Mudit's Portfolio (Passively Active)

Investing Strategies
42

Just reading Tao of Charlie Munger…Awesome book…
What striked me more is the realisation that we generally think that staying invested for long time in stocks, is what is Patience. Which is considered holy grail of investing. But there is another aspect of Patience, which is to hold on to cash patiently and wait for right market opportunity to buy stocks at good valuations.
Most fund managers and PMS ppl are driven by quarterly performance of funds and PMS so they just cant hold cash as their overall return performance will suffer.
But we , retail investors have this great superpower, we can hold cash for a long time. And whats more fascinating is , a normal Bank FD will give us atleast 6.5%, so its not that cash is not earning anything.
The only problem is that we are patient enough to hold stocks for long term but not patient to hold cash for long term.
We get our funds through our profession , job or business, mostly frequency is monthly…so we are brainwashed into being always fully invested or doing SIP.

Applying this realisation to my portfolio above, i started accumulating Divis lab when its PE was around 55 to 60, while currently its trading at 10 years average PE of 30…There has been no much change or deterioration in business profile of Divis, may be a slight reduction in gross margin in last quarter, but not something which warrants 30% price erosion. My buying price is around 4475. So if i could resist myself when it was at high PE of 55, and may be entered now, at very attractive valuations, things would have been better. Now the obvious question is, how would i be sure that, it will come to PE of 30?
Well there is a tendency of all stocks and overall market, to come to attractive valuations atleast once in 3-4years…What we need is patience to hold on to cash.
Same is about Berger paints, Muthoot finance who are at their 10 year median PE and these are good companies, with their business economics intact.

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43

Indeed great thought

This depends I think if any SIPer believes in what he is doing is best for him or its a borrowed conviction to get profits

Question is not whether any company would come to a PE of 30 from 55, question is by the time it comes there, how many X times it has increased its profit already, provided it has been a good growth stock

Completely agree. Many experienced investors who are either significantly invested already or have achieved major life goals would do that. For rest, can we afford to stay away from markets for 3-4 years? And that too from an Indian growth market? Just a thought - Peter Lynch also mentioned in one of his books that the power of remaining invested is that if a stock goes up multifold, the majority of its upmoves are in only few probably single digit occasions and if we show the patience at precisely the wrong side on such occasions, then we end up not being part of it…

So, IMO both these virtues are important and entirely different style of investing and one can devise a methodology of extracting the best of both worlds, if possible, by optimal allocation of cash & patiently holding on to it as per our own temperament. One might do well in both these styles as the primary virtue, as rightly said, is “Patience”.

Thanks again for the beautiful though of presenting the other side of patience…

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44

A lot of things in market are not absolute, they change from person to person, and market itself is not absolute, it if fluid and changes. So we all have to make our choices depending on our current and future situation.

Someone can afford to miss an opportunity because he can find other opportunities which will give equal return if not more return, this choice of missing one and selecting other comes from experience or with conviction, Dr. Hitesh comes to mind, he has both, he is very experienced and reached a level of expertise.

For someone like me, who understands a business but unsure if or when the valuations will come down, building a position so as to not miss the opportunity and also in a relative safe zone due to not allocating completely at high valuations, but only say invested half. If the stock falls, I would buy, if it does not, I will again slowly increase the position, and all of this takes time naturally, and that is a good thing here, as I get a chance to know more about the business, follow the business, so even if the price falls or moves up, I am more knowledgeable than when I started invested in the stock, I will be adding. I also sell when the price falls more than I can take, breaking support levels etc, even if the profit % is a few points, the absolute profit is good enough for me, so I sell and start building my position again, the cycle starts again.

I don’t know what to call this, but even with long term holdings, I follow this. I am not equipped with the skills and talents of someone line Ayushmit, who can stay invested for years despite a fall because I don’t have deep understanding of any business.

Another point I guess that don’t get discussed is the investing time period, I know about professional managers who in 60s or even 70s manage money, bury themselves in their work, but can we do that cognitively, financially and joyfully? I cannot, like a boxer who can have a maximum of 20 or 25 years. So I have to get into the waters, while I still can, and if I am not greedy and focus on learning, accept a better return than a FD, gain experience and take better decisions as time progresses, my return will also increase, at least I will make less mistakes. I cannot lose the chance of experience citing valuations, overheated markets, or any other reason. I can read, learn but I think the lessons market teaches in real time are the best. To each his own of course.

So I guess, it is the way we think, the affordability of money and time, the age we are in life, the situation we are in, the kind of money we want to make, all of these make us choose or reject something.

If I know where I should go, which bus I should board, I will try to board that bus, no matter it is full or empty. And fortunately the current market gives more than necessary options to choose from.

Just presenting my thoughts, hope they are coherent, and I know that all of what I have mentioned is not applicable to you.

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Exactly! In my experience waiting for cash in hand is anxiety inducing due to seeing your stocks performing and you not betting enough , waiting on sidelines. Having no or little cash to invest compared to portfolio helps me to avoid running after any small opportunity. If one has a good companies in the portfolio which have been increasing its earnings , I find it best to go all in at right valuations and let time do its work.

The only time I have excess cash is in overheated markets when everything is expensive and no price is safe.

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47

Just came across a new factor index Midcap 150 quality 50 index. Seems it has outperformed all active midcap funds on almost all time horizons, be it 15 years, 10 years, 5 years etc.
Looking to explore this option. Currently stocks in this index are very good and they are in my portfolio too. Seems promising in long term…

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I could see 2 MF (3rd one has no AUM) with index funds for this.

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51

Tata Fund is not quality…its momemtum 50.
Currently just 2 funds…UTI and DSP
Since i already have Nifty 50 index as well as Nifty next 50 eith UTI…i invested in DSP to have AMC diversification. If somebody doesnot want to study fundamental analysis and technical analysis of midcap companies and still want the higher CAGR for overall portfolio, this can be a good option.
Disc. This is no recommendation. These funds are brand new.launched within last 6 months.

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I am realising the hard work i need to do…

  1. Reading Annual reports of 30 companies of portfolio plus another 10 companies of competitors.
  2. 120 concalls in a year of 30 companies
  3. 30+ Credit rating reports.
  4. corporate announcements 100 per month atleast
  5. Management Interviews
  6. Institution Research reports atleast 3 per conpany.
    Etc
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I think, once you find our own way of reading, we will know what to definitely read, and what can we skip, because some things will be repeated always, and they almost always remain the same, these could be standard questions in concalls, or standard explanations about business in reports from the management, standard predictions from analysts etc.

Also, many things will be more or less the same with all the businesses in an industry, so once we understand what is happening with one company, the same thing will be repeated all over the industry or the sector.

Just like when we are new, looking at financial ratios is confusing, but once we develop our own way of looking at them, the time is reduced to few minutes.

Another thing is, the tone of management does not change much, so once we know what a company’s management is like, we will not see much changes in their future predictions of the business going forward, we may even feel like same things are getting repeated by them every time.

Just saying.

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With each passing day, my inherent style of investing and my own nature about investment is getting clearer.

  1. Iam a kind of investor, who majorly wants to remain passive.
  2. select companies, which will withstand the test of time, and once selected, i will be with them in all storms and volatility.
  3. keep investing in the same companies regularly without making much fuss about valuations and price, since my time horizon is decades.
  4. Keep reading about invested companies regularly and getting to know them better with time.
  5. In short, its more like an arranged marriage, where i may not know the spouse entirely from day one, but relationship will build over a time and keep on getting stronger. I will keep holding my promise of loyalty, till the time my company doesnot cheat on me.
  6. One night stand ( opportunistic short term trading) is not for me. Neither a one-off fling…Committed relationship is what i look for and value.
  7. i dont expect my company to be multi bagger…my overall portfolio returns should be around 15%, and i m as happy as if i have got Dipika padukone…Low expectations is my forte and loyalty is my armour.
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Very well written and summarised, only one point addition, I use short term equity stands to have charm in portfolio life.:joy::joy::joy:

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Finally decided to trim the portfolio. Want to bring down to 15-20 ultimately.
But to start with, first would like to get rid of duplicacies and redundancies.
The first casualty is Kotak Bank.
In banking , i will stick to only HDFC bank and ICICI bank.
Also in IT space, thinking hard about whom to sell? Out of TCS, Infosys or HCL

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But kotak is a conglomerate of all BFSI verticals whose sum of parts value should be quite high compared to the current combined entity.

This would be tough but considering that TCS and Infosys have been the index movers and mkt darling, I’d let go HCL tech.

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It was a choice between HDFC bank and Kotak bank or New avatar of ICICI bank and Kotak bank, and i sided with HDFC bank and ICICI bank…i may turn out to be wrong. But i dont have option. As i wanted to stick to just 2 banks. Its actually a choice between good and better and not between good and bad

In case of IT, am thinking of current performance of companies and its tilted towards HCL and Infosys. TCS return ratios are better but thats because of heavy dividends and low Reserve and surplus. Currently performance wise HCL and Infosys are faring better but i have emotional connection with TCS…decision is difficult

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Even I am also facing this issue. I have 3 companies TCS , Infy and HCL. Not sue which two I can stick.
all the three are great companies at their own space. HCL is more interesting due to its ER&D segment.
Personally I like to be with TCS as it is my current employer.

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If you are working in IT, aren’t you able to decide which one to sell or if all three are different, so all can have a place in the PF, is it hard for you too?

How do you compare all three of them by what happens inside of the businesses?

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