Hi guys,
I’m Nirmal George, an aspiring equity investor who decided to challenge himself during this lockdown and get started on a core portfolio of high-quality stocks to preserve the invested capital as well as provide benchmark beating returns in the long term.
Goals:
-
Constructing a diversified equity portfolio for the long term.
-
I had been investing in companies in small dribbles for the last 3-4 years.
-
Investing to pay for predictable future financial expenses coming 20-30 years down the road.
Risk Profile:
Time horizon more than 20 years so high-risk high return bets acceptable.
The objective is to build a high-quality portfolio of stocks and buy more in dips for rupee cost averaging.
Current Portfolio:
I have a modest Portfolio of ~20 stocks and wish to divest the bad apples and invest the proceeds to better quality stocks with a bright future.
| Absolute % Gain |
|---|
| -9.84 |
| Symbol | %Gain/Loss | %Weightage | Business Details | Rationale for investment |
|---|---|---|---|---|
| ALLCARGO | -25.24 | 7.43 | Logistics MNC | Attractive P/B Ratio & Good Dividend Yield |
| CESCVENT | -62.16 | 0.54 | IT and Allied Services | Attractive P/B Ratio and repeated profits |
| CRISIL | -4.31 | 7.92 | India’s Foremost Rating provider | Good ROE >30% and very low Debt/Equity ratios |
| FEDERALBNK | -35.49 | 4.16 | Banking and financial services | Attractive P/B Ratio & Good Dividend Yield |
| GALLISPAT | -7.36 | 0.06 | Agro, Steel, Power and Real Estate. | Great Value and Consistent Profit Growth |
| GDL | 1.01 | 0.27 | Container related Logistics | Attractive P/B Ratio & Good Dividend Yield |
| GODREJAGRO | 0.58 | 10.51 | Diversified agribusiness | High ROCE & Good Dividend Yield |
| HDFCBANK | 12.25 | 1.88 | Banking and financial services | Consistent Profit Growth >20% and healthy dividend Payout |
| HSIL | -28.29 | 0.53 | Building products, Packaging products, Consumer products | Attractive P/B Ratio & Good Dividend Yield |
| ICICIPRULI | -8.56 | 14.61 | Life insurance, pensions, and health insurance | Consistent ROE & Good healthy dividend Payout |
| ITC | 22.60 | 11.29 | FMCG, Hotels, Packaging, Paperboards & Specialty Papers and Agri-Business | Virtually debt-free and providing a good dividend yield. |
| JKIL | -48.09 | 0.08 | Infrastructure projects | Attractive P/B Ratio & strong growth prospects |
| KAYA | -8.30 | 7.73 | Skin and Haircare Clinics | Virtually Debt-free and much-ignored stock. |
| NATCOPHARM | 6.86 | 0.59 | Pharmaceutical sale, R&D, Manufacturing | Virtually debt-free, consistent profit growth & Good ROE track record |
| OMMETALS | -9.60 | 5.60 | Infrastructural facilities | Virtually debt-free and attractive P/B ratio |
| PARAGMILK | -40.06 | 0.80 | Manufacturing and processing of milk and milk products | Attractive P/B Ratio, Consistent profit growth & healthy dividend payout. |
| SHALPAINTS | -44.96 | 0.39 | Manufacturing paints, varnishes, enamels or lacquers | Attractive P/B Ratio and scope for increasing market share. |
| JTEKTINDIA | -45.60 | 0.46 | Automobile Components | Consistent profit growth & healthy dividend payout. |
| SOUTHBANK | 14.56 | 1.20 | Banking and financial services | Attractive P/B Ratio, Consistent profit growth & healthy dividend payout. |
| TATAELXSI | -9.15 | 14.92 | Misc. design and engineering services | Virtually debt-free, consistent profit growth & Good ROE track record & healthy dividend payout. |
| VGUARD | -6.15 | 8.33 | Stabilizers, Digital UPS, UPS, and Solar Inverters | Virtually debt-free & healthy dividend payout. |
| YESBANK | -63.36 | 0.63 | Banking and financial services | Attractive P/B Ratio & healthy dividend payout. |
| ZEEMEDIA | -60.27 | 0.05 | Broadcasting of satellite TV | Attractive P/B Ratio and Brand Capital. |
Watchlist with prospective allocations:
I have been reading the Value picker forums as per recommendations from my brother, who is an active member here.
I have zeroed in on a High PE COVID-19 Blue Chip Bellwether Watchlist based on the Pay premium for Quality mantra as given below.
OPTION 1:
All the OPTION 1 stocks are highly discussed and familiar to the community hence the investment rationale in one sentence:
Consistent Wealth Compounding Blue Chips
| Name | %Weightage |
|---|---|
| Berger Paints Limited | 5.00 |
| Asian Paints Limited | 5.00 |
| Bajaj Finance Limited | 7.00 |
| Dr. Lal Pathlabs Limited | 7.00 |
| Abbott India Limited | 12.00 |
| Page Industries Ltd | 17.00 |
| Kotak Mahindra Bank | 8.00 |
| HDFC Bank | 8.00 |
| Pidilite Industries | 10.00 |
| Relaxo Footwears | 10.00 |
| Divi’s Laboratories Ltd | 5.00 |
I was unable to buy the above stocks during the slump in March 2020 and is now considering a value investment portfolio with 10k invested to each company as given below:
OPTION 2
*Investment rationale behind option 2 stocks:
Companies with value P/E Ratio, High Return on invested capital, low Debt and Consistent 5Yr Profit growth/Return on equity.
| Name | Weitage% |
|---|---|
| Eris Lifesciences | 10.00 |
| HCL Technologies | 10.00 |
| HEG Ltd. | 10.00 |
| IOL Chemicals and Ph | 10.00 |
| L&T Technology Serv | 10.00 |
| Natco Pharma | 10.00 |
| PetronetLNG | 10.00 |
| Polycab India | 10.00 |
| Tata Elxsi Ltd. | 10.00 |
Action plan:
Portfolio restructuring based on new insights on the stocks being held.
Considering the bearish phase in the market with many stocks at mouth-watering valuations, I wish to add quality stocks to my portfolio.
Kindly give feedback on the bad stocks to divest and also on the stocks to be added from the above lists.
Most of my existing positions have been based on hearsay and FOMO except for my darling stocks with high Conviction like HDFC, VGuard, Tata Elxsi, Godrej Agrovet, etc.
I’m willing to book loss so as to exit companies with bad management/corporate governance issues with little prospect to recover OR irrelevant weightage in my portfolio.
“Traditionally, the investor has been the man with patience and the courage of his convictions who would buy when the harried or disheartened speculator was selling. If the investor is now to hold back until the market itself encourages him, how will he distinguish himself from the speculator, and wherein will he deserve any better than ordinary speculator’s fate?” – Benjamin Graham
