ValuePickr Forum

Navneet's Portfolio

Hi VP Board,

I have been investing in small amounts since 2014 and had reasonable success during the bull period.

I made avg 70%CAGR for 2014-2016 on a very small 2lc portfolio (all small and midcaps) which was basically a pure value play on small and midcap stocks and offloaded my holdings completely around demonetization since I needed money for my wedding.

After squaring off my holdings, I had a hard time pulling the trigger again due to absence of the same type of valuations and limited time for research.( It was easier back then to find undervalued stocks and end up with smart returns and I do not have enough knowledge to analyze growth stocks and identify multibaggers)

I consider myself as a high risk investor, but I feel that the strategy I am presenting is a very conservative one. I need your guidance to identify If we can do the portfolio in a better way.
I am targeting 1L/m of investment towards Equities.

I have made the following strategy to re-enter the market with the view to have some core holdings in which we do SIP and save the remaining money as gunpowder for when the market throws us a sweet deal.

Following is my strategy in detail :

  • Monthly 50K towards direct equity.
  • Monthly 60K Sip ongoing (Axis Focus 25, Reliance Hybrid,Mirae Emerging Bluechip, PPFAS)

DIRECT EQUITY

  • I am thinking to allocate 50% of the direct equity allocation(25K/m) towards the following stocks in the ratio below with a long term view of atleast 5-10 years.

  • If there is no value buy available, the remaining 25K goes into liquid fund/FD as gunpowder.

  • I am trying to have 1 steady compounder each from the sectors which I think will remain favorable and in line with the Indian growth story and without drastically downgrading their ROE objectives.

  • I have not cared much for Intrinsic value calculations in these stocks since the SIP in these stocks will be for a minimum period of 5 years.

Allocation - equal % in all

  1. Reliance

  2. SunPharma

  3. Marico

  4. Bajaj Finance

  5. Thomas Cook

  6. LnT

  7. Adani Ports

  8. HDFC Bank

Queries -

  1. I am looking to add one stock from IT sector but am having a hard time coming up with shortlist. Any help and suggestions would be great.

  2. Would you rather have Piramal instead of Sunpharma? Or any other better candidates for this sector?

  3. To play the electric vehicle space, do I look at automakers directly or battery companies etc.

  4. Comments on overall selection of companies?

Mutual Funds

We have ongoing SIPs of 15k each in Axis Focus 25, Reliance Hybrid,Mirae Emerging Bluechip, PPFAS.

I am willing to trim these SIPs and have more in cash

Thanks in advance!

I understand a lot of people have done well during this time frame so just out of curiosity I wanted to compare this 70% CAGR returns over 2014-16 (till Oct 2016) with the mid-cap and small-cap index returns.

The BSE Small-Cap index is up around 105% which is a ~28% CAGR
The Nifty 100 Mid-Cap index is up around 101% which is ~27% CAGR

Now you’ve smashed both the Mid and Small cap indices with a 70% CAGR over a 3 year period - which is not a small time frame in my opinion. And even during this time frame I can name hundreds of small and mid caps which have not made the investors great money.

Given your stupendous outperformance and reasonably decent stock picking skills - I’m really surprised why you want to re-enter the markets with a proposed 50% allocation towards the large caps.

Very true gurjota,

The high allocation currently is due to 3 things :

  1. At that point of time, I had a lot more time and a lot more conviction behind my bets and a lot lower budget. As I moved into a much much busier job, It lately became a lot difficult to even track the topics on vp and my portfolio/watchlist stocks. I personally feel rusty with such a job.

  2. The fact of the matter is that I am pretty comfortable allocating a part of my overall portfolio knowing that I can do without missing a few of their quarterly earnings reports. 50% felt like a good place to start.

  3. I still feel the markets have some way to go till I find the kind of valuations Im comfortable investing but im not averse to trimming the SIPs and having more in cash in case that happens. After all it still is my first ever bull run and Im still figuring out what works and what doesnt for me.

One last thing, back of the mind, I still feel the stocks I picked during the outperformance phase tapered out in the next two years, so maybe I was lucky to exit at those numbers. I feel there is a lot to learn for me wrt the investment thesis behind a stock and the mental strength it takes to hold them through thick and thin.

This time around with the index still at 24 odd p/e, marks another round of learning for me and how to invest at these valuations. I just wanted to be safe than sorry.

Views invited

1 Like

Thanks for the detailed response.

I surely missed the agro tech foods and loved your inputs on the EV space.

Will have to look into 3M in more details

i think you shouldnt invest in 3M India, they dont pay dividends. I would recommend you to look at Wendt India or Carborundum universal,part of the great Murugappa conglomerate

I am not commenting on whether to buy 3M or not. However, one should not decide your stocks (i would call as business as we are shareholders of the underlying assets / operations) based on dividend yield.

Once the Company has paid the dividends, the price of the stocks would reflect the amount of dividend paid. That is why in certain business literature, you can see the phrase ex-dividend price or X company will trade ex-dividend today. So can’t find any reason to select stocks / business based on dividend payout. Hope it helps

So here’s an update,

During the past year, luckily again, my move into large/large mid-caps caps paid off for me as I did decent returns with the comfort of low volatility. I still plan to hold these largecaps and liquidating them is not on my mind. Following are my returns from the stocks on an absolute basis

painting

I got out of Care rating, where I got a dent of 50% in a short time and wasn’t fast enough.
Took some small trades on dhfl and yes bank, the gains and losses cancelled each other out but they were a sweet reminder to me why I should go that route in the first place.

Recently, I can see some runway emerging towards mid caps and small caps and initiated entry into ION Exchange, Delta Corp and Sonata Software.

Im also keeping an eye on - IOLCP, Suven,Coastal Corp, JK Paper, West Coast Paper, Caplin Point Labs

I am looking to add one stock from the chemicals space and one from pharma, the search is still on and any pointers towards these sectors or overall portfolio would be very welcome.

So im currently adding into small and midcaps as im not mentally strong enough to liquidate largecaps and move headfirst into mid/smallcaps. Instead, I am more comfortable followings a core and satellite portfolio approach where I utilize any major gains from small and midcaps to add onto my core portfolio.

Currently where my portfolio size is at, Im 80% largecaps and 20% small/midcaps. Im happy to take this to 60:40 in a few months time.

On the SIP Front - Ive consolidated all SIP into 1 arbitrage fund, 2 corporate debt funds and PPFAS. This is the only MF strategy I intend to follow for now.

Thanks!

1 Like

Portfolio Update :

As per referencing other threads, Im going to remove the returns but start mentioning the weights accurately. I think that this will lead to much better feedback from the forum.
image

Updates

Entered :

  1. Rites - On my watchlist for some time. Valuepickr posts helped me form my investment thesis and I believe this business is a decent enough proxy for governments Infra push until I find something better.
  2. Delta Corp - Had a small tracking position since long and finally pulled the trigger few trading sessions ago, my sin stock exposure, the business is attractive on valuations and if the long term story of dominating internet gambling pans out(although it has been pretty okayish till now) earnings growth can be non linear.
  3. Ion Exchange - Finally found an entry but didn’t enter fully, would have picked up more, I don’t know if its inexperience or the volatility just kept me on my toes a bit
  4. Sonata Software - Attractive mid sized IT business, play on INR weakening a bit and business maintaining its margins.

Exits :
ITC, Thomas Cook, Adani Ent

Current Allocation :

Screenshot(2)

As I said previously, I’m bringing down my allocation in large caps down to 60%, I think that will happen with last remaining capital allocation.

Need Advise on

  1. Pharma Sector - I am confused between the potential of Crams business vs biosimilars play vs pure play drug mfg
    How do I create a thesis in my mind if I have to understand where will these businesses be in next 3-5-10 years? In comparison to tech companies, to me, Crams business is like TCS (services outsourcing), Biosimilars is like Facebook,(a better trap) and Cadila is like a good ol IBM

Also what makes Syngene better than a Suven what value diffrentiator should I be looking at?

  1. Cyclical Plays - Read a bit about investing in cyclical stocks and recent video by @jitenp at PPFAS also gave a lot of starting points on what to keep in mind. Any sectors that the boarders can advise that I look into actively.

Thanks for reading.

1 Like

PL mention your holding period approximately. Then only returns make sense.
In your holding Delta Corp being in casino business is subject to change in rules and regulation.
Most of your large caps are v good blue Chip companies and can be held for fairly long periods to take advantage of compounding.

The column is actually weights, Ive corrected it in the original post. Thanks for pointing it out.

any specific reasons for exiting ITC

The reason is that the portfolio felt diversified enough as it is and I needed to let go of 1 fmcg play. Also, given multiple revenue streams for ITC vs Marico, Marico and Nestle make easier businesses to analyze and track for the long term given that im holding 15 biz in my folio now. I believe accumulating Nestle and Marico over time would be more rewarding from an earnings growth perspective.