Please find below my Retirement portfolio for your reference which i plan to maintain for next 25 years. Please review the same sand provide your genuine feedback on the same. i have been doing monthly SIP in below stocks from past 30-35 months.
Stock Name Buying Price % Allocation to PF
TCS 1480 15% (SIP Closed)
Kajaria Ceramics 605 14%
Lupin 1050 13%
Asian Paints 490 12%
HDFC Bank 750 12%
Godrej Consumer 900 9%
Relaxo Footwear 230 7% (SIP Closed)
Brtannia 2800 6%
Blue Dart 6500 5% (SIP Closed)
Suven Lifesciences 178 4% (SIP Closed)
DCB 81 2%
The idea is to get 25-30% ROI and strong dividends from above portfolio in coming years. I don’t like cyclical and commodity stocks and have no place in my long term portfolio.
Could you clarify the following questions with respect to the creation of the above portfolio? Based on that, we will be able to give more detailed and logical feedbacks.
What is the logic behind the selection of the stocks ? Basically, what factors have you considered while creating the 25 year basket portfolio ?
Based on the stock picks you have mentioned, I see a huge bias towards growth based stocks which trade at high multiples in the market currently. (Eg: Relaxo,Lupin,BlueDart,Britannia etc) Do you think that these stocks have the ability to grow at the same high rates as in the past 10-15 years ?
Since you are creating a highly long term portfolio, you need a huge focus on minimizing risk. Investment in high multiple stocks suffer from an inherent risk of margin of safety. In your portfolio selection, what is the consideration of margin of safety in the investments ? Some might consider low PE as a margin of safety, some high growth rates as a margin of safety etc.
Disclosure: Of the stocks in your portfolio, I personally hold Relaxo Footwear, which has around 12% allocation in my portfolio.
For any specific queries and discussions, I am also reachable on my email.
Some of the stocks in your portfolio are trading at a very high valuations. However your purchase price is appears to be at reasonable valuations so you can continue to hold. However i would not be comfortable buying Britania and Blue dart at such high valuations. I feel there are better bargains available in the market that you can look for.
Most of the companies u have selected are dominant plays and in all probability will remain relevant for a long time . they have the characteristics of long term compounders.
But I dont see the same characteristics in suven and dcb.
Rest of the companies will provide u with good steady compounding.
I dont take a 25 year view on a single company but would suggest a review every year to take stock of the fundamentals of the company.
If your view is really 25 years, high valuation doesn’t matter much. Only thing is whether these stocks can grow at 25 to 30% or not (here stocks means business or Net profit )
Here is how.
lets say these stocks grown at 27% CAGR for 25 years.
Then your return after 25 years is 394X
Suppose if your buying price is at very high valuation, lets say at double the fair valuation. Then ur 25 years return is 197X which is fair 23.5 CAGR.
Thanks for the prompt reply. Please find below my inline response for the above mentioned points:
Point#1. My logic is based on below parameters:
a) Business Sustainability
b) Trust worthy Management
c) Leader or top 3 company in a given segment
d) Strong Balancesheet (Strong Cash Flow, less debt and pledged shares)
e) Dividend paying company
f) Face a downturn/recession in a matured manner than getting collapsed like Unitech/DLF
g) Grow EPS at a rate of 20% + (TCS and HDFC Bank might not fall in this)
Point#2. I have bought these stocks almost from past 2-3 years because of which my buying price is very low for most of them if not all of them. Yes, they might not grow at 25-30%, but i am Ok with a 20%+ CAGR on my retirement portfolio as i dont want to churn it a lot by playing it in too much of small/midcap. I already have a satellite portfolio of below stocks which i play for 4-5 years and keep churning:
Lincoln Pharma - Buying Price: 150
Bajaj Finance - Buying Price: 3900
Emami - Buying Price: 690
La Opala - Buying Price: 240
Above stocks have been bought in last 18 months. i get out of the stocks once i start getting 100% returns and sell partially with time.
Point#3. Minimizing Risk: Why a stock quotes high PE ? As per my understanding market gives high PE when market can see the future earning of a stock today itself … Most of the known stocks have high PE because the risk is less with those set of stocks unlike mid/small cap. In order to propel my pf i have added midcap of the likes of DCB/Suven/Relaxo/Kajaria.
I have added DCB as a contrarian call because i feel that DCB will get re-rated in next 4-6 quarters and is available at just 12 PE with industry average PE of 18-19. IndusInd/Axis/Yes might not give me same returns due to higher base which is not the case of DCB. I do agree that these biggies have a very strong management which DCB doesn’t have but still i feel DCB is the way to go.
Coming to Suven, i expect the company to deliver strong numbers starting Q2FY16. If 502 molecule goes through then sky is the limit of this pharma gem. I like Mr Jasti who is a conservative guy and always delivers above guidance.
Yes my vision is to live on Dividends from these gems and i can’t rely small/midcap with a blind eye for this goal. On a conservative approach i expect to get anything between 20-25% CAGR.
In last 3-4 years of investing for my retirement pf, i am getting 28% CAGR as of today.
Last 1 Year CAGR has been 31.4% for the above portfolio. Please note that Britannia and DCB have been added to the portfolio in the month of December 2015.
Hitesh/Anurag/Karthik,
Please let me know if there are any stocks which can replace below high PE Stocks ?
Britannia
Blue Dart
Relaxo SIP is closed and i am not buying the same anymore ; sitting with 120% gains on relaxo in 15 months and would like to hold it for long term.
Btw… i hope Lincoln Investors enjoyed today’s 15% upmove !!
@ilovestockmarket,
when you say SIP, do you mean you just fixed the next month data and then keep buy or you follow any price trigger mechanism, if so , would appreciate if you can share your SIP mechanism
I am doing monthly SIP by using ICICIDIRECT Brokerage House. I have spread the dates for multiple stocks in a given month and the buying happens automatically on a given day/month.
I don’t have any trigger mechanism except the date setup; i wish i was such a geek to trigger SIP based on price trigger mechanism
Couple of my satellite portfolio’s stocks viz Lincoln Pharma, Bajaj Finance hits another 52 week high… what a beauty !!!
One of the drug has been banned and stock has been battered !!! Even the last 1 month rally was done by operators … Cant do much as stock is stuck in lower circuit now, that’s what happens to midcap/small cap if market is correcting and there is a bad news for the company !!!
Not to worry as it is just 1% of my overall pf … I doubt if it will stop before going into 2 digits now !!
I will buy Bajaj Finance if it comes near 5200 mark !!!
I am starting investing again which i had to stop for last 18 months due to unforeseen reasons. I do keep reading threads on the website but have not been actively participating in the discussions which i plan to do from now on. I have reshuffled my retirement portfolio a little bit by excluding some and adding fresh stocks based on my reading of difference aspects including management, results, moat, roe etc.
Exclusions - Blue Dart, Lupin, Kajaria Ceramics
Inclusions - City Union Bank, Titan, Havells, Pidilite, Vinati Organics
Fresh Monthly SIP In below Stock started in the month of July, 2019.
STOCK, AVERAGE PRICE, % Allocation
BAJAJ FINANCE (Average Price: 480) 14%
HDFC Bank (Average Price: 750) 12%
TITAN (Average Price: 750) 11%
HAVELLS (Average Price: 550) 10%
Asian Paints (Average Price: 750) 10%
Godrej Consumer (Average Price: 350) 9%
TCS (Average Price: 900) 8%
BRITANNIA (Average Price: 1550) 7%
RELAXO F (Average Price: 120) 7%
DCB B (Average Price: 110) 6%
VINATI ORG (Average Price: 1900) 3%
PIDILITE (Average Price: 1300) 2%
CITY UNION B (Average Price: 190) 1%
My expectation from above portfolio is to get 17-18% CAGR which i have been getting till now since past 6 years of SIP (Excluding the 18 months period when i had stopped SIP due to personal reasons). Till now my portfolio CAGR has been 19.5% from past 6 years and since most of the stocks are large caps or strong midcaps i can have sound sleep instead of worrying during blood bath which is going on currently. If my portfolio becomes 2x every 4 to 4.5 years i am happy with the same
Please feel free share your comments and feedback.
Note: Apart from Above PF, i have 3 small/midcap mutual funds which have not been touched from last 5 years and SIP is going on with a CAGR of 9.5%
Havells - I selected this due to management credibility and the leader in pack. Isn’t Crompton Consumer have same management as Crompton power which is struggling with debt ? I will look at TTK too as i had only looked at V-Guard compared to Havells and Havells has a solid integrity, past history and know how as to how to run a business.
Relaxo - I have been investing in relaxo from past 5-6 years and it is not a new investment which i plan to do. Both companies have given flattish results in last 3-4 quarters but if you look at last 4-5 year results relaxo is a clear winner. Will keep an eye on Bata too. Relaxo has been a 4x for me in last 6 years !!
Vinati - Will check out SRF, ATUL, Aarti too once i get some time.
Nope, Thapar family (Avantha Group) no longer manages Crompton Consumer. They exited it few years back. Only the brand name is used. Please follow the thread we have here.
… I doubt if it will stop before going into 2 digits now !!