ValuePickr Forum

Portfolio suggestions

I have started building a portfolio of small cap stocks for medium to long term. To start with, I have added few stocks across the sectors. May I request the fellow boarders to throw some lights on it.

can you provide a short writeup about why you have selected these stocks?

Yes. In fact, I am constantly trying to evaluate ‘What Works on Dalal Street’. Finally, after 7-8 years of studies, I could understand that stock market salutes 3-4 things invariably. These are growth, both revenue & profit; operating efficiency, i.e. margins; ability to sustain; use of capital, i.e. ROE etc.; demand/supply situation & above all management quality. I left large caps because I do not need safety, at least with some predefined amount of money. They will not grow substantially till complete turnaround in the macro economic scenario across the globe, which is very unlikely in near future. Mid caps too have quite matured. Multi-baggers can evolve from small & micro caps only. The only requirement is to select the proper stocks from small cap empire. So, what I did was screened all the stocks, some 800, from bse small cap index, computed cmp/ 52-week high & cmp/52-week low to identify which stocks are currently on the radars of investors; history of returns in 1,3,5,10 years; revenue & eps growth in 1,3,5 years; ROE & %OPM; debt/equity, price/sales as a valuation & trend matrix. After that, I examine which company does what, who are the peers, who are promoters, what is the news in quality business journals, what is the mind set of society, i.e. where people want to spend; how is it placed etc. etc… upon both objective & subjective considerations, I started with little money which I will increase, both no. of stocks & money. I have 10 years. I want to build wealth not only for me but for my near & dear and ultimately for society if I get huge success. Even if I fail, I have already defined how much risk I am ready to take. But my target is 0 or 5-10 times in 10 years. I can elaborate much but hurriedly I could write this much only. I have just tried to strike a balance between value & trend/momentum. And, yeah, I have also tried to strike a sectoral balance as a hedge.

I see the quantity is very less even if stock gives multibagger like 10 times you will not achieve much as the quantity is less.

One more thing if you are planning to average is it going to be average up or down.

Will you do sip in these stocks and how many stocks you are going to hold of its too diversified then returns will be minimal

Are you attending any conference calls and how you are doing the ground work and how you are selecting the stocks based on anyone’s help or recommendation and which tools you are using to check the financials

Thanks
Shekar

Yeah. The quantity is too low. I have just started. I will add, quantity as well as stocks; drop whenever I feel I was wrong. I will average both rising & falling stock depending upon my conviction. I use business & finance sites for data & information. I do not get anybody’s recommendations. I myself first identify stocks, maintain them in my watch list for quite sometime, track the movement. If I get someone talking about stocks that I have selected, it further gets validated. Please note, I do not rely on single source, I check it with multiple sources. Then I buy. After buying, my strategy would be completely dynamic, i.e. I may buy, sell, hold, add new as well as existing ones both under rising & falling scenario. But frequency would not be too high, maximum 3-4 times in a year.

I would like you to emphasize how you have arrived at the recommendations once you get some free time . What was the rationale of ur investment in each company which will let members add their valueable comments

The broad description that I have given suggests that I have studied each company on macro level and not on micro level. I have posted it here on VP so that I can get some suggestions and more detailed understanding on these & alternative stocks as well so that I can get along successfully.

Hi, You seems to have developed & filled up extensive checklist as part of analysis. Can you please share with?

Hi, I will have to take some time to reply to this. In fact, I am trying to screen stocks from small cap empire based on momentum, return, revenue & eps growth, roe, margin, debt, price/sales; both singly & in several combination. Further, I try to get lower number of stocks by making my filter criteria more stringent. Then, I try to understand each company. But, what I have understood is that, firstly, whatever criteria I consider to buy has to work & secondly, whatever expectations I build around the companies I select have to come out true. And, here is the catch in investment world, you call it luck or call it expertise. I will keep on writing more on these, but for the time being I would like to share one graphic & the link to article from where it has been taken. Wish, we continue this discussion. It is all about being a explorer in the equity world.


Source: http://www.afr.com/markets/equity-markets/momentum-overpowers-value-investing-in-aussie-market-morgan-stanley-quants-20170201-gu2wor

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