Sahil's Portfolio

Shivalik and RACL are rest 30 ?

A few days ago, where you have disclosed your PF in Twitter, you had positions in Goodluck, moldtek, ujjivan SF…do you still own those, if in case you have exited any of these stocks, please mention how these Cos no longer matched your thesis?

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Hi Sahil, Thanks for sharing your thought process. One question on screening of Aurionpro. How did you screen the company? I mean how it came into your radar to research it further. I am trying to understand if you identified this by running a screen and later analyzed the company in detail.

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Thanks for explaining it so thoroughly mate. Really appreciate it. Being so genuine, eager to share & having such a great process…:pray::pray:

Hi Sahil, RACL was your highest allocation… trimmed or found better opportunities…

Hi, Sahil, please share your view on Mold- Tek teach. I would appreciate your view for learning purpose. I am tracking this company closely and want to understand your view after the recent concall

Hi Sahil,

Despite of a good growth visibility for Shilchar where the management has guided for 800 Cr. revenue in the next 3 years there has been rounds of promoter selling in October as well as November. The management has good execution track-record which helps to build trust but promoter selling is definitely an anti-thesis. Any rationale behind this action?

Minimum investment in any Portfolio Management Scheme is 50Lakhs. It’s SEBI mandated. I am looking to reach that mark in free cash and just leave that money in a PMS.
Mutual funds will not give you much returns

Can you give some data, that PMS has been better than mutual funds? Have you considered all costs, including short term and long capital gain tax and brokerages , DP charges, STT etc?

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This is First Global , Devina’s Presentation. Out of top famous 20 PMS, only 4 PMS have beaten Nifty 50 from March 2020 till date. So 16 PMS have not even been able to beat the larger Index. And if you consider the actual buy and sell of PMS investors and Taxes paid on them, then their returns will be still lower than even these shown returns.

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Hi Sahil, do you use technicals to exit a stock?

Can you please tell me which books did you referred and any websites and YouTube links to learn investing?

Sahil sir, Your thesis on Addictive Learning Technology (Lawsikho) company.

Sahil ji please share your views on these stocks

My latest thoughts on investing

  1. Truth seeking -Parallels between Investing & Entrepreneurship: Both are highly truth seeking activities. An entrepreneur has to understand the different ways in which his customers needs can be met, different shortcomings in his services/products, competition & their ability to meet those needs. An investor has to do the same. Every Management will throw numbers. Every business will claim to be a monopoly (Peter thiel’s Competition is for loosers: https://www.youtube.com/watch?v=3Fx5Q8xGU8k). Your job as an investor is to discern the truth. This needs 2 key functions: (i) High data & evidence gathering. Scuttlebutt. Talking to users/clients physically, digitally, on google maps, on amazon, on LinkedIn, on Twitter, anywhere everywhere. Talking to distributors, dealers, suppliers, competitors. (ii) Forward modelling of the world. An investor’s edge or alpha is their ability to discern the truth ahead of the markets. This requires deeper work/data gathering for sure, but it also needs deeper thinking. Asking the ‘why’ question until you reach axioms or theorems which are widely accepted. Until you reach laws of physics, or laws of chemistry, or laws of human behavior (sociology, psychology). This is why a deeper understanding of how the human mind works (both individually & in groups) is undeniably at the heart of equity investing. Why is it that typically listed companies with frugal resources can outcompete their richer unlisted VC & PE funded peers? (Say in the Flex working space). Or Why is it that some entrepreneurs in Edtech with humble backgrounds are far better capital allocators than others who come from abundance & PE money? Understanding the causal chain of events helps in building efficacious high probability forward models of the world. WHat is likely to happen is tied at the hip to what has already happened. Gangaji can only flow from Haridwar TO Kolkata not othe way around. A very important trait to have for good forward modelling of the world is ability to stay curious, hold firm beliefs backed by data but willingness to change them when presented with the contra evidence of higher efficacy.
  2. Aatmanirbhar Investor - The Independence of thought : Its a funny profession. At the same time, it is very lonely & very social. Ive covered the social aspects in last point. Its lonely, because your only allegiance is to an efficacious causal forward model of the world (what causes what) based on highest amount of unbiased data gathering. 99% of the crowd follows price momentum which is inherently consensus of the crowd. Nothing wrong with that. But you, as an investor focussed on XIRR will need to evaluate the forward risk/reward based on dynamic ever changing current causal factors like competitive intensity, demand-supply mismatch, government policies, valuations. Paradoxically you will need the self-confidence to say I am right ahead of the markets but also the humility to know when you have gone wrong. Although other investors & sources of knowledge can be inputs to my model, the decision to invest has to be my own. This, is the heart of the loneliness. There is primal creature comfort in being a part of a crowd. Being lonely is upsetting, Because we are a social species. But both the journey of a successful enterpreneur & successful investor are lonely ones to undertake. Find your social creature comfort in family, not in being part of a herd which runs after 1 NBFC & discards every other.
  3. Alpha = Hard work + Ability to reason early in the Causal chain of the world: (i) Hard work is self explanatory. IN every profession there is a Gaussian curve of effort people will put into their profession. You must aim to be in the top 1% of hard workers. The benefits for such extra-ordinary hard work are mediocre at best in most professions but it is exponential in Investing. A lazy investor might study 10 businesses in depth in a year, a mediocre investor might study 20, a hard working investor might study 50. Investing outcomes follow the power law. 80-20 rule. Your 80% of return will be made in 20% of stocks you study. THis distribution naturally lends itself to white swan events. You want to study 50 or 100 or 500 so that you can find those few which create most wealth for you. In the last year 20 businesses were 10-bagger. How many did you own? how many did you identify? How many did you find but not study? How many did you own? How many did you allocate heavily to? That will define your portfolio level outcomes. (ii) : There are laws for the human world just as there are laws for the natural world (physics). Just consider 1 causal chain: Politics => Policies => Government frameworks, schemes, incentives => Entrepreneurs with core capabilities + ambition making solid proposals based on concrete MOUs & hiring => Capex / Factory/Machinery ordering => Machinery delivery, installation, stabilization => ramp up capacity utilization & revenue recognition => operating leverage & disproportional profit growth => Consistent growth in profits for X years (execution track record). thanks to the superb government we have, we have continous new sources of alpha getting created. An investor’s ability to decipher the probability of success at each step along the causal chain & thus the joint probability of success critically determines their alpha. You can buy a 600 cr Semiconductor company with 0 revenue or you can wait for the Execution track record & buy it at 16000 cr. The edge lies in these probability models. We develop good probability models by watching evolution of similar industries, same industry in other countries, we develop it by deciphering different participants incentives, Why do people do what they do? In fact, when i talk to managements my primary motivation is to get data & information for sure but it is to understand their motivations, their intents, their incentives, their purpose. A person with better causal chain probability models will avoid more duds, & catch more multibaggers early in the journey. The future is predictable (up to an extent), it is caused by the history & present. It is far more predictable than what we would like to believe. If you carefully think about it, this is the reason why investing even works. Why companies do not randomly wither away into nothingness in a few short years or months. The causal nature of the universe we live in gives birth to competencies, moats, competitive advantages, right to win. Build better forward probability models of the world, folks. That is the edge. Btw you actually read through the whole post, can i request you to comment “This was helpful” just as a social experiment for how many people actually read the whole thing.
  4. Respect data; not dogma - We are in a truly golden age of value creation. Government policies are giving birth to huge vat vrikshs of massive profit pools literally in a span of months. If anyone hasnt, i highly recommend you to watch this video & figure out what are the Vat Vriksh of new profit pools getting created https://www.youtube.com/watch?v=zUVnJVmmYMo. In such a scenario of very high churn in economy, high economic growth rate, it is highly irrational to practice a dogma like buy & hold. A profit pool like Solar module & EPC which practially did not exist 5 years ago might be 10,000-50,000 cr large today. It happened overnight due to government policies. Your ability to participate in this will critically decide your alpha. But, market will always overshoot. It will always overvalue. Good executors will always be priced to perfection & beyond. Is that a problem? not for the public market investors. This is because new profit pools are continuously getting created. Nal se jal, ujwala, Power sector reforms, Huge infra creation , Airports, Railways, Highways, New education policy, Wind power, solar power, nuclear power, Geospatial mapping policy, Semiconductor policy, Green hydrogen policy, Extended Producer responsibility (recycling) policy, EV policy, electronics & component manufacturing policy, Ecommerce policy, quick commerce policy, data center policy. a new policy is born almost every quarter if not every month. There are new areas of alphas waiting to be discovered. You can discover them. They can create wealth for you. But this can only happen if you have a fluid mindset. This can only happen if you are willing to reject popular dogma shoved into your face & respect facts, data, causal reasoning, first principles thinking. I still think 90% people will prefer momentum than thinking. This is not only okay, it is healthy. After all the deep thinkers need someone to sell their overvalued equity to :wink:
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Love it ! Reminds me of a dialogue from Matrix " You see, there is only one constant, one universal, it is the only real truth: causality. Action. Reaction. Cause and effect."

Causality is inherently linked to decision-making, as causes let us better predict the future and intervene to change it by showing which variables have the capacity to affect others

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Hi Sahil,
“This was extremely helpful”. I appreciate you clarity and analysis ability. I am not young like you. I have seen many bear and bull markets since Harshad Mehta time, and also faced 2008 subprime crisis. IMHO while making investing decisions, calculating an ‘expected value’ intuitively is an effective way to decide what choice to make – play the game or not.

“What is expected value?” you may wonder.

In the 1989 AGM of Berkshire Hathaway, Warren Buffett was asked about his approach to risk and investment decision making, and he replied –

Take the probability of loss times the amount of possible loss from the probability of gain times the amount of possible gain. That is what we’re trying to do. It’s imperfect, but that’s what it’s all about.
As an equation, it reads thus –

Success in investing = (Probability of gain X Amount of possible gain) – (Probability of loss X Amount of possible loss) = A positive number

Michael Mauboussin describes this concept as expected value. It is actually a very simple concept.

In essence, you don’t have to be right a lot, you just have to be right about your big bets at the right time. Here, while the probabilities matter a lot, so do the consequences i.e., amount of possible gain/loss.

It is important to get that equation right.

If you are willing to buy a stock, say, priced at 60-70x P/E or more, thinking the probability of it going higher is good, also remember the consequence of a period of weakness/slowdown in business. Such expensively priced stocks ride on high expectations, and the consequences of a small slip could be really bad.

Given that we often tell ourselves false stories to avoid the truth, with our minds clouded by denial, optimism and negative decision-making tendencies, the expected value idea can help us avoid the landmine of expensive, hot and bad stocks that cover a large ground in stock investing.

Buffett says –

In order to succeed you must first survive.
The stock market is not a casino. Unlike a casino, the longer you play here, the more are your chances to win (survive and thrive). But it’s important to –

  • Play by a process and stick with it through the cycles.
  • Think and act like owner of businesses and not renter of stocks.
  • Use the expected value model to decide which businesses you want to own (where the expected value answer is positive) and which ones you must avoid (where the answer is negative).
    Regards
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