Auto, pharma, metal and chemical those sectors link with economic cycle. During bad cycle portfolio performance majorly affect. It has to be sector allocation is very important to avoid major drag in portfolio return.
Updated Stock Portfolio
- Exited Opportunistic bets Quess Corp, INOX, Bharti Airtel and booked profit. Will relook if it comes down.
- Entered Coromandel and UPL under agri theme as the story seems structurally strong for next 1 to 2 years. Believe it to be a relatively safe sector until corona is mitigated.
- Rebalanced / Accumulated some stocks in Pharma, Chemicals, and Auto basket.
- ~ 49% in Indian Stocks
- ~ 14% in Indian MF
- ~ 29% in Nasdaq listed cos (Mostly through ESOP)
- ~ 08% in Cash
Updated Stock Portfolio
I’ve been consolidating my portfolio over the last month.
- As Pharma trend emerges clearly in the market, supported by earnings and future growth visibility, accumulating some stocks in my portfolio.
- Exited auto basket entirely as most stocks has ran up and I’m not comfortable in deploying more money at this price and circumstance. Booked profits in Lumax, Frontsp, varroc, jamna, ppap. Booked loss in GNA @Rs200 as earnings are disappointing, and heavy vehicles recovery could take more longer time. Would relook when clarity emerges or price drops.
- Booked profit in Heidelberg and Sirca. Nothing wrong with Sirca but not comfortable in adding more (due to missing clarity in Italy covid impact and recent fire accident in Ind plan ) so makes sense to sell it instead of holding tracking position
- Strategy remains same, mainly focusing on Pharma and Chemical.
You surely need to plan on pruning the portfolio…its not a good idea to track so many stocks.
Yes, feeling the same, but not mentally prepared enough to handle concentrated portfolio. So sticking with bucket approach, as and when my confidence level increases on the stock stories I track, I will minimise the portfolio size. I used to hold four stock in finance sector, and now I have reduced to one (should have been two but ok for now to hold Manappuram alone). Planning to follow the same when I am comfortable with selective stocks in other baskets.
Here is my analysis of your portfolio
I think you have knowledge of identifying good businesses. So, first part of investing is done.
What is your rationale for buying 11 stocks in pharma when you can also deploy the funds via a thematic fund like SBI Healthcare or Nippon Pharma or DSP Healthcare? Just evaluate the options. 11 active tracking Vs 1 passive tracking. As I see, you identified pharma sector in March and pharma funds gave substantial returns from then. I think restricting the basket approach to 3 or 4 is better?
I assume you are more into fundamental analysis - Do you like or have good understanding of any sector? If this is the case, I would suggest you to keep a higher allocation to your top 2 or 3 stocks in that sector based on your conviction. When your conviction becomes stronger, you are more certain about getting your returns. If you are here to make money you need to beat FD & MF returns as you don’t need to put more time and effort for investing in FD & MF. On an average, you can expect 10 to 12% CAGR from MF if you take long term horizon like 10 years.
You are talking about opportunistic bets. I think if you can mix your knowledge with technical analysis skills it can reward you more. I am yet to learn it.
Disclosure - Not an expert
- Bucket Stocks vs MF - Lot of us have a perception that, buying MF is better than holding a bucket of stocks as individual can’t track all of them. But there are lot of pros in holding bucket of stocks. I’m not getting into whats the right size of the bucket as I’m still exploring it but I can share few points on how bucket approach helps me and why I like it.
- Small/Mid Caps - I don’t have conviction and risk appetite to bet 10 to 20% on a small or mid cap stock. Also I don’t think I can predict the next leader accurately without some luck as there are several candidates, so by investing in a bunch of potential candidates and by adjusting the allocation over time based on how they progress, I am increasing the chance of building a decent 5% to 10% on the next-leader business.
- Regulated Industry - Sectors like Pharma always have regulatory risk. No matter how good the management is, a single notice or observation can create huge mess for prolonged period. Bucket approach de-risk this to some extent. Also from export restriction, import duty and other regulatory decisions.
- At-least one of the stock in the basket will be a value buy most of the times, it allows me to slowly build the position by looking at the company performance and valuation. This works well for me as I’m salaried. I started with a < 2% allocation in Neuland, laurus and Biocon. When I felt that the business has the potential to grow for long term, and sector has tail winds, I slowly pumped more money and invested > 5% on each. In the next 2 - 3 years. As you said, the basket size need to be reduced definitely, once I have more clarity I will shrink my basket size by moving money to businesses that emerges well among the basket.
- I don’t track companies too closely. I follow respective valuepickr pages, track quarterly results, read con-call summaries. So I don’t see tracking that hectic.
- In MF, I can’t control the allocation and can’t bet more on emerging leaders so I don’t like it.
- Fundamental Analysis - I closely track my XIRR returns of MF and Stock Portfolio to understand whether my effort and time does anything good. For the last two years my stock returns are lesser than MF returns. But now the trend is reversing, I will give some more time to my stock investing voyage as I’m still learning from my mistakes.
- Technical Analysis - I’m not into technicals. When I see severe under-valuation, I but the stock with a view of 1-2 years as I can’t find the reversal trend from charts, mostly insignificant position to taste a quick 2X. Few examples, INOX @ 180, Quess Corp @ 170, Metals @ decade low.
I think you already have all the answers and its only matter of time you will move towards lesser basket size and eventually higher allocation to your high conviction ideas. Tracking XIRR regularly is also the way I assess my performance against other options.
I found the below post very useful and hope it also helps you. Even though, it is about PMS funds, we can also use it to our portfolio building.At the end of the day, we need to fight the inherent market volatility and so have to understand risk adjusted returns during bull and bear phases.
Lastly, regarding pharma mutual fund, I have recency bias here. I am invested in DSP Healthcare MF. Why did I chose the fund?
- I don’t know or have pharma background/understanding but I anticipated sector tailwind is due
- Indian pharma companies have good export market in US. The person who is tracking closely the US market can be at an advantage here as he needs to understand the business of pharma companies & regulations there. DSP Healthcare invests 25% in US pharma companies. No other pharma fund in India does this. For me, I don’t have exposure to US markets directly. This fund invests in Apple, Google, Amazon etc of pharma for me. Say, if Abbott Laboratories in US gets a vaccine for Covid-19, this fund will jump the trigger as it can be a huge opportunity.
- The fund manager(Aditya Khemka) seems to have reasonable overseas experience and also good understanding of pharma sector - generic & domestic. I saw this video of him, way after investing in this fund.
- The fund was having very less expense ratio and low AUM. Recently, they increased the expense ratio.
I invested only in Laurus Labs and Dr. Lal Path Labs in pharma from March. The returns are better in the case of direct investing but if I compare risk adjusted returns, I feel I am lucky.
Having said all these things, I completely agree that each investor’s style and journey is different. Also, it is better to go with your strengths. Happy investing journey!!
After going through the DSP healthcare portfolio, I find only 8% equity exposure to American Pharma Companies…please correct me if I am wrong…
Abbott Lab 3%
Intuitive surgical Inc 2.8%
Abiomed Inc 2.5%
I should have written upto 25%. I have seen it more than 10% once. Basically, they have a provision to invest upto 25% but at the moment, it might have found better opportunities in India or they might be conserving some cash to deploy on the right opportunity like Covid-19 vaccine.You can find more information in their scheme documents as well.
The cash is 6% here and also their investment style is Mid-cap growth which I feel will give superior return in a sector tailwind scenario compared to risk.
Not denying what you are saying. It is no.1 Healthcare fund in India returning 73% during last one year having beaten not only the pharma index but all its Peers also by a wide margin.
But one need to be careful while investing in any sectoral fund , though Pharma seems to be a safer play considering the tailwinds the sector has which is expected to continue post covid19 according to most analysts !
People just can not neglect their health !
True. This is the only thematic fund I have. I will be stopping SIP in it soon. I understand the risks in thematic funds.
@Southern_Cross why are you planning to stop? Arent the tailwinds still there?
I look at my portfolio level and take decisions. Pharma is constituting 24% of my portfolio at the moment for me and it is not a good idea to invest more into one sector alone.
Updated Stock Portfolio
- Exited ITC@198 and added Transpek after quarterly results.
- Exited JB Chemicals@1050
- Reduced stake in Manappuram and accumulated existing holdings in pharma and chemical basket.
- Added Vedanta, hoping 20%+ profit there.
- Momentum: Booked profits in UPL and Coromandel. Added Excel and Astek Life.
I like the PF because of the weightage to pharma (specially API) and chemicals…I have also 40% allocation to these 2 sectors and riding on the momentum…have many stocks in these 2 sectors common with you…hope the juggernaut in these sectors continue for long and reward us handsomely.
Updated Stock Portfolio
Overall strategy remains same, trying to consolidate positions based on Q earnings
- Alembic, Biocon, Jubliant
- Transpek, DeepakNit
Booked Profits in
- HindZinc, Excel
Booked loss in Vedanta
- entirely in AartiInd@1150. It’s almost a ~3 bagger for me but sold as I felt that there are better opportunities at current price levels and wanted to book profits. I’ll enter again when I can valuation comfort.
- entirely in ITC@190 as it was a short term bet.
- partially in Biocon@440 due to valuations, but may raise my position again if it comes below 360
- Jubliant Life
- Birla Corp, SIS, MCDowells as short term bets (<3 months view) based on valuation and results
- partially in AlkylAmine @~4800 as I’m not comforatble with the valuation, P/S is ~10 now. But good businsess so will add when price comes down
- entirely in SHK @~140 as I allocated more in my existing holdings where my conviction is higher
- entirely in Trading bets with decent profits.
- Astec @~1180 with marginal loss as I allocated more in my existing holdings where my conviction is higher
- Astec with marginal loss as I allocated more in my existing holdings where my conviction is higher
Accumulating following on falls using money aquired from sale of stocks.
No capital infusion in the last 3 months, just moving money around within portfolio.
- entirely in Alembic @~960, Natco @~ 935 and Aarti drugs @~660 to increase my allocation in bets where future earning visibility is better.
- partially in Transpek @~1500 after disappointing Q3 results. I will increase my holding again if it comes down to attractive price.
- again into Astec @1050 post disappointing Q3 results as price seems attractive when considering future prospectus.
Accumulating following stocks slowly
- Deepak Nitrite
- Dyn Products
- Kovai Med
No fresh capital infusion in the last 4 months, just moving money around within portfolio.