Nikhil's Investment Journey - Past and Current

Dear all,

After many years of silently browsing the site and posting occasionally, I am making this thread for explaining my journey and evolution as an investor/trader etc. I will occasionally share some of my investments, my current interests etc. Hope you find it useful in some way.

A little bit about myself:
I am 47 year old, family person, currently based out of Hyderabad. Professionally I am Mechanical Engr from GBPUAT with MBA from IIMB. I am currently full time investor. I left my job last year (2nd time) after spending almost 22 years in Corporate world - primarily with Pharmaceutical companies - Dr Reddys, Cipla, Jubilant etc mostly on the API and Supply Chain side.
My investing Journey:
Well, I have always been enamored with Stocks. I started investing my own money in 1998 from my first job after Engineering. Was not aware about the fundamentals, business and only saw the prices at that time. Lost ~ 1 L during the period out of my own meagre savings in stocks like Manna Glass, Rolta and so many more. Lesson Learnt - Nothing as I could not develop any understanding and rules.
Again started investing after completing my MBA in 2003-4 in MF and also directly through ICICI Direct etc. I subscribed to a trading service also which was a disaster as I let the losses run and book the small profits. This phase continued for multiple years till 2007-08 and led to minor profits despite the biggest bull run in Indian history. One thing I realized was that this was not the way to make sustainable wealth (trading , option etc).
During 2007-08, I came across Theequitydesk.com, site founded by Basant Maheswari. Lot of information was there and started learning and following Basant and different other people on EquityDesk at that time. I also started reading books and trying to develop some understanding of the business, companies etc. This was along the job and therefore I could not devote too much time. However was lucky to have several multibaggers on the way , primarily Symphony (100+ times), Page (100+ times), Hawkins, Repco, Canfin etc for me. Symphony was my first one. Since it was BIFR case and was just coming out of BIFR, I invested 13000/- in the stock and held on. It gave me ~4-5L overall when I exited the stock. Nothing to change lives but told me about power of stocks.
In parallel Page industries happened - I identified the stock at the same time when Basant was initially buying. I would have bought small quantities only but somehow got the information that Basant is bullish. I doubled up on the stock and it became my biggest holding over the next 2-3 years. At that time, nobody knew that it can go from 400-450 to 50000 so I kept on buying as the conviction and story unfolded. This was the first stock where I made serious money on my portfolio.
Canfin was another one which happened primarily due to Hitesh Bhai here. He posted it in this forum. I got interested and picked up reasonable quantities and it did very well over 2014 -16 time frame. Still hold some quantities

I would consider this phase of learning and picking stocks fundamentally as most rewarding phase of my investing career. This ended last year post my leaving the corporate job and becoming full time investor. There were some other notable things happened from 2015-2020 which I will detail in another post later.
Thanks for reading
Nikhil

32 Likes

Thanks for writing , will follow you.

Very interesting read, I too am 47 years old and though I am working, its like quiet quitting. I have stopped asking for any rise, more career growth as I am WFH rightnow and in no mood to rejoin office​:joy::joy:.

I have made some serious money in markets, first as lucky idiot in F&O during 2007. Used 70% for home emergency, rest all wiped out in 2008 crash. Entered again in 2013 when Some capital start coming in from expenses. Capital multiplied by 120X by 2017 from 2013. Kept putting bonuses, savings in stocks. Made 5X gains in 2 Infra stocks, Believed in large bets and traded heavily, including F&O. Took out 40% capital by Feb 18 as i could sense short term rate rise. Lost 80% or remaining by March 2020, major drags on PF, Force motors, PC Jewel, Yes Bank, Reliance power, Infra, Capital. Lost 10 lakhs in yes bank only.

With remaining capital of X, my current portfolio is 16X rightnow. Major blockbusters, Tata Motors, 8X, Rushil Decor, 7x, SHIL, 6 X, KPR Mills 4.5X Apollo tyre, PCBL 3X, Varroc 4x, Shoppers stop, 2.5X, ABFRL, 2 X 20% holding of core portfolio. My current investment thesis is to focus only on safety of margin. Avoided crash of IT stocks as i was never convinced of valuations, avoided Banks as Yes Bank was a major eye opener. Organized retail is 60% of my PF including ABFRL, INOX, Shoppers stop, Arvind Fashion, and others are small caps top researched myself.

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Hi Nikhil,

Will be an interesting read if u can detail ur stock picking process for ur multibaggers and checks that could have saved u from disasters?
Also, since u are Pharma veteran, some light on pharma sector will be helpful - on API front, Future trends, Competition intensity, what’s the preferred area of work for employees in pharma sector etc

All the best on ur future investing journey

Hi Nikhil, since you were into Pharma and specifically API, would like to know your views on DIVIS labs as its a major holding in my portfolio. Also about Abbott India and Laurus Labs…

Hi Focused_Investor
It would be a very long list of disasters which have happened over the last so many years. I have survived despite those because of good luck wherein I held on to some of the stocks that gave good returns and support from my job which allowed me to hold the stocks.
I will detail them further later on.
Pharma question is too broad - All I can say is I am not bullish on Generic API and Regulated market formulations. The space that remains then is CRAMs to innovator, Domestic/Emerging market formulations. This is where growth can happen meaningfully depending on the company and the desire to win.

Regards,
Nikhil

2 Likes

Hi Mudit,
I have not studied any of the 3 companies in any detail to offer any meaningful suggestion. I can give high level view if that helps

  1. Divis - Going through a temporary adjustment to lower CRAMs revenue due to Molnupiravir loss. They will not be able to make up those numbers and margins from Generic API business. So the business may show growth once they get a replacement to Molnupiravir which I believe contributed more than 1000+ cr over last 12-15 months.
  2. Abbott - Many believe it is like a consumer company. Well, it is valued like a consumer company, grows like a consumer company and will give returns like a consumer company with a little more variability
  3. Laurus - Interesting foray into CRAM, Fermentation etc. Also they have done commendable job in getting established in Generic ARV API business. So interesting company. I will watch this out especially for growth in CRAMs Segment

Thanks
Nikhil

3 Likes

Welcome to writing about your thoughts!! We need experienced folks like you to share their thoughts often here…With your excellent background & experience in as well as out of Markets along with significant time in Market…I am really excited about your thread as a good thing that has happened recently in this forum…Keep writing…

I was of the same opinion sometime back and infact considered Abbott to be slightly better than consumer companies because it didnt need to market the way consumer companies need to and I believed had more brand stickiness…however on deeper thinking I felt I was not so right in an year of holding on to Abbott, therefore decided to exit completely and replace that position by a Nestle (this was quite sometime back)…slightly more expensive but with equally better predictable moats…

Disc: Invested hence biased. Not eligible for any recommendations

Hi Nikhil,

From managing your personal finance perspective, are you comfortable with sharing this information for us to learn from, since you are now a full time investor:

  1. What’s the size of your portfolio?
  2. What’s your investing track record been like over the years? i.e. CAGR
  3. What are your annual household expenses?
  4. Do you own your house or rent?
  5. How much is your dividend income?
  6. Has there been a major lifestyle change? e.g. Spending less on vacations

Continuation of the earlier narrative:
The period of 2008-2022 in my journey can be broken in 2 specific timeframes - One till 2014-15 and the next one till 2022. Till 2014-15, I was very much part of Theequitydesk group and acted generally based on the advise of the group with limited independent thinking. Since the focus was on buying high quality business, I did well.
In 2015, I became part of a popular new PMS(PMS1). The performance of the PMS in the first year was not good. Infact to subscribe to PMS high ticket amount, I sold most of my “Slow moving compounders” which in hindsight was a bad decision. The PMS had its share of wins but there were more losses as they went into smallcap stocks in search of higher returns. I dissociated myself from the PMS after one year but till then some damage was done to my portfolio.
In 2016, I went to another PMS (PMS2) focused largely on small cap stocks. In the first year, the PMS did extremely well (in line with 2016-18 smallcap boom) and doubled the value. However they did not reacted once the smallcaps were busted and held on the not so strong companies. I also invested a very significant amount in end 2017 into this smallcap PMS and also bought on the side the share that they invested in. Some of the stocks did not performed well and in couple of those, I lost 90% of the value. Post this fiasco, I did not invested any additional money into the but let the PMS team manage the account.
In the meantime, in 2018, I left my corporate job to become a full time investor. However given the meltdown in my portfolio happening in 2018 I got scared and went back to job in early 2019. In hindsight again, I could have possibly managed at that time, but my learning was incomplete. On the side, I was again investing any surplus amount into stocks with my own study, visiting different website and valuepickr also. I made some interesting bets on Suven Pharma (predemerger), JB Chem, Alkyl Amines (Small Cap PMS stock) and held to them.

If I want to summarize the reason for my limited success in the stock market, it will possibly be

  1. Sit on your winners - Water your flowers and Cut the weed - This is the single most important reason. I was lucky to have a few winners as mentioned and I sat on them without worrying too much (Did not had the time). Great companies come few and far between and it is our duty to sit on them.
  2. I have never been afraid of taking a loss. Infact I don’t like losers in my portfolio, from a fundamental perspective.
  3. Avoiding big mistakes - I never did F&O after 2008. I placed a trade to buy Satyam Option at that time. I invested some 12-13 K in that option. I lost all the money as the option was not called. I was quite horrified that I lost all money without anything happening in the company and vowed to never do that again. Till date, I have not done any other trade in F&O
  4. Not buying on Leverage - I was fortunate to not enter into leverage. It is a tool for very experienced investors. I believe my knowledge is still not complete. 5-7 years back, doing leverage may have been a disaster. It is also good that govt restrict LAS to 20L/pan so it not interesting anymore.

Some key learnings;

  1. Don’t trust anybody with your money unless you explicitly trust the manager and the investment philosophy which have to be making money in all kind of markets
  2. Leave the difficult to understand sectors. There are many parties in the market and I have to choose which parties to attend. (This is probably RJ’s quote, but very apt). So generally I now dont invest in Realestate, Construction, “Esoteric business models” etc.
  3. Investing is a very serious business. Unless you can devote significant effort every week to know/understand, you should not look to invest directly in stocks. I have realized this more after becoming Full time investor. The time aspect can be reduced if you work in your circle of competence and study few business at a time.
  4. Get out of your mistakes quickly. Hope trade does not work especially if the business model is not correct.
  5. Understanding the business model of the company is the most important aspect besides promoter integrity and their hunger for growth. If you get these 3 things cheap, you have discovered a gem.

Regards,
Nikhil

11 Likes

Hi Anish,
Without getting into specifics, I will respond

  1. My portfolio size when I left my job was 10 times my Annual salary
  2. I have made ~20-21% CAGR for the last 10 years, from the time I have my “kaccha record”. This is despite the various mistakes I did over the last so many years. Markets have been kind and I have been lucky.
  3. Roughly 3% of my Portfolio value
  4. I rent a house. I had a house but sold couple of year back.
  5. 0.7% of my Portfolio which takes care of ~20-25% of my expenses
  6. No. That was one thing I promised my wife when I left my job. If it comes to that, I will have to find a job. :slight_smile:

Thanks.
Nikhil

8 Likes

Thanks Nikhil, your responses are appreciated.

Thank you for the elaborate writeup sharing your experience in the market. It would be helpful if you can share your
1.) Current style of investment (Microcap investment, Special situations, Growth style, value, Monopoly and largecap , Contrarian etc.).
2.) Goal (%CAGR or final corpus).
3) Sectors you are interested.
4.) Portfolio or stocks which you like.

Hi Sritej, Some comments from me on your queries

  1. I am still working on the style. Broadly I am flexible. I own Microcaps to Largecaps. I also invest in Special situations, IPO, Growth (Generally we are all growth investors). I am not good at Contrarian or deep value waiting.
  2. My goal is to better the market by 3-5% over a reasonable period of time. Corpus is an outcome
  3. As I mentioned elsewhere, except the difficult to understand bucket, I am interested in everything else. The only limited competence I have is in Pharma so that is of most interest. Rest all are neutral.
  4. I have written briefly about some of those. I will detail my small thesis as we go along.
    Thanks
    Nikhil
4 Likes

This is fantastic thread Nikhil, so inspiring for young and amateur investor like me. I would request to all members who have such extensive investing experience to post their threads too like their investment style, learning curve, memorable winners/losers, portfolio size, CAGR over number of years etc.

Part 3 of the Narrative:

My 2nd innings as full time investor started from March last year. I was not getting satisfaction with my Corporate job and was not able to do well. Somewhere in a job, it becomes a matter of surviving and passing your time rather than working to deliver more (due to inter departmental issues and other requirements) which was not acceptable to me. Senior positions also required different personality than what I possessed and enjoyed. So I resigned from my job and my fat salary and started on my own.
Besides the equity investing for myself and family, I also became a licensed Mutual fund distributor and still work with some clients. I very strongly believe that Mutual funds are a good medium for people who lack either of the 3 requirements - Time, Passion and knowledge- to beat inflation and have a corpus.
My journey over the last 1.5 years has been enjoyable. This time markets were in different mood. After leaving my job, in the first quarter itself, my portfolio was up 15-20% due to the rally. So it gave a lot of support and confidence that I would be able to survive in this competitive field. Overall the performance has been good over the last 1.5 years.
I have been evolving as an investor over the last 1.5 years -Some of the key things that I have been experimenting are:

  1. I started looking at other options in the markets - Subscribed to smallcases, some advisory services to complement my thought process.
  2. Also I started to take interest in technical/charts and learning some of these aspects over the last 6-9 months. I have also started to gravitate towards momentum investing and at this point of time engaged in understanding how it works, identify some concepts and implement them in the market to get the learning. Basically, I am moving towards the techno-funda kind of investment framework though it is still evolving (How much technicals and how much fundamentals to work on)
  3. I also started watching markets very closely. Initially I was very jumpy on the moves that were happening but the reading/learning over the last 6 months have given some stability in my reactions to small market movements. I am still very impatient and impetuous but trying to control the urge. I believe that watching the markets without emotion (if I reach that state) may give some edge to sense the direction specially on individual stocks.
  4. Attending Concalls and AGMs more regularly than past. Also reading/listening to different market views from experts

This is where I am at my journey and hope to become better investor with time.

Thanks.

Nikhil

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Portfolio Composition:

Wanted to share some views on my portfolio, without going into specific details

  1. I own a very diversified Portfolio - More than 100+ companies in my portfolio. However the top 10 of these will contribute ~40% of my portfolio. My portfolio diversification today is resulting from my experimentation on different styles and opportunities ( Recently technicals, small caps, IPO’s, Buybacks, Advisory services, Smallcases etc). Also I view these large positions as optionality which allows me to move in/out quickly. Over time as I crystallize my style and become more discerning I believe the numbers will come down but may not be less than 40-50 stocks.
  2. I have generally reduced large-caps significantly over the last 6 months - Earlier I kept more large-caps to get stability in the portfolio but now I believe that with actively following markets and some research and understanding, I can possibly get better returns from Midcap/Smallcaps. Still own some largecaps which are trending. However Smallcaps (MCAP less than 5000 Cr) will be a significant part of the portfolio.
  3. Generally I don’t like companies which have significant debt. I have lost money earlier and now I am reasonably scared of high debt companies
  4. I look at my company shortlist from various lists - ATH, yearly H/L, Breakouts, News reports, Analyst mentions, Corporate announcements, MF portfolios, Friends advise etc. Basically I try to look at all companies people mention to have a view and then if I like it, I can move ahead.
  5. Without specifically preparing, I have today a Core portfolio where I dont do much activity unless there is significant change in conditions. Then I have a large Satellite portfolio where lot of experimentations are happening. The whole idea is to build some idea in the mind of what works and what does not. The tenet for the secondary portfolio is to “Fail fast” and “Make more Money on Winners and Lose less money on Losers”

At this point lot experimentations are happening and hopefully I will have more clarity and possible investment style in 12-18 months.

Thanks

Nikhil

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Schneider broke out today from its resistance of 165-68 band. Can move higher.

Nikhil

Disc: Invested.

Hi Nikhil,
Won’t MF Distribution is time consuming and low ROE business? Or not? I wonder what interest you… Thanks

Hi Deven,

There are 2 reasons

  1. This is an opportunity to help people build wealth over long term. There are many people who are not aware about the basic tenets of building wealth through equities and who need financial advisor/MFD distributor to guide them.
  2. It is a steadier business than equity investing. If somebody does it seriously ( I am not focusing so much on this right now), then it can become a significant annuity business. Plus there is no dearth of business for a motivated/dedicated person.

Regards
Nikhil