @Cshar
How are you navigating the market off late ? Any recent modification to your portfolio and how is the portfolio composition now?
Thanks
Hi @Amit_Paul
Thanks for remembering meā:joy:
. Yup am doing excellent as of now, its 45X on PF in last 4 years, from March 24, up close to 45% now.
Hits Kalyan, AB Fashion, Force, moderate gains in rest of stocks (20-80%)
Exits: Narayana Hrudalaya (-4%) brand concepts (150%)
New entries Piccadilly agro, Samhi Hotels
Kalyan Jeweller ( 24%) 450% gains
Force motors ( 8%) 700% gains
Aditya Birla Fashion ( 25%) 30% gain
Aditya Birla Capital ( 9%) 100% gains
Tata power ( 3%) 25% gains
AGI Green ( 3%) 225% gains
Arvind Fashion ( 6%) 60% gains
Sanghvi Mover ( 3%) 20% gains
LT Food (3%) 90% gains
Thomas Cook (2.5) 100% gains
Wockhardt ( 7%) increased bet size
New
Piccadily agro 3% ( testing waters)
Samhi Hotels 3.5 % (accumulation)
Trading positions
- Swelect Energy
- Ion exchange
- PVRINOX
- Rushil Decor
5 BHEL
6 LIC Housing
7 Suzlon
8 watech vabag
9 Gulshan Poly
I am bit cautious on markets now as froth is building everywhere. Main killer in last 3 months was AB Fashion which was a losing position and gained from 208 levels to 330 in 4 month, capital allocation at 208 was close of 35% of PF with highly leveraged position, cashed out gains on 50% and converted remaining to delivery, playing on upcoming demerger as i feel post demerger valuation will rise to 500 levels.
Kalyan and force are real star, its nonstop for Kalyan, thanks to initial capital allocation of 20% despite its rise of 5.3 X from May 23, it still around 24% amid surge in other portfolio stocks, diluted 10% to shift capital in wockhardt. Still planning to hold this for 1000 as titan is shaken now by kalyan hence MF FII loyalty is shifting.
I am avoiding all Cap goods, Defence, Semi conductor stocks for now and all PSU basket, BHEL is exception as i still finding value in it.
Samhi Hotels looks interesting bet from risk reward perspective.
Water is next theme to invest, Ion exchange, EMS, Va tech wabag and Jash are good choice.
Cautious outlook on markets post budget as lot of churn will take place from hot sectors, consumer focus might come back due to political setback for BJP in last elections.
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I totally agree ā¦most of investors dont put stop loss and keep on holding even beyond 20 % loss but profits they always book faster.
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