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Nigam Coffee Can Portfolio : Request Views

Hello,

This is my first post on the forum, having learnt a lot from the various posts.

I work in the Corporate Banking domain for one of the main Private Banks, so going through balance sheets on a daily basis is part of my work. However, I do not see myself as an expert in terms of investing basis a deep balance sheet understanding.

Coffee Can type of investing suits me as per my limited balance sheet understanding, and as my equity investing is planned for at least till the time of my retirement. I invest major investing amount into the portfolio on a regular monthly basis, to try and attain a rupee cost averaging instead of trying to time too much. Some portion I keep on the side for a timing opportunity.

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My first aim was to just beat the Index. Working in the Corporate Banking domain I feel I have a better understanding of banking, so I started with evaluating investing in Kotak Bank ETF, but I did not want any money in PSU stocks. So I started with a portfolio of Private Banks and am comfortable with it being skewed towards the domain. Also, my understanding(which might be totally incorrect) is that with increased marketing of MFs and Index investing, the SIPs into the major Nifty stocks will continue(and will change only with a big change in Nifty composition).

HDFC, ICICI, Axis and Kotak - These together help me diversify within Banking. I ideally want a much higher allocation to Kotak, and am working towards that.

Reliance - Forms a large chunk due to its weightage in Nifty currently, and majorly due to their plans in the retail domain. There are a lot of firms I have met in the domain, and their feedback about Reliance’s agresiveness is the same. Based on all that I have read and understood, I have the feeling that Mukesh Ambani wants to be the biggest entity in India and wants to get to the Alibaba/Amazon level in India.

Nestle - Was a pick due to a Peter Lynch line of thought. I was reading his book and asked my wife to tell me a firm she felt would do really well in India. Being a Coffee lover, and having seen the kind of product range Nestle has internationally whenever we have travelled to other countries, she told me Nestle can expand to a huge product range in India. I analysed the financials, and decided to invest, which has turned out really well in terms of returns till now.

TCS - I wanted to have some exposure to the IT domain, and between Infosys and TCS, decided on TCS due to the Tata group and the various articles on the web I studied about the firm.

Bajaj Finance - Again from the financial domain, but seeing the kind of retail debt I saw everyone around me taking(plus the increased focus of the banks towards that domain as well now), I wanted an exposure in the domain. From all of my analysis and the options available, Bajaj Finance seemed the best bet for the long term.

Asian Paints - I do not have an in depth understanding of the domain, but based on the historical track record(plus the financials showed enough strengh), decided on the firm.

Marico - Wanting an additional exposure in FMCG, with the other firms have very high valuations, I decided on Marico since I was getting good value plus again the historical track record and the increase towards the health segment helped me decide in favour.(Other candidates were Britannia and HUL).

Titan - I handle the Jewellery segment in my region for my bank, and while I personally never thought that in the long term our generation will buy a lot of gold, I was proved wrong looking at the kind of business the unorganized sector does(many small players are my clients).I saw that a lot of business Titan can still eat into(and is regularly eating into). They have already proved adept at moving from watches to Jewellery, and seeing Taneria being launched I was confident of their long term prospects. Being from the Tata group also helped.

Tata Global - This was a very small bet as I really wanted to get into the Starbucks story, plus I wanted to own a small cap stock as well before the days it became big. While it will take a long time for Starbucks to be big, which I feel it will seeing their presence in other countries, and our culture shifting to a daily coffee habit after some years. Already the multiple Starbucks around me are always full despite the prices(I buy a stock of Tata Global every time I go to Starbucks for a meeting and don’t buy an expensive coffee, just for fun). The FMCG strategy of the Tata Group might do well too, but I do not have the confidence yet to invest a larger amount(the stock has run up a lot too). Trent was a candidate which I decided to pass up in Tata Global’s favour.

HDFC Life - The Life insurance business will do well as per my understanding. Banks sell a lot of Insurance as cross sell, as some people might have noticed, and HDFC Bank’s branch network and aggressiveness will help HDFC Life do a lot of business in the future. HDFC AMC was also a stock I wanted to own, but I was not sure about the long term prospects of the AMC domain in general.

Abbot - Wanting an exposure in the Pharma domain, but not having an in depth understanding, my first criteria was a debt free firm(an advantage with Nestle as well), as I have seen first hand in my job what debt does to a firm( I am confident Mukesh Ambani can handle it). Pfizer was another candidate but I liked the financials of Abbot plus the product range expansion plans looked good. This has given good returns till now as well.

I am looking for a chance to increase allocation to the non financial stocks whenever the timing is right.

In addition, I have SIPs in:

  1. Axis Long term Equity(Direct Growth) ELSS for wife(expense : 0.92%)
  2. Mirae Asset Tax Saver(Direct Growth) ELSS for myself - I liked the lower expense ratio of 0.3% and figured Mirae would want to improve the AUM of their ELSS so will focus on performance. Mirae has a good record and Neelesh Surana’s performance in his other funds is good.

The other funds I have are Multicaps/Focussed funds from 3 different fund houses because I don’t have the knowledge for Mid Caps/Small Caps, so I was okay with giving that authority to a fund house. Low expense ratio was a big criteria.

  1. Kotak Multicap Fund - Direct Growth(Expense : 0.87%)
  2. Axis Focussed Fund - Direct Growth(Expense : 0.65%)
  3. Mirae Asset Focussed Fund - Direct Growth(Expense : 0.23%)

Hope the long post made sense. Will edit and correct this for mistakes.

Happy for any feedback on this.

Thanks,
Himanshu

15 Likes

I find your selection of scripts and MFs to be very robust.If you could add your average buying price, it would be more meaningful.
Out of all the above scripts, I feel Reliance will HV a huge disruption in it’s petroleum business as well as retail. You may visit D Mart and Reliance and D Mart stores and then decide.I personally would bet for D Mart on declines
Tata global to my understanding would have to be watched for meaningful growth and profits as putting up coffee kiosks is a capital intensive business and customers becoming cost sensitive ad yourself mentioned.
Rest of it seems excellent

1 Like

Thanks for your reply.

Tata Global I am already very careful about, also because Starbucks is a miniscule part of the business right now. How fast it will grow in the next decade, it will have to be seen, but Starbucks is faster in india than it was in China, and with the recent CCD news, they will be even more dominant as per me.

W.r.t Reliance, I have not seen a lot of D Mart stores in NCR hence my understanding is limited. Also, Brick and Mortar mid level retail is extremely competitive as per me which is why I did not finally go with Trent or Page Industries.

Reliance is working towards Ajio being a big player and also is partnering very aggresively with international brands and current list of partner brands are Marks & Spencer, Tiffany, Mothercare, Armani Exchange, Emporio Armani, Georgio Armani, Burberry, Pottery Barn, Brooks brothers, Canali, DC, Cherokee, Deisel, Dune, Gas, Hugo boss, G Star, Hunkermoller, G Star, Hamleys, Jimmy Choo, Muji, Michael korrs, Steve Madden, Superdry, Scotch and Soda just to name a few. While most of these names might be unknowns here currently, they are established brands internationally. And India might not have the purchasing power for all these brands now, but I believe this will happen in the future. The lower to mid end of the retail business will be extremely tough(we have brands like Uniqlo entering the market, and anyone who has seen them internationally or knows about them will be wary), but the high end of the business requires a lot of brand power which is where Reliance seems to be focussing. At many Malls in metro cities, most of the brands I have mentioned above have stores already plus they will expand to other cities as the country grows over the next decade. Plus they are planning an aggressive online retail strategy as well. I don’t know the Petroleum domain in detail, but I am okay with the direction which Reliance seems to be focussing on.

Please correct me if my understanding is wrong somewhere.

1 Like

Nice picks .Going forward private sector bank and NBFCs are going to create lot of wealth for investors and u have almost 50% weightage in robust banks and nbfc .

2 Likes

Very sound portfolio! My Compliments!

You have kept away from small caps. Is this something that you propose to continue ??

Also would be interesting to note when you started investing in stocks like ICICI & Axis Bank

1 Like

@Himanshu_Nigam

Yours is as good a coffee can portfolio as it can get. Strong banks and financials is a proxy to play the India growth story over the very long term. The only issue can be very high, nearly 70% allocation to the sector.

Having a high allocation to such a strong sector can be okay but this hinders allocation to some other sectors where there can be strong tailwinds. I would love to see higher allocation to consumer names in the portfolio .

With the kind of maturity I see in your crisp logic detailed for your picks, I feel you might invest all your funds on your own rather than relying on MFs. And you might as well have a look at good companies in small and midcap space as I feel that is where the most money is going to be made in atleast next couple of years or even longer.

Loved reading your post and all the best.

6 Likes

@maheshkumar : Thank you.

@manishdhariwal : I am not yet confident about having enough knowledge to evaluate the financials of small caps because there is not a lot of other publicly available information like articles/news etc. I handle some corporate clients which are listed entities, and my experience has been that even being someone who meets their promoters/CFOs on a regular basis, a short term investment might be okay but a long term investment is tough for me to evaluate.

I started investment in the last 1 year in individual stocks. As I had mentioned earlier, I started with investments in the 4 Banks at the same time, and kept adding gradually. ICICI has given the most profit out of the 4, and Axis the least. From what I am seeing in the domain, ICICI is quite agressive currently(and quietly, without their CEO being in the news a lot), while Axis is hiring from other Pvt. banks very well.

@hitesh2710 : Thanks a lot for your reply. I am looking to increase allocation to the other sectors going forwards, and looking for an opportunity to do so. I started with investing in Banks and financials, and hence the high allocation.The increase in value post the tax break announcement have made me pause for a bit. I have increased allocation to Titan since the last quarterly result because of the drop in price. Will try and see if I gain the confidence to invest in smaller stocks.

1 Like

Second that!

Though Small caps is a mine field

Your timing was very good as there was a long period of time when ICICI and Axis under-performed. Have you firmed any ideas on exit strategy

No exit strategy as of now. Like I had mentioned earlier, I’m focussing on holding my equity investments till retirement and hoping I will be able to do that.

In case something major happens which shakes up the Nifty composition itself and leads to reduced flows in the major stocks, I might hold investing further amounts. But I think it will be tougher now than in the past because of:

  1. Increased understanding of Index funds(SBI Nifty ETF has a huge AUM of 65000 Cr just due to the passive inflows, and an expense ratio of 0.07%).

Even EPFO has been investing in ETFs since August 2015. Initially, it was 5% of its investible deposits. Later, the proportion was increased to 10% in 2016-17 and 15% in 2017-18 and onwards. 22% of those funds are going just into HDFC Bank and Reliance on a regular basis.

  1. An analysis of all major MFs on the basis of AUM size shows again that the majority of funds are flowing into the Nifty stocks in more or less a similar proportion. With AMCs wanting to increase their business, 60% of India’s population under 35yrs of age, and increased marketing of Mutual Funds, this should continue/increase.

This is also a trend I saw when Nestle entered Nifty.There was a good amount of price increase post that. I think/hope something similar happens with HDFC Life which is why I am looking to increase allocation there.

So once this trend starts changing, or new stocks come up to a greater proportion, I will evaluate not investing more amounts into the existing stocks. This could be a completely incorrect way of evaluating things, but this has been shown to happen in the US stock market as well with Index funds.

But there is no exit strategy I have thought of since my main focus is to see how long I can hold on to this. Plus I don’t have an understanding of how to formulate an exit strategy at this stage. One of the reasons my stock investments have started 1 year back is that the funds were required for long term major expenses, and whatever major expenses I foresee in the future, I keep/will keep that amount saved/invested into debt funds separately.

4 Likes

It is a good idea to hold good companies for as long as you can. You can even give those companies longer rope in the face of some years of slow growth as these have the propensity to bounce back, but be mindful to Yes Bank or DHFL type scenario.

Other than that. good portfolio and so good luck. :slight_smile:

1 Like

Thank you. And yes will definitely not keep holding even if there are alarm bells. I do try and keep track of everything on a very regular basis so as not to miss any chances of adding more, which I am hoping should help avoid losses as well.