My thoughts

Hi everyone,

We have had an interesting time since I put up my recommendations on valuepickr. Our stocks outperformed the market notwithstanding a huge set back in arshiya international. However I am not too perturbed by that for the reason that:

a) I learn from history or so I believe. On 26th December itself in a posting on is very blog, I wrote how globalization and other black swans have increased investor risk in any co. There is nothing as a free lunch or a fool proof investment in such times and had accordingly advocated the need to be both invested and DIVERSIFIED. Much as I am quite conversant with traditional books on investments recommending a concentrated strategy, we are no longer in a world of calm and certainties and almost any co is subjected to too many black swans.

b) while I continue to hold arshiya, on my twitter I’d I constantly discouraged add ons once the black swan set in. I follow several motos, one of which is my summary statement to be: in terms of greed and fear, let not one stock make or break you. (If it does make you, remember some part of it was random and don’t over credit yourself). History will teach you what happened to facebook when mark wanted to focus on wire edge, or when Larry wanted to sell google to yahoo for 1 million, or when Nokia moved from making green boots to mobiles.

c) if you haven’t leveraged and invest with disclipline, and with some effort to know why you hold in a balanced manner, you will inevitably do well. Ironically, our portfolio went up when with arshiya’s decline as some of the other convictions including amara raja, satyam, tech m, unitech ( a recent addition at 32) to name a few made more than up. You can track my recos on twitter although I am trying my best to increase my participation here and pen down more thoughts.

d) I follow a strategy of holding some cos as core and a very few as trading. My definition of trading is not a technical call, I rather not even dare to do what I don’t understand a clue about. Trading for me are short term mis priced bets which I buy on delivery for atleast a 20 percent if not more upmove. A recent example would be ACG network, a stock recommended by me at 360 rs on a per bonus basis. The stock now trades at 220 or 440 which was precisely the target I wrote about at 360. I use such bets to increase my cash flows and to maximize my returns. Other bets that worked include hdfc warrants recommended multiple times at 60 bucks, then 48. I encased both at almost two to three times the value.

e) my core picks are not in nd outs. I usually remain invested in them till the story remains intact and don’t get blinded by sudden moves. Stocks like Wockhardt, tv18, den, strides acrolab, Atul auto, Mayur etc are examples. I own indusind, hdfc bank etc longer than I can remember.

f) I don’t believe in or follow experts on tv. You guys are far better as your basis is some knowledge or research while tv analysts are all noise. I strongly recommend you to read The SIgnal and the Noise as a recent book that I read.

G) investing is an ever evolving process. My lessons I have learnt are to keep ideas simple, diversify, learn from history, be disciplined and never try to time what otherwise seems convincing.

I continue to wish you guys happy investing and am pleased if I have helped anyone do better. I do not want to boast of my absolute returns as no matter what the sky is always above. Cheers.

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Can you pen your thoughts on your stock allocation strategy?

How much do you invest in the core (%) versus trading bets (%)?

Within the core what % do you allocate to each company?

Is there a maximum (as a % of your portfolio) you will allow a particular company to be in your portfolio?

Is there a minimum (as a % of your portfolio) you will invest in the company that qualifies for core portfolio? (For it to count or make a difference to your performance)

Do you gradually build up a position versus buy all at a certain price?

Do you sell a position to create space for a new position you are more convinced about?

I am trying to think how these individual allocation decisions could lead to long termout performancefor individuals (versus institutional investors bound by their requirements) as well as creates a safety against the black swan like events you refer to.


Safir bhai,

I am slowing turning into a big fan of yours, and your investing style. Recently I have been reading Benoit Mandelbrot’s “The Misbehavior of Markets”. That he is a genius was a old news for me, I have heard about his in my college days and have created software programs to create his Mandelbrot set. Do a google image search on “mandelbrot set” and you see what kind of image I would have generated.

In his book, he want to convey that stock market tends to follow pareto/power-law distribution and hence have a fat tail. So super-rare event like 5-6 sigma happens quite frequently as compared to normal distribution. If you can feel the implication of it, one will definitely like to diversify so as to save oneself from these black swan events.

Off late I am starting to understand Ayush’s reasoning behind not having more than 7% in any of the stock in your portfolio.

Thank you subash, I will surely look up on the points flagged by you. Thank you deep insight too.

To address some of the issues raised:

1). I do not follow any hard and fast rule of what portion is core vs trading. This is a natural consequence given that in my trading too I am looking at atleast 20 pct returns. If you see two of my trading picks as put on my own blog, Mrf was initiated at 6500 and hdfc warrants at 48 and 60. Mrf currently trades at 13500 odd and I have only booked small profits.

2). The view on what is trading vs core is a function of how much liquidity I have, how much conviction I have in a stock in terms of visibility and how much I can afford to lose as opportunity cost of money that’s locked in.

3). At 4700 levels of mkt, I was crying, screaming buys. That time every bit added was only core. Some in large caps like hdfc, hdfc bank and some in small caps like cera, amar raja, Mayur. I have given nifty indication only as a barometer as I did not buy or hold on to nifty per se.

4). My initial allocation to a stock cd be upto 3 pct with a max of 5. I then let the mkt play its role and if a stock goes up the allocation is auto adjusted. In other words, Indus ind for ex has rallied from 190 to 430 odd and thus it’s allocation has automatically improved. As long at it does not cross 7 to 8 pct, I may not prune it. If it does, like has happened in some of my investment ideas, I may re adjust,

5). Arshiya had not been performing, so even with my initial exposure to it, it’s allocation kept coming down, as other stocks rallied and improved their allocations. In fact as you can read on twitter, 12 stocks crossed a three digit return, making arshiya even smaller in the fund. I also follow the rule of not being overtly greedy on one company although I usually do not follow the same rule on the markets. Thus in phases such as at 4700 I remained fully invested. Right now, I am substantially invested though not fully.

6). A separate reply on what I make of arshiya will follow soon.

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Thank You Safir for enriching us with your thoughts.

It was very interesting to know your investment strategies and it makes complete sense.

Seeing many black swan events like Arshiya I think a good amount of diversification is surely required. But how much? And what is the best way - different sectors with different correlations? Or different market-cap sizes? Or are we only talking about company specific black swan events in which sectors, correlations and market caps can be ignored?

There is also the question of how many stories can one find out get convinced and track atleast quarterly. Valuepickr, TED, blogs like Dalal street, your twitter a/c etc have been a boon in helping one findout stories and also in analysis. But still finding out 20-30 stories and tracking them could be a big task for many salaried people.

In the quest for diversification one should not lose out on quality of analysis and conviction. There in lies the challenge to bring in some fine balance.

Safir, you broughtup this topic at the right time I guess…when many of us are thinking about capital preservation after a very good run due to some good “luck”.



Hi Safir,

Excellent thoughts. Though my investing style is quite different from yours, I see the immense clarity of thoughts in your approach. Each of us have a different personality/ experience/ interest/ situation, and our approach should reflect that. If one is clear of that, things are much more clearer.

I think an issue with an overall forum is it gives false impressions. Focusing too much on peopleâs portfolio without knowing the background is of not much value. In terms of analytics, stock allocation is 5th level question.

Level 1: How much are equities part of your net worth?

When we see someone with 1/2/3 stock portfolio, we think how concentrated/ focused. Actually, that person might be investing only 10-25% of his investible net worth (say excluding primary residence etc.) in equities. A person with 15 shares might be more concentrated than this person in terms of net worth. Frankly, with 10-25% of net worth in equities, the overall impact is very much minimal. He could speculate with poor quality or very high valuation shares, it wonât matter much in the long term. I see this all the time with some of my relatives/ friends.

Level 2: How much will your next 3-5 years savings will be as proportion to net worth or equities?

A young person or high earning person might look very concentrated but current portfolio might be small as compared to what he will save and add over the next 3-5 years.

Level 3: How much is your income correlated to stock markets?

For a person in fund management or a full time investor, future income/ savings might be highly correlated to stock market, so he has to take care accordingly. A person from an IT/ Medicine/ some other background may not feel any impact of a long bear market on his future income/ savings and might even welcome it to keep buying stocks if can sustain conviction.

Level 4: Are you financially independent?

A person with high net worth as compared to expenses can go easy. Like the point Rudra made in another thread about 1% of Buffett

I think that without knowing these 4 things about a person, evaluating a portfolio on just 5th level information could really mislead someone.

So whenever one sees someone portfolio with 50% in one stock, if we see in light of above parameters, things will be more rational.

50% is 30% of networth or 5% of net worth?

And all this talk about concentration vz. diversification is pretty futile. When you buy a high quality stock at cheap/ reasonable valuations, you can be concentrated. When you buy the same at high valuations, you need to buy less or in other words, diversify. When you buy an average quality stock, you need to diversify even if you buy cheap. HDFC Bank at 3 P/B you can be concentrated. When you buy at 6 P/B, if at all, you need to diversify. In FMCG stock you can be concentrated, in cyclical you need to diversify.

Of course, the 4 levels above can lead to different conclusion.


Hi vishal, I agree with the point made. I have a fairly large amt in equities per se. At the same time I am diversified in other asset classes too. Overall equities cd be as high as 70 pct, that too not by allocation per se but do the fact that some of my real estate investments have gone up. I intend to keep investing in equities and in that sense remain loyal to most of my ideas. On a stand alone basis, my investment in any stock is a decent amt per se but fits in my risk strategy of not being over dependent. History teaches us that no blue chip too was spared in mkt crashes and many stocks fell despite highest mkt integrity smoky because of external black swans. These ranged from forex to Europe issues to even death of a key promoter. So in effect I provision for abt 20 to 25 stocks at any point and frankly have not missed out by only betting on less than 10. In that sense it also allows m to plan monthly additions based on returns, outlook and overall exposure to both individual stocks and markets.

Thanks Safir. 70% of networth in Equities is substantial. I should re-look your portfolio !

No. of stocks is an individual call. My learning is only overvalued bluechips fall substantially in a market fall (as I saw in Dec 2011), so i sell/ reduce those on valuation reasons. Of course black swans are tough to predict.

Frankly, I think there is too much song and dance about Arshiya falling (disc: never looked/ invested). Arshiya in Samir Arora’s equity portfolio would be <5% and % of networth would be even less. If one ventures into unexplored territories, risks are always there. One should take allocation accordingly. Like between HDFC Bank and IndusInd Bank, I will be willing to take far bigger exposure in former than latter, when both are at attractive valuations. Disc: am invested in IndusInd right now from lower prices.

Interestingly, there was a very good insight by Pabrai in one of his recent lectures.

He said that Templeton had mentioned that the best of investors get 7 out of 10 investments right. Pabrai looked at 70 odd big investments of Buffett, and saw that only 2/3rd by no. made money for Buffett. But the genius of Buffett lied in the fact that he had invested 90% of his money in those 2/3rd of investments ! So because of higher dollar wightage, he made better than best of investors. The fact that his nearly whole networth has been in equities, speaks volumes about the right investment strategy.

Safir/Vishal paaji,

Kindly request you to see the portfolio ‘Novice’ in the Forum Portfolio Q&A.

Since its a concentrated one & micro-cap heavy, concerned about it.

It will be of immense help, if you can guide me.


Hi Safir

A lot to learn from you. Please keep posting your thoughts regularly. Currently my portfolio is structured on similar lines, 50% in strong long term names like Asian Paints, HDFC Bank, Bajaj Auto etc…, 40% in strong growth business like Atul Auto, Mayur, Kaveri etc… and only 10% in trading or pure undervaluation bets like say Mazda… overall 20-25 companies.

Can we have a separate thread on Arshiya ?


Very sane thoughts there!

That’s a good strategy to follow, Raj. Almost akin to what I’ve been doing for years now. Except my core is abt 85 pct of invested value, sometimes even 90 pct. your choice of cos is good from the ones you have detailed.


Thanks for the viewpoints on portfolio and allocation strategies.

I agree that how much networth is into equities counts for a lot. Read in ambore’s thread that he has only around 5% invested in equities. For such a guy he can easily afford to have even a two three stock portfolio.

Personally I am almost 100% into equities since almost 4 years and things seem to have gone quite well. I usually make it a point to make sure that a single stock does not cross 15% allocation in terms of invested amount. If it increases due to run up then I try to ride it and then gradually trim it to below comfort levels.

Now the aim is to convert some part of equity holdings into a dream farm which I have been craving since a long time. But that will happen when everything falls into place.

Till that time equities is the only avenue of investment and if I feel markets are overheated, I intend to move into cash for some time. I have never moved into cash too much so that should be a new experience and I feel for someone on the lookout for opportunities in stock market, sitting on cash might be a difficult job.

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Hello Hiteshbhai,


Have been following you since more then 1 yr, initially on TED and now here also… Was just surprised to know that u r almost 100% into equities since last 4 yrs… I have been a great admirer of you in terms of stock-picking ability based on your insight and detailed analysis… But still 100% into equities?? R u comfortable with your portfolio allocation?? Also 5 yrs back when I ventured into equities without much of knowledge, I was also heavily invested into equities with around 95%weightage but thanks to 2008 crash which taught me the important lesson of asset allocation and portfoliodevelopmentand eventually I have diversified into different asset class…Hiteshbhai I would also like to know that since how long u have been into equities?




I have been almost 100% in equities since past four five years. About being comfortable yes there does not seem to be too much worry about the portfolio mainly bcos I dont have to worry too much since I dont really need any money from portfolio for my daily or other expenses due to alternative streams of income. So I can afford to look at my portfolio with a sense of detachment.

regarding being in equities, I have been tracking and buying and selling stocks almost mindlessly since 2000 and till 2008 there was no method in investing. I used to do some f&o, some trading etc based on tips etc but quantum of investment was very low since I did not have enought money back then to invest. So the 08 fall did not hurt me badly.

Now since the portfolio has reached certain desired level, I intend to diversify into other asset classes so as to diversify risk. One of them which donald mentioned to me and which ayush’s dad is famously quoted about is to build hard assets after sharp run ups in equities-from part of profits- this means buying real estate or such similar assets.


Hitesh, I have also been craving for a farmhouse. But given the property rates in Delhi NCR, will need potfull of cash and Mar 2009 like valuations to reach there any time soon :slight_smile: If I am able to buy it, will host all the investor friends for a retreat !


will certainly take you up on your offer and hope u get ur farmhouse soon.

if u are anywhere near baroda, I would be pleased to host you and other friends at baroda–with or without the farmhouse.

back in aug 12 , we had a wonderful three days get together of valuepickr friends.

My rules are simple…

  1. The money which you don’t need in a foreseeable future should go to equity.
  2. If you have other streams of regular income for living, you can put 100% in equity till your portfolio is significant where you need to worry about capital protection. Everybody is free to define there threshold. For me in will be $10 million at least. It means miles to go …
  3. Buy low debt companies…debt kills at times. Since I bet a maximum of 4-5 companies at a time, can’t afford to bet on such themes.
  4. Even if the market slide by 50%, you should have the appetite to hang on in the market. I survived the 2008 crash :slight_smile:
  5. When there are so many stable businesses, why spend your time on fickle purchases…Peter Lynch. Bet on secular growth stories as trying to catch every little opportunity may not be your cup of tea.

So far, I have not found any other ethical way except equity to increase my net worth, hence 100% in equity till the threshold is reached.



Safir bhai,

Do you foresee the delay in the rollout of digitization as a risk for den and tv18? I am expecting that byfy14 start digitization would have been completed for all Indian cities. Please refer the link below

Hi Hitesh Bhai,

All the very best for your dream of having a farm. You have the right person @Manish, (who seems quite experienced in this area) to help you.

Yes, over the several years, investing some portion of equities after sharp run ups into real estate has worked out amazingly for us. Real estate has also given extra-ordinary returns and gives a lot of comfort during bear runs :slight_smile: But somehow, since 5-6 yrs we haven’t invested much into real estate as the run up has been very sharp in real estate prices and I feel that its becoming sort of a bubble area. Prices have just been going up sharply every year in Lucknow and now I see people having blind faith in this area andguaranteeingatleast 20% returns. I also see people leveraging themselves and trying to book multiple flats etc in pre-launch with intention to sell as the prices rise. So lets see how this area shapes up.

Nevertheless, farm is always a good area especially when you have created good returns in equities :wink: With quickly expanding city limits, one strikes a multibagger here too, till then it gives lot of peace, nature pleasure and satisfaction. And like equities, go small in starting and then try to scale up if you keep getting a good feel :slight_smile:



thanks ayush.

regarding the farm, it will be baby steps since around 4-6 friends are ready to pool up to contribute to the farm so individual investment should not be a big amount. Plus with these guys regularly using the farm maintenance etc should not be a big worry. Plus the location is somewhere 15 kms from my place so that too should not be a big problem to commute.

Me and my friends want to make a nice place for weekends and other ocassions so lets hope things materialise and we can go ahead.

about real estate bubble I agree fully bcos there seems to be blind faith that prices are never going to correct.