As of today, NIFTY is in 9,142.75, and SENSEX is in 31,122.89, almost 30% down from their all-time high.
In this scenario, I made a portfolio with some selective stocks which have lost their value significantly but the business model is intact. I emphasis on some aspects of the business i.e.
- Positive Cash-flow
- Low or nil debt
- Low sales to market cap ratio
- Integrity in Management
- Value in Products
- Easy to understand business model
Portfolio(Approx price, %weight):
- Zee Entertainment(162,7%)
- JK Paper(95,5%)
- Yash Pakka(32, 5%)
- Siyaram Silk Mills(110, 9%)
- Delta Corp(71, 8%)
- Bandhan Bank(205, 10%)
- Jamna Auto(25, 5%)
- IDFC First Bank(25,8%)
- Ashok Leyland(48, 8%)
- Sinclairs Hotel(150,5%)
- Sunteck Realty(175, 8%)
- Nocil(85, 7%)
- Piramal Enterprise(900,8%)
- Meghmani Organic(40,7%)
Many of the stocks here are cyclical in nature and some of them are turnaround potential so I understand ‘exit’ will play a vital role here.
Please share your views on this. I will update the changes regularly.
Edit 1: I changed the title from “My Conservative Contrarian Portfolio” to “My Riding the Economy Portfolio” which seems more suitable.
Can I ask for reasons behind those picks? Because your title suggests that you are going for conservative picks, yet I don’t see any large cap companies and while you have low debt as criteria for your stock picks, so many of your top picks have high debt. I think you’re heading for classic value trap portfolio with stock picks which are valued at low P/E because of either high debt/low growth or combination of both being present. I am not trying to come across negative, but I think many of your contrarion picks are high debt companies which will suffer greatly in coming times because of low sales in specific sector and their earnings will fall. When that earning fall happens P/E will adjust to the prices. I welcome your thought process behind stock selection.
Here when I say “conservative”, I mean the stocks with low downside risk. But I also considered the impact of lockdown which may make some of the stocks more vulnerable further. But I think only 2-3 stock may fall under this. And I couldn’t understand your logic behind conservative and large-cap, as conservative stocks does not necessarily have to be from large-cap sector. Also apart from financial, I don’t think any company in this portfolio is highly leveraged. Every company over here has passed my checklist. I see financials in a different manner.
Still, your feedback is welcome. It would be great if you specify the issue instead of a generic view.
Baring a few names, most of these are in highly cyclical sectors. There are no compounders I see in this list. Unless you have a very long term holding in mind and you can exit correctly when the cycle turns, this seems to be a value trap and not at all conservative. If I want to be conservative in terms of not losing the capital and want to have some return on capital, I would rather buy businesses which are market leaders in key sectors where growth is visible for few years atleast.
I like your portfolio.
Some alternatives, if you want to diversify little bit with similar theme
- TV Today <-> Zee (Better div yield)
- Seshasayee paper <-> JK paper (No debt in seshasayee. Also always better to hold 4-5 same sector cyclical stock. See talk by @jitenp on youtube )
- IDFC Bank <-> IDFC (I feel better value is available here due to the AMC)
- Suntech <-> Kolte Patil
- Piramal <-> Bajaj Holdings / Mah scooters
Yask Pakka is also from Paper and Paperboard sector. I understand Sunteck Realty better, they have a good brand value. Also it is an asset-light business model despite being in the Realty sector. Anyway thanks for your suggestions.