I couldn’t decide which one to sell out of three as it quite difficult to track other sector companies due to time constraint.
As of now, I closely tracking these companies by attending their respective concalls. Also I worked in Infosys earlier and I have good contacts with mid level managers and we do have discussions about what is going on at company level. Now a days, HCL is growing in their ER&D which is very interesting.
Appreciate your view on deciding which two are best.
Out of my 4 large cap, that is Infosys, TCS, HCL and LTI, i have decided to sell LTI for sure as after mindtree , it will be at apr with other largecap. Also reduced half the holding of HCL…
But yet not decided about Infosys, TCS, HCL…
What an amazing place is markets and difference in perception play at its best! All 4 seem great companies and incidentally post Mindtree merger, LTI is now the largest holding in my IT basket…Not a buy/sell recommendation just an admiration on difference in perspective which makes this market! Cheers
Some short term issues in IT sector.
Generally we think that if number of stocks increases then returns of that portfolio started mean diverting to Index Returns. But this need not be necessarily true. Just take a case. If we find some good stocks out of Midcap 150 stocks , fulfilling basic parameters like Return on equity, Debt etc…So if even 50 good stocks are selected, returns can be way better than index returns…There are so many Mutual funds which are giving high returns like SBI Small Cap …where more than 50 stocks are held…This is a fallacy that more number of stocks give average returns like index…It depends on which stocks you have selected and not number of stocks…If u select 50 stocks which all are giving 30% CAGR, then why the portfolio will give 12% CAGR of Index?
While that is true, the overall return depends on the nature of the stocks. If all are growth oriented, bought at reasonable price, GARP stocks, the return could be better than index, despite some fall. But if the same stocks are bought at high prices, the return could be lower than index too.
Also, as market favors different sectors at different periods of time, money moving from one sector to another, even GARP stocks could face low price appreciation, as there is no demand. So from this point of view, allocating a small portion of PF to stocks that may not be pure growth stocks but are available at relatively low valuation, high dividend yield etc may give good return, if they catch the market fancy, but the caveat is, they may never catch market fancy, and may remain at our purchasing price for longer periods.
So if we create a PF concerning all of these points, the overall return could be that of the index.
Of course, as one matures as an investor, the performance of the PF will increase, as one understands the nitty gritty of the market. Also of course, as one matures, I think not everyone can afford to be adventurous, and may very well settle at 15% CAGR, with minimal maintenance, also because the PF may have grown substantially.
All of this is a journey for sure, if we are in for the long term.
Just my thoughts, not yet experienced all of what I have said above.
Agree with most points…
some observations:-
1)When I started constructing my portfolio in 2020 in Nifty 100 universe, i purposely avoided all PSU stocks like SBI, etc Also I avoided metal stocks like TATA steel etc. Then I avoided Infrastructure stocks, stocks like ITC …And to my surprise, all these stocks started performing in next 2 years, while the usual growth stocks took backseat. So when I started constructing my portfolio, my simple thought process was that if I avoid all these dud companies , i would definately get 4 to 5% alpha straighway, without applying too much brains and hardwork, time…And this has been a narrative all over the places, all Fund managers , all PMS managers says these things only. And these stocks behaved exactly opposite of what they are supposed to behave. Even Coal India performed good. Its like in last 2 years, Back benchers are getting distinction and front benchers are failing tests.
As they say each dog has its day, so even battered down PSUs and the likes can surprise us, due to unexpected or unforeseeable conditions.
PF construction in itself is a learning and journey, as you have pointed out. Either we create one with strong, established, household names which can still deliver 15%, or create a PF with sectors that are in vogue, rising or even niche, either top down or bottom up.
I think, as we progress as investors, the number of stocks that have gone out of the PF will be more than those which remain. All of this is learning.
And as far the MF performance goes, we can only pick the funds after they have performed, and we cannot do that in the middle of their journey, unlike with stocks. Of course, we can select a fund based on a few qualitative and quantitative parameters at the time of our selection.
There are many ways to construct a PF and as such many ways to tinker with it too. Either we can focus on a number if we have one and see if we are going towards it as time passes, or expect a certain return from the PF, and make it happen, in ways we can. The beauty of personal finance.
Again just my thoughts.
This is an interesting observation. Most of us can pick up good MF after it has performed well for more than few years. So there is no guarantee about its future similar performance.
While in stocks, you can start investing when its ROE/ROCE is improving and then can hold it for longer period and take advantage of its better performance till we can see some stagnation in its performance.
Individual investors can actually perform better than Index if they hold onto high quality stocks for longer periods. Most of the investors do not do this hence they (including me) do not beat index with wider margins. We generally generate some Alpha but not up to its true potential since we tend to switch from stock to stock, based on our understanding of valuations, noise around us, news so on and so forth.
you have chosen top companies from N50 and NN50. fine. again you are investing on the same index by mutual fund. so its like you bought chicken to cook at home and also you bought chicken curry from restaurant. what s the logic behind this? there is huge overlap. if HDFC bank goes down, N50 goes down as well and your portfolio goes down. so better to avoid the concentration. N50 top 10 companies provide the largest market cap, if you already hold those, then what else u will get from nifty50 mutual fund? also, I have tracked Dmart for some time. the PE is 91. is it worth investing ? same for many other stocks in your portfolio.
I am personally holding bajaj finance, hdfc bank, HUL, divis.
Hi…I have changed the composition a bit after the initial portfolio. Currently it has 22 stocks. Also.now investing in SBI micap 150 index fund to adress the points raised by you. Also earlier my stock portfolio was almost 95% of overall portfolio. Now my stock portfolio is around 70% only. Major shift is into Midcap 150 index and small cap active mutual funds and also some factor index. Some stocks, I am holding just for them.to recover a bit, so i will sell them off…hence not updated the portfolio…Will do asap
Still some changes done are
Next in line …to be sold asap
Hi Mudit,
Question - Reason behind selling or planning to sell:
a. Kotak Mahindra Bank
b. Muthoot Finance?
Curious to know the reason.
So, your selling basket has all the big & established businesses, are you changing your philosophy of investment?
In my view, we should have a balance b/w big players n hidden small cap gems.
1)Kotak Mahindra Bank i sold only because my banking and NBFC space has been over populated. Already i had two largest banks, HDFC bank and ICICI bank…so i wanted to sell …and that happened to be Kotak bank. Now reasons can be given on both sides…simple way to say…Kotak is currently appearing weak.compared to HDFC and ICICi …
Last 2 years have taught me many lessons…I have not booked any losses yet. But the ups and downs in some of my major bets have been very revealing.
I have decided to restirct my stock portfolio to 35% maximum…currently long way to go there.
I want to have 35% exposure to active small cap funds too, as they have given better returns than most of small cap portfolios i have seen here as well as in known investor community. Also most PMS and smallcase have not been able to beat the normal.small cap funds.
For Index funds , i want to invest , as already said into Nifty Index 50 and Midcap 150 index. I am losing trust on Nifty Next 50 …
In stock portfolio, i would.like to hold only those companies which are bluechip as well as fast growers…Thats why sold slow growing Nestle, HUL, Pidilite etc.
I agree and resonate your logic. I have also invested a large chunk nifty next 50 and returns are very poor. I dont know what to do with that. even when other indexes are growing. this does not grow. how do u identify good active small cap fund to hold for longer duration?
Hi Mudit,
Thanks for sharing your selling stocks.
I would like to know the anti thesis for selling Laurus labs. I guess it has long runway for growth in one of their business CDMO, currently it facing temporary headwinds.
Thank in advance
You can see the Laurus labs thread on VP forum itself. Arguments are given from both sides. As far as my personal take is concerned, I dont want to lose my sleep over the future performance of this company. It may do very well in future, but it doesnt sync with my nature of stocks…I am giving it a pass…And I reserve the right to be completely wrong.
