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Omkar's Portfolio Analysis and Discussion

Apologies, my second table is wrong. Posting data again correctly

Business wise De-risk as of FY 20

Region % of Revenue
Branded generic - India ~30%
Branded generic - Asia ~28%
Branded generic - Africa ~14%
Generic – USA ~20%
Africa Institution ~8%
1 Like

This post is very interesting @OmkarT

It is correct that Ajanta Pharma has not seen any US FDA issues in the past. And that can be attributed to low exposure to US markets in the past. But the exposure to US markets is increasing for Ajanta Pharma. Therefore cannot rule out the possibility of US FDA issues in the future. The impact of US FDA alert or ban on Ajanta Pharma would be significant due to increased exposure. It might sound improbable today as we are not hearing about US FDA issues very frequently. But the impact of an improbable event is worth considering to create a robust portfolio.

From a different point of view, the companies which have successfully handled USFDA issues in the past might be a better pick as the management is aware and build know-how to handle such situations if one arises in the future and things to take care of so that such situation never arises.

One downside of a diversified business model is on management focus and too many moving parts. For example, in the case of Ajanta Pharma, it is branded and generic business, different geographies and different strategies, etc. Compared to that, management focused on Indian markets with a diverse product portfolio such as Abbott India might get better management focus and devise better long-term strategies.

Overall the posts are very nice and interesting. I enjoyed going through them.

3 Likes

Point well noted Ishan. I am closely tracking Abbott India which has less moving parts and better ROEs. The recent underperformance can provide good opportunity to allocate. Going slow.

One of the downside of Abbott India I felt is that its revenue is heavily dependent on power brands. In recent quarters, impact on just one brand - Duphaston is causing drag on overall revenue. I am sure management will introduce better version of the product to fight back competition and this is in fact is a very good opportunity to include in company the portfolio.( Good news and good price never come together)

I am still not 100% convinced whether - Business model which is driven mainly by power brands (according to me) is better business model compared to more granular distribution of revenue over multiple products and geographies incase of Ajanta

In this post, I am going to talk about my ‘Sell’ decisions so far and losses (if any)

Before going to the topic, I would like to highlight two points that weigh heavily on my sell approach.

First - Who makes more money – promoter or institutions or a retail investor?

As Mr. Ramdeo Agrawal has said - out of promoters, retail investors, and institutions; the largest wealth is created by promoters over the long term. Why because – They don’t sell stake in their companies and switch to other companies when their own company is underperforming or ‘valuation’ has breached the red zone. They stick with their own companies in all seasons and their reasons for selling stakes are completely different than what investors think when they trim or sell companies in portfolio completely

Second – Reinvestment risk and portfolio management

This sounds counterintuitive but I don’t consider myself as a good portfolio manager but a naïve retail investor. Portfolio management I feel is a science and it is a way to manage your risk. I am managing that risk with a slightly different mechanism where I am paying a fund manager to manage my portfolio and trying to understand few good companies where I have comfort. And that’s why Reinvestment risk is real when I am selling one company and buying a new company. I can go wrong at two places – (1) selling existing and (2) buying new which reduces chances of success.

Considering these points and keeping my quest to keep a promoter-like attitude, I rarely sell companies and if I sell, I jump out of ship completely. I have never ‘trimmed’ my position. To date, in the last 7 years – I have pressed the sell button only twice

Granules India – Exited with minor gains (2016)

The reason I sold Granules India was that I was not happy with following capital allocation decisions.

  1. Entire Omnichem JV saga where they were going cater only one client and that client retracted leaving JV in losses
  2. Entering and exiting in Biocause JV
  3. US pharma deal. I was getting a sense that they were trying too many things at the same time
  4. All these decisions impacted their cash flows and return ratios (Franchise was impacted in my opinion)

Talwalkar’s – Exited with minor loss (2016) luckily

I think I was drunk when I bought Talwalkars no other reason can justify that. These were the early days and the day when I realized the mistake, next day I pressed the sell button and came out with a minor loss. My cost price per share was around 310 and I sold at 280 / share. The absolute loss was in 4 digits. One look at the cash flow statement was enough to take that decision

These are the Sells so far, other than that in direct investing and also in MF, I have stuck to what I have bought and added moreover years.

4 Likes

Hey! I have enjoyed reading your thoughts about businesses and capital allocation. Thanks for sharing them and I hope to learn more from your experiences and improve my own processes.

Does this mean that in the last 7-years, you have bought 5 businesses (Kotak, Suprajit, Ajanta, Granules and Talkwalkars)? It seems that you are interested in buying structurally good companies with industry tailwinds and reasonable management. If that’s the case, how could you only identify these 5 businesses in India in the last 7-years? Or to put it in another way, are these the only 5 businesses available that meet your criteria?

Looking forward to reading your thoughts! Again thanks for your time

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Hi @harsh.beria93

Hi Harsh

Thanks for writing back.

Coming to your question :

Does this mean that in the last 7-years, you have bought 5 businesses (Kotak, Suprajit, Ajanta, Granules and Talkwalkars)? Answer is Yes

Coming to next question - are these the only 5 businesses available that meet your criteria? Let me elaborate that little more because there are multiple thoughts behind that, I hope, I can explain well

I usually check past 10 years track record first before even start reading about company. When I say track record some of the quantitative parameters are – (1) Last 10 years ROCE (2) Last 10 years Sales and EPS growth (3) Last 10 years Margin trends (4) and Last 10 years cash conversion cycle. Apart from that qualitative parameters like management quality which I have explained in earlier post

Now, there are off course many companies which pass that criteria. But it is also important how much conviction you are able to build on the company. Conviction according to me can be defined as how well you understand the competitive advantage of business. This conviction is very important because it is very rare (and only in excel sheets) you have very smooth sales and EPS growth. Business risk is very nonlinear and almost any business going through let’s say 1, 2 or 4 quarters of underperformance is a norm. You will hear lot of negative chatter when business is under performing. At that time if you don’t have conviction then you get suck in to the negative discussions and instead of adding stock (in the best time), you end up selling or trimming the position

And building this conviction takes lot of effort IMO. You may have to read (and understand) conference calls, annual reports of the company then competitors (Indian and global). With my family and other life style I have finite time which I can dedicate for investing. It’s a question of how I use that time effectively.

Example – When a wonderful company like Bajaj Finance fell to 1600 levels last year, even I was one of the group who thought they are going to suffer because of personal un-secured loans portfolio. I did not have conviction. And I did not have conviction because I do not fully understand business

And next point is, even you believe you have conviction what is the quality of decision making. You can see 2 out of those 5 selections are wrong (Which I sold)

Making a diversified portfolio of quality businesses is the only answer to these questions. Because beyond a point I believe, diversification is the only way to hedge the risk. My technique of diversification is little different. I believe fund manager can construct better ‘’portfolio’’ than me and I can improve my decision making ability by focussing on few businesses where I can build ‘’conviction’’.

This I believe is an ‘’Art’’ part of investing and there is no one right answer. But I am a believer of diversification, how do you achieve diversification is your ‘’art’’

I hope I answered your question.

4 Likes

Thanks a lot for your answer. I agree with your comment on projections, businesses are inherently risky and can never move in a linear fashion.

Now delving deeper, lets say we are trying to understand which pharma company to invest in in 2014, and we have the choice of Sun Pharma, Lupin, Ajanta and Granules. Past growth looks awesome for everyone, Sun and Lupin have the most superior margin profile among large generic companies with very large and dominant Indian businesses, and diversified cashflows. In that scenario, how were you able to differentiate between a granules vs Sun/Lupin? Again thanks a lot for your posts!

@harsh.beria93
In 2014, I would have checked past 10 years track record which would have had at least one down cycle. The one who have done well or remain unscathed in those down cycle years, I would have chosen them over others, because I have a confidence that even if business cycle is challenging company will perform. If all of them would have performed well in down cycle I would have gone ahead with the leader in margin and ROCEs

That is one of the most important thing I check before making decision. Has industry or a company has gone through at least one down cycle and how company has done in that down cycle

Kotak bank - unscathed in multiple down cycles of credit (along with hdfc bank)

Suprajit - again did much better than pack in down cycle. In FY 20, when industry has degrown -15%, their sales is flat. Same in earlier down cycles

Ajanta pharma - One of the best return ratios in down cycle of 2017 - 2019. Also this decision was more situational. As explained in the filter, Big guns were facing FDA issues when I started investing in (2017)

cheers

2 Likes

Buying granules was a mistake (according to me) with this framework and thats why sold out. Hence not referring to granules in answer. This thinking evolved over last 7 years and it was not the same thought process in 2014

Today quickly, I want to show how I track past 10 year track record. I use website https://www.moneyworks4me.com/ . In one glance you can track all important parameters. You just have to register and their 10 year xray feature is free. Following are snapshots (Its free version, thats why I hope I can paste image just to show its usefulness).

Lupin

Ajanta Pharma

Suprajit

Why I missed Laurus Lab with this process - Imagine yourself in 2019

2 Likes

This is a very interesting question and thanks @OmkarT for sharing your inputs.

My take is that, you can make error back in 2014 and invest in Sun Pharma and Lupin. We as retail investors have limited tools and capability which are available to have a clear view of future.

But good part about about investing is that the returns are positively skewed.

“Max you can lose is 100% but there is no limit for gains in investing,” says Prof Sanjay Bakshi [1]

If you have a portfolio of 15-20 stocks which are spread across different sectors and out of this 25-30% of your portfolio is of bad stocks and remaining portfolio of good stocks. Then, the remaining portfolio of good stocks not only makes up for that losses but also gives superior returns.

You can finalise the approach to shortlist stocks in your portfolio. Check the stocks which make the cut in 2014. And see the percentage of bad stocks selection from it. If it is on lower side (25-30%) then you can ignore them and enjoy the power of compounding from the remaining good stocks in your portfolio.

[1] Source: “Max you can lose is 100% but there is no limit for gains in investing,” says Prof Sanjay Bakshi

Thanks Ishan for the feedback.

I completely agree to your point - ’‘We as retail investors have limited tools and capability which are available to have a clear view of future’'

And that is why I focus lot on the past data (qualitatively and quantitatively). I personally think past data reveals lot about business and creating mental frameworks around past data improves the decision making because how much ever I analyze business from future lens, I would like to believe that I have limited time, resources, tools and intellect to cover all the risks in the business. (So far I have done extensively only for one business. More on this in next post)

Coming to next point of owning 15-20 stocks, Again I agree with you that without going into too much analysis and by just having broad view, we can pick quality companies which are leaders in growing sectors. Axis long term equity fund where I have a significant position provides me ready made portfolio for the style I like (Quality Growth) and all I have to pay is 0.72% fees

Having said that, I have done some work around how would my ‘‘Portfolio’’ look like. I will share same in the next post

Thanks again for your inputs. Really appreciate them!

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This post talks about – (1) How my thinking got evolved from cycle 1 to cycle 2 (2) why my stock universe until now is compact (3) Future plans of portfolio

1.Current thinking of Risk Reward equation

I consider Suprajit as ‘somewhat hidden gem’, Ajanta as a ‘gem’ and kotak as a ‘Common sense’

image

2. How does this thinking got evolved from first cycle (2014 – 2018) to Second cycle (2018 – 2020)
image

3. Constructing common sense portfolio – My thinking
Idea of choosing common sense portfolio – (1) Diversified across sectors (2) Market leader in a growing sector (3) High ROE businesses with proven track record (4) Companies willing to make money for their shareholders (4) Businesses which require cursory broad future outlook and not detailed analysis

That portfolio looks like below –
image

4. Why I have not constructed a portfolio so far

Axis fund house is providing me exact same style by paying just 0.72% fees with impressive XIRR of 18% (started in Dec 15). I am still not convinced, if I construct a portfolio; I will do better than this

5. Why I am owning Suprajit and Ajanta which falls outside common sense portfolio

Idea is to build 70% to 80% portfolio like above either through direct stock investing or mutual fund and with rest 30% - ‘’Dilon main apni betabiya leke chal rahe ho to zinda ho tum’’

Note – for 70-80% of portfolio, I have not yet decided whether in future I will continue with MFs or direct stocks. I am a fan of mutual fund (Current allocation 50%)

6. How I am thinking of executing from current state to desired state of portfolio

Next post

Current state of portfolio (As explained in first post n this thread)
MF - 50%
Direct stocks (Suprajit,ajanta,kotak) - 50%

Desired State
Common sense portfolio (70% - 80%)

6 Likes

Ajanta pharma

Capex done in last 6 years ~ 1600 Crs

FY 21 CFO – 576 Cr

FY 21 Capex – 171 Cr

FY 21 FCF – 284 Cr (18% of the capex done in the last 6 years)

FY 21 Buy back – 135 Cr

FY 21 Dividend – 82 Cr

Cash + Current Investment – 352 Cr

Capex for Next 5 years growth – Being taken care of. Diversified business model is in place. Only maintenance capex required for next 2 – 3 years (As per FY 20 annual report)

Do I trust management with capital allocation of the cash on balance sheet – Yes, as they have top class track record so far

Can management act naughty in future - Always a possibility, only answer is diversification

Are there risks to derail growth - Always a possibility. Have considered in analysis as much possible with my level of intellect. Diversified business model. Beyond that only answer is portfolio diversification

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In this post I would like to talk about why I stay away from mega trends (Current thinking which may change in future)

Less focus on r and more focus on t

As explained in the post earlier, from cycle 1 to cycle 2 – I started focusing more on t (longitivity) and less focus on r (rate of return) looking from the lens of compounding – P(1 + r) ^ t. For a mega trend (If caught early and that ‘if’ is a separate topic), can give let’s say 30% CAGR over next 5 years. The same can be achieved with mid to high teens of ‘r’ over next 8 to 9 years with better certainty (This is applicable to me. Different investors can have different beliefs for this equation.)

Capitalism at play

When there is a mega trend, it will always attract more players who will compete with each other to bring down ROEs. Only after first phase in to the big trend, one will know who is a clear winner. Can Investor find out who is that winner early? Obviously yes. But for me, I would like to believe I cannot do that

Live Case Study – LEDfication in automobile

I am going to talk about one current case study of mega trend which is unfolding and where I have done some work. That is LEDfication of lighting in automobile. Lumax is the leader so far but look at the competition - In PVs: Magneti Marrelli, Koito (IGL), Minda and Unitech. In 2 wheeler: Fiem, Rinder, In CV: Hella, Neolite, autolite. Apart from that there is Hella, also motherson is planning to enter. Leave aside other foreign players.

Can competition allow Lumax to sustain ROEs? Only time will tell. Am I in a position to know who the future winner is? – I would like to believe No and err on the side of caution rather than on the side aggression

The trends I have missed with this – Chemicals, API and China + 1, EVs, PLI and the most recent biotech

If it’s a mega trend, I would like to believe that it will last for multi decades and after first few years you will have obvious names to invest

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In this post I want to talk about – Could I be ‘’greedy’’ and when market was ‘’fearful’’ in last 7 years. To discuss that I am going to break down this famous quote of Warren Buffet to three separate levels which according to me have different textures. These three more nuanced version of the iconic quote are – (1) Was I greedy when entire stock market and economy is fearful (2) Was I greedy when there was a fear in specific industry or a sector (3) Was I greedy when there was a fear about specific company. Let’s discuss one by one

1. When entire stock market and economy is fearful

  • Frequency – Once in 10 years or so as history suggests
  • Need more EQ to be greedy in this situation than IQ
  • One need to have resources – Cash at disposal and good emergency fund

What I did in Mar 20 crash

I was definitely prepared mentally to handle such crash and I did not sell or trim any of my holdings. I also had powder dry to be opportunistic but I could not do that to the extent I could have. The reason was there was so much uncertainty that my job was at stake and that’s why instead of going all out in Equity I thought it is better to save for rainy days. I could only deploy approx. 5-10% cash available with me, right in the middle of the crash and that’s where I initiated position in Kotak Mahindra Bank at 1100.

2. When fear is at the industry or sector level

  • Multiple instances from 2014 – Pharma from 2017 – 2019, NBFC from 2018 – 2020, Auto from 2018 – 2020, IT in 2016, Banks post Covid crash
  • Need moderate EQ and good IQ (Conviction)
  • No need to have cash ready to be opportunistic as the opportunity window is 2 or more years
  • Since opportunity window is large, investor can go slowly quarter by quarter to check which company remains comparatively unscathed. Example – HDFC and Bajaj finance in NBFC crisis
  • I personally think this situation is the best situation to be Greedy for my temperament, since franchise remains intact and you get long opportunity to accumulate. (Increasing allocation in Kotak Mahindra this year)

3. When fear is at the company level (Systemic risk)

  • Happens almost daily
  • The most difficult to be greedy among 3 for my temperament. Very high IQ (conviction) needed
  • Better to look for companies where growth is broken and franchise is intact than turn around stories
  • Litmus test of conviction
  • Diversification helps
  • In Ajanta pharma, apart from industry issues there were company specific issues in FY 18 and FY 19. Derma growth was broken, Branded generic business was broken, US business was just starting and that’s why pulling down margins. As explained in Ajanta Pharma post, I waited for a management to deliver and post FY 20, I started building the rest of position (around 70%). It was very difficult for me in those years to visualize Ajanta will come back to growth but I could held on because ROEs were maintained at respectable 17%
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In this post, I am going to talk about execution followed by portfolio update

Execution

Execution I feel is the least talked about subject. Most of the discussions are focused on ‘Portfolio Approach’ but I personally feel very less has been talked on how to execute from the scratch on the decided approach. I am not even considering the complexity of not having any sound portfolio approach when one starts investing (just to keep discussion simple). I experienced following challenges while executing

Challenges faced in execution

When I came out of MBA and started working, I had almost negligible corpus in Equities. In the May 2014 when I got my first salary after the break of 2 years (Education break), I had following questions

  • In which stock should I invest?
  • Shall I put all the money available for investing in one stock or multiple stocks considering amount to be invested is small?
  • If ‘’multiple’’ stocks, Do I even understand those many stocks to start with
  • Portfolio – Hello, what is that? Is it even worth to construct portfolio for few thousands?

Next month in Jun 2014, when I got second salary I had following questions

  • Should I invest in the same stock as that of last month or should I invest in the new stock
  • Stock has gone up from last month’s price, should I invest?
  • OR stock has gone down from last month’s price, should I Invest?

So on and so forth

Current approach

Having faced with so many questions on execution each month, I came up with simple approach of execution for myself. I select one stock for a year or two and invest predefined amount in that stock on the first of each month**.** Currently I am doing same for Kotak Mahindra Bank

Valuations

I pay least attention to valuation – between execution, analysis and valuations. All I make sure is when I am start investing in a company, there is some kind of bad news for the sector. (Example – Banks in FY 20 and 21). Which hopefully make sure - I get a long year or two window which I am looking for to complete the allocation and valuation is sensible compared to historic averages

Portfolio Update for April

Company / MF Allocation Status Activity
Suprajit Complete No change
Ajanta pharma Complete No change
Kotak Mahindra Bank In progress Added
Mutual Funds N/A Continued SIP
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I would like to put across my thoughts on ‘Portfolio Construction’. Stock picking and portfolio construction I believe are two different aspects. Please note that there will be a lot of gaps in my current thinking about portfolio construction and it is still a work in progress (that’s why I have not constructed a portfolio yet). Your inputs are welcome.

As a retail investor, I tend to focus a lot on individual stocks and stock picking, etc. but I have paid very little attention to the question – ‘’what is the right way to construct a portfolio?’’.

With the limited resources and skills, I possess to construct a portfolio, there is very little I can think on my own regarding this topic. Fortunately, there is a section of the equity market that focuses a lot on this aspect - in fact, portfolio construction is their bread and butter – and that section is the Mutual Fund industry. My effort is how I can learn from Mutual Funds about portfolio construction.

This is a five-part series that includes the following topics – 1) Portfolio Philosophy 2) Risk-adjusted returns 3) Allocation and position sizing 4) Market Cap equation 5) Cash, market timing, and valuations

In this post, I am going to talk about Portfolio Philosophy

Portfolio Philosophy (style)

Portfolio philosophy is important because of two aspects – (1) It gives you overall construct to select companies in the portfolio and (2) which is the most important – it helps you to assess your underperformance objectively

Some of the examples of portfolio philosophies are Quality & Growth, High beta, Value, Growth at Reasonable Price (GARP), etc. I agree with the point that the definition of these philosophies is a ‘grey area’ because growth is part of value and value is in the ‘eyes’ of the investor. So on so forth. To keep the discussion simple and objectively assess different philosophies or styles, I am going to give some examples

Fund House Style Example
Axis Quality Growth Don’t mind overpaying for growth stories – Bajaj Finance and Avenue Supermart
IDFC High beta Focus on outperforming markets massively in good years by taking help of high beta avenues like – Small caps, Metals, Industrials
Mirae and Parag Parikh GARP Conservative on paying high monies for growth. Equal focus on quality and valuations

Why knowing or defining the portfolio philosophy (style) is important

I am going to talk about in detail the second aspect of the importance of defining portfolio style which is - it helps you to assess your underperformance objectively

It is proven that no portfolio or an investor can outperform the benchmark every year. To try outperforming NIFTY/Sensex every year is futile and if someone tries that then in fact there is a higher chance of underperformance. Conviction to stick to style when it is underperforming decides long-term investment success.

As the underperformance in some years is almost always guaranteed, portfolio philosophy helps to determine in which market conditions the portfolio can underperform. For example – Axis portfolios underperform when there is a broader market rally like FY 20 but they tend to outperform when there is a sideways or bear market. Similarly, IDFC portfolios fall hard in the bear market but compensate more than they lost in the bull market (high beta).

If we know or have some guidance on when our portfolio will underperform then it is very easy to judge objectively whether underperformance is due to portfolio style out of favor or else whether it is due to the process is broken

Case study - IDFC Fund style

The following screenshot shows, how the return of IDFC fund house’s philosophy was looking like in July 2020. Five years’ CAGR returns were less than 5%. All the thoughts which would come normally like returns less than FD, MF never make money, etc. flashing in my mind

image

Knowing IDFC employs a high beta style, I asked my self – Is the underperformance due to style out of favour or the process is broken. I concluded it is because style out of favor since 2018 broader market and high beta stocks have taken a hit. I held on and check below what happened in 8 months. In Mar 2021, 5-year CAGR was 18.30% ( from less than 5% just 8 months back)

image

Conclusion and takeaways for portfolio construction

Knowing and defining portfolio philosophy helps to navigate through underperformance which is as certain and routine as the sun rising from the east for any portfolio

4 Likes

This is a second post of the ‘Portfolio Construction’ series where I am going to talk about my thoughts on ‘risk-adjusted’ returns. Again I would like to highlight that there will be possible gaps in my current thinking as it is still WIP

Risk-Adjusted Returns

The simplest possible way to show what do I mean by ‘risk-adjusted returns’ is considering the best case possibility of the equation as below. If high returns are achieved with the low risk then that is considered as the best possible outcome any portfolio manager can achieve

image

What is Risk (From portfolio point of view)

In technical terms, risk can be defined as beta (is it right?) which we use to calculate the expected return in CAPM. Easier is to highlight risk is in the case of mutual funds by showing volatility – when the index rises by 100 points, by how many points MF portfolio rises, and similarly if the index falls by 100 points, by how many points MF portfolio falls. Parag Parekh fund house has one of the best equations for risk as shown below (source: Morningstar). You can see when the Index downside is 100, their portfolio’s downside is only 37

Capture Ratios Fund Category Index
Upside 80 90 100
Downside 37 92 100

What is Risk (From Investor point of view)

This risk or volatility at the portfolio level gets transferred to investor’s psyche. Therefore the simplest and most relatable way to define risk is – ‘’The emotional feeling one has when the portfolio takes a knock’’. It is the risk because ‘that feeling’ of stomach churn can push you to take wrong decisions like coming out of the stock market or selling at the low point or questioning your thesis etc. It is important to note here that risk tolerance is developed over investor’s experience and that is why high risk does not mean a ‘same’ emotional psyche to everyone

To avoid complications and keep things simple – It is safe to assume that if a portfolio has low risk (volatility) and moderate returns then the chances of success for an average investor are higher than high risk and high returns

What do industry veterans say about the ‘risk’

Chandresh Nigam, CEO of Axis MF (and partly Saurabh Mukherjee) believes that the argument ‘’High returns can be achieved with high risk’’ is true only at the asset class level but within the Equity asset class, that argument does not hold.

S Naren and the team believes that the best way to achieve superior risk-adjusted returns is by the ‘’value’’ style in which the fund manager is usually very conservative while paying for the franchise. The conservative price paid leads to low volatility

Neil Parikh of PPFAS believes that he would not mind average returns but he will do everything to make sure risk is low. Geographical diversification is one of the ways to achieve better risk vs return matrix

Anoop Bhaskar of IDFC fund house cherishes risk. He usually favors high beta style to achieve better returns in the bull market

Conclusion and takeaways for portfolio construction

I still have not concluded what is good for me. If there are two choices available – (1) low volatility with 16% CAGR over the next 5 years and (2) High volatility with 19% CAGR over the next 5 years, I do not know yet what will I chose

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Can I be greedy when others are fearful - When fear is at the industry level

  • Purpose of the exercise - to hone skills and decision making abilities and not necessary for portfolio allocation

  • Industry under fear - Micro Finance

  • Company - Bandhan Bank, Leader in B2C Micro lending

  • Current knowledge about company - Nil

  • What am I trying to judge - Since issue is more at the industry level - Is the franchise of the company intact? Is this a temporary problem? What are the chances of same event occurring in future? what are the changes in the business model?

  • Next steps - Go through company updates, conf calls, check how competition is handling the negative cycle, pay attention to which micro finance company is reporting the best performance in challenging times

  • Opportunity cost of time allocating for the exercise - Not much as not looking for new opportunity in the portfolio for at least next 6 months. Will be adding on same names

Will post next update on this once I do my homework. (Hopefully I wont act lazy :slight_smile: )

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