Quite an year it has been where I have underperformed most portfolios with around 45% returns in CY 2021, post taking out all expenses like tax, brokerage etc. CY2020 has been around 43%.
The PF has fallen 20% from top, due to tech heavy and concentrated nature of the portfolio.
I have exited Dixon, Sona, Route, Nazara with profits & Cartrade with gigantic loss.
I have not sold Indiamart, Zomato, Saregama but have increased allocations in the first two.
CarTrade is my mistake of commission (2021 cycleās biggest mistake of mine) where I have accorded much higher valuations than what Market is ready to give yet. Lesson learned: Stay with leader, only very few companies deserve high valuations and can maintain them. Being a leader in the industry is one of them. Will companies like Cars24 with high PE money take the wind out of Cartrade? I canāt answer confidently, so exited. Hitting stop loss is also one of the factors of exiting.
Dixon, Sona: These gave really good protection to my PF during the heavy fall of tech stocks and I think the relative valuations are much higher now and I found HDFC life can provide that 20% with much lesser risk. Sona - the exit will either be prophetic or one of my biggest mistakes if EV really is at the start of the J curve as per the popular narrative around. Iām not sure, so exited. The margins, the narrative, the valuations are all at a high. Typically, best time to time an exit.
Route: Competition coupled with high volume - low margin game, relatively high valuations, frequent media appearances with twitter post promises. I personally do not like such things. When in doubt, exit. Again, the sector seems promising and like the stock, but I will prefer Nykaa over this. Sunder Genomal is an example for me while evaluating promoters.
Nazara: Holding structure is quite a dampener for me. On top of it, there is a strong leader in every segment except esports. Even in esports, the competition is heating up and not sure what moat they have in front of large players. The valuation comfort that I have at 1500 levels is no longer there. In real money gaming, Dream 11 is a leader by far and is profitable, Play to earn - their games are below par compared to others and competition in this segment is crazy with no entry barriers. Even huge games like call of duty has to keep finding new games once the trend or craze dies down and success like these are one in a million. Nykaa is a better bet for me than this. Jet synthesis owns 40% stake in Nodwin who is a competitor to Nazara and are aggressive too. Buying founders at low valuations is not a sustainable approach during these high liquidity times. I was actually interested in esports and then real money gaming, but now I think they cannot be leaders in either of these segments.
Nykaa, HDFC life are the new entrants. HDFC Life probably will stay until the technical upside has been achieved. Nykaa will stay untouched (like Indiamart, Zomato) until the high growth stays which I think is for a long time. The allocation of Nykaa in my PF is unconstitutional, the highest after my Page industries allocation in 2012/13 of around 60%. The accumulation was around 2000-2100. My PF will always stay highly concentrated with high quality stocks, high growth, leaders, promoters with high integrity. I will evaluate Delhivery for the IPO valuations & Policybazaar for results delivery. PhonePe got something right, I believe. People are preferring PhonePe over other apps. Iām not sure what & why of it.
Nykaa: I think market is underestimating the platform nature of Nykaa. I do not want to put numbers here to paint a rosy picture but the advertisement revenue on Nykaa will itself be a sizeable part of revenues by 2025. This ad revenue revenue will come at 60% margins at least. Iām aware of the popular narrative of 1600 PE (foolish narrative), Nykaa is extremely expensive but I believe otherwise and Nykaa is not expensive than any other consumer company is currently. So, it will fall and rise as per the growth achievements and in tandem to other consumer companies valuations. There are consumer companies at less than half the growth of Nykaa and are trading at abnormal valuations. Any change in sustainable growth estimations will have a bearing impact on valuations in both directions.
Super Key point: @gurjota with super high diversified PF has comfortably given more returns in 2021 than my super high concentrated PF. PPFAS portfolio with diametrically opposite philosophy than mine has given better returns than mine. So, it does NOT really matter what type of PF (concentrated, diversified, balanced), what kind of strategy name you give it (growth, value, momentum, technical, fundamental, tech plus funda, thematic) etc. each will perform if you stick to a certain process and keep learning and making changes as per facts. How ever, DO NOT get into very low quality stocks and leave ego outside before you enter stock markets.
The number of twitter followers and threads is not an enough qualification to be a Warren Buffett, who by himself does not have twitter account and sits by a phone on a desk, reading his newspaper and books while going back to his modest home purchased few decades back in a car that is few notches below Tesla. The Mr. Narayana Murtyās (NRN) principle of ācompassionate capitalismā is the need of the hour during these distressed times of Covid where the below poverty line people are hit hard compared to rich and upper class. This is diametrically opposite to my thinking in 2015 when I quit job during the highs of bull market. I was of the opinion of whatās wrong with buying vanity items with hard earned money? I think thereās nothing wrong with this even now but just that my enthusiasm to buy a Mercedes waned along with my age and rise of portfolio value, quite contrarily. I now prefer stability, low volatile life. Not sure if this is mid life Crisis every one talks about when entering 40s! Reading Ms. Sudha Murtyās books during nights to my kids >>> watching Peppa Pig. My kids get to do both, not one at the cost of other.
Sorry, the above paragraph is out of syllabus.
I think people stick to a certain approach because thatās what worked for them. High allocation in Page industries in 2012 is what worked for me and from then Iām inclined towards that concentrated approach somehow. Generally speaking.
On a hypothetical scenario where I have to quit managing my own PF and give it to professionals, I will invest in PPFAS even though my approach is opposite to theirs because they stick to a consistent and keep refining process across cycles. My goal is to make money over a benchmark NOT prove one approach or my approach is better than others etc.
Cycles: There are heroes in every cycle. 2013-2015 has them, 2017 has them and even 2021 will have them. The key is to stay relevant across cycles. A certain stocks will find favour in certain type of markets and then they go mum for decades or forever. If you stick with industry leaders, high quality stocks your PF will stay relevant across cycles.
I made mistakes in 2015 cycle after being a hero in 2013-2015 cycle. The same mistake I have not repeated twice but have made different mistakes. I will enumerate them below in the hope that this may help others in the current cycle.
2015 cycle mistakes - Quality ladder mistake: Got into low quality stocks with high allocation. My Low point was Feb 16, 2016. I remember that day because I exited my job to turn into full time investor and lost 35% in a year. Key example: Cupid. I think I wrote this mistake in one of my previous posts back then but I was criticised. It is 6 years hence and the Cupid stock is still to reach those highs while Page industries is 4 times that price even from those HIGH valuations of 10,000 rupees per stock. So, page industries added 35,000 crore in market capitalisation and Cupid could not add 1 crore! This is not to broad brush all stocks and categorise them but understand the companies case by case and follow the story, separate narrative from reality.
Iām a product of 2013 bull market and if I were to know then that trading, active investing has so many snakes and ladders, may be I would have thought more before I took my decision to quit working. Cut your PF size into HALF from top, assume 5% returns for 2 years and account for your expenses and see if you can bear that pain, patience and then decide. Stress, pressures, peer comparison will force you to make mistakes. Psychologically, you need to be strong. So, anyone thinking of quitting and joining markets, make sure what you are getting into. 2020-2021 is once in a decade opportunity. Do NOT extrapolate. Probably, extrapolation is the biggest mistake investors make.
On the beautiful other side of it, if you survived, then the water is calm like the middle of an ocean. You have weathered the rough seas that exist at the start of the ocean. So, I think it takes 3 bull-bear cycles (equal to 10 years roughly?) for certain amount of maturity. Of course, there are some genius investors that I come across at such a tender age of 28 years who are more matured and better than me at 39 years now.
2017 cycle mistakes - Valuation mistake: Quality stocks are worth the āpriceā but only if they continue to show the growth. Until the growth comes back, it goes into side ways correction after a steep fall and when the growth comes back and everything else is same they will break out into new highs. Either have patience to hold them across cycles or know what you are getting into and when a mistake is made, exit without ego. Opportunity cost in markets is very high. KNOWING what the current price is factoring is a key factor for active investors.
Do all this drama of active investing or simply follow technical analysis with stop loss or just be a holder (HODLer!) of high quality compounders for at least 3 bull-bear cycles.
Stick to stocks where you have reasonable understanding of the fundamentals and know the key drivers of earnings and key factors of re-rating / de-rating.
2021 cycle: I, somehow see a repeat of past cycles, where the 3rd rung stocks in a sector are high flying while the leaders are consolidating in a range. People are giving gyan, narratives, 100 year stories, tech eating world narratives, twitter spaces, a particular hero / fund manager of this cycle starts giving lectures to industry stalwarts. HDFC Life, Kotak bank, HDFC are being ridiculed while a particular low quality stock has gone up by 3x. All these examples, observations point to froth. I would be careful in my stock selection. Iām on the look out for what mistakes I will learn in this cycle, hopefully, not fatal.
Some significant choices giving me hard lessons:
I have exited all the stocks mentioned below, but lessons remained.
Year 2020 - Hawkins vs. Dixon: I still remember thinking which one to buy in 2020 last quarter. Hawkins was around 5000/5500 and Dixon around 9500 (pre-split). I bought Hawkins because of low valuations compared to Dixon. Since then Hawkins is more or less consolidating while Dixon TRIPLED. Cycle may turn but not before hitting extremes and in the interim giving significant lessons on valuations, market. Market IS right actually, Since then, Hawkins profits have stagnated with very low revenue growth while Dixon revenues galloped. Is Dixon now at a stage where Page was at 15000 levels in 2015? Time will tell based on revenue growth acceleration or deceleration. It is important, if you are a MEDIUM term investor, at what valuations and growth expectations you are entering the stock. While this may remain immaterial for 3-5 market cycles. Even otherwise, the long term growth projections, sector size is very important, Dixon long term growth may be at 25% while for Hawkins it is at 10% with limited market size.
Year 2020 - ITC vs Page: Before typing the stock name in my brokerage page I vividly remember, ITC around 200, Page at 20000. I bought Page with the thinking that high growth will be rewarded with higher valuations and re-rating. Since then Page more than doubled while ITC is still. Super high valuation got even higher while the lowest valuation stocks remained as is. The role of growth in valuations is misunderstood by markets. There is no point of high cash on balance sheet or high RoCE if you can not re-invest them for higher growth.
+++++Think of it like this+++++: What is the point of having 1000 acres land lying vacant while you can build a productive Dmart store on 1 acre of land and make profits terminally. Over a period of 20 years the profits made on 1 acre land are much higher than 1000 acres land lying vacant. Here 1 acre >>> 1000 acres. This is really a significant lesson for me. Milk the limited assets productively >>> Huge Assets lying around under utilised. Thatās why Nykaa, Dmart will ALWAYS be valued significantly higher than other high dividend and low growth stocks and experts will KEEP saying that Nykaa or a Dmart or a Page valuations are super expensive than ITC. BUT, for a medium term investor entry valuations do matter. Buying Dmart at 1000 is NOT the same as buying Dmart at 5000. One bought at 1000 will have a different story than the one bought at 5000. The difference between these two is āwisdom, experience, patience, stock marketā, whatever name you give it.
Year 2014 - Page vs Hawkins: Page double for me then while Hawkins fell. There was a strong urge to sell Page and buy Hawkins. But I refrained with one thought, ādo not sell your performers while buying laggardsā. This has been one of the biggest lessons.
Year 2015 - Page vs. Cupid: Sold Page while getting the decision right at the time and buying Cupid. What a fatal mistake!
Selling Dmart around 2100: There were bigger mistakes in terms of returns but this one stands out particularly because Dmart is exactly the type of company I invest in and yet the urge/ itch to switch took the better of me.
So many mistakes, but at this time Iām tired of writing. All the best!
A 20% entire PF compounding over 10 years >>> two 10x stocks >>>> A hero of one cycle and a zero of next 2 cycles and repeat.
Disclaimer: There are transactions in last one month in all the stock names I have mentioned above, either buy or sell. Iām not a sebi registered analyst and have no qualification to suggest stocks to anyone. I will sell or trim when growth does not match valuations accorded. Iām writing my personal experience and thatās it.
