I have shared my portfolio earlier in this thread. You may scroll up and will find…
Edit - Link below
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No, these are not top sector allocation. These are sectors I am most active at since 2020 crash as I have been building new positions…
I have biggest huge exposure to FMCG. Adhesives/Construction chemicals & Paints would be no. 2 followed by Life Insurance & Retail.
You have a lot of consumer companies in your portfolio. Have you ever considered a good consumer mutual fund instead of holding all these companies. If yes, can you share your views on some funds.
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How to minimize tax outgo when we receive bonus shares.
Say I have a company’s share at holding price 25. Now it is trading at 100 and the company issued 1:1 bonus share. The price will now become 50 and I will hold 2 shares.
If I was holding the share for more than a year then my LTCG will be 25 and the STCG is 50, if I sell them both. Total tax is 10 (2.5 + 7.5).
Had there be not a bonus issue my tax would have been just 7.5.
How do people deal with such situations?
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No, I have not considered a sector specific mutual fund yet. I have only one MF - HDFC Midcap opportunities as around 5% of Portfolio. Most of this was added during market crashes.
Reason for not choosing consumer specific MF is that they would mostly be invested with top allocation to the likes of HUL, Nestle, Page, Titan etc. while my top allocations would be way different than theirs. I might have their major constituents but allocations would be dramatically different.
To keep allocation of individual stock in my control, I have not chosen sector specific MF yet.
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Very interesting question. I need to think over it and read some details myself.
Anyone having insights on how does cost of acquisition and date of acquisition on bonus shares & Original shares work from point of Taxation, would be helpful.
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S. Naren saying that next decade will see good economic growth in India but may not be Equity Market returns as good as last decade. rather he is saying that Debt returns will be better…Any views?
@Mudit.Kushalvardhan - I think what he is saying is that Equity returns would be lower and Debt returns would be better than last decade…does not seem like he is trying to say that debt returns will be better than equity…they may merge so one might think that risk adjusted return in debt are attractive…
Thats what I could infer from the video…
Coming to my thoughts, every year, month, day we would hear different pundits making different predictions/statements…they maybe wrong, they maybe right or we may not understand exact essence of what they say. like above…
To me, biggest threat over long term is becoming a disbeliever in equity. (I can be wrong)
Equity returns may comedown from 15-20% to 10-12% and debt returns may go up from 5-6% towards 8-10% range for whatever reasons in short-medium term…but decent equity should give better returns than debt over long term. Add to it the increase in dividends which in a decade might be equal to debt returns of last couple years…
Lastly, leave a decade, in last few months itself decent equity has given 30-40% jump from their crashed levels for any brave incremental money that might have been invested…that would take care of half decade of debt returns on that incremental money…so biggest risk IMO is to become disbeliever in equity over long term…(Again, I can be wrong)
First, we need to decide how much we believe in equity/equity MF and put our efforts in right direction accordingly to set up our own equity/equity MF framework. Else simply invest in Hybrid funds which takes care of both equity/debt and their allocation levels or become macro experts and invest in equity/debt and rotate…choice is yours…
Disc: Above thoughts are no advice or recommendations but only for academic purposes. I can be completely wrong in all my assessments. Not eligible for any advice.
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Yes. I meant the same. Debt returns would be good but compared its own returns in last decade, not more than equity.
Portfolio is now 2% above last peak, Sensex approx. 2% below and BSE Midcap approx. 2.5% below their respective last peaks
Well looks like BSE Midcap did play a good catch up since my last update…
As always, my focus has been on Portfolio structure & allocation, so I had been thinking, am I well placed for any upcoming bull run and subsequent melt up, if any? I am well aware that leaders change in every bull run etc. etc. and looks like next few years could well belong to manufacturing, defence, engineering, even auto/auto anc., green energy etc. etc…in this context, I was introspecting how am I placed and am I ok with it…
My current portfolio structure stands like this -
1. FMCG - 46%: Mostly Midcap ones with relatively older holdings and added in recent crashes. (Significant 14% is Tata Consumer and 9% is recently added ITC, leaving rest to relatively comfortable 23%)
2. Adhesives, Chemicals, Paints - 11.5%: Hold only 2 stocks. Pidilite is older holdings and Asian Paints added in recent crashes
3. BFSI - 11%: 8% in Life Insurance and rest in 1 AMC and 1 Bank. Life Insurance is older holding.
4. Retail - 9.5%: Major part of Retail is built recently
5. Consumer Discretionary - 5.5%: Major part is built recently
6. Consumer durables - 4.5%: Major part is built recently
7. QSR - 3%: Major part is built recently
8. IT - 6.5%: Major part is built recently
9. Manufacturing/Energy - 2.5%: Major part is built recently
As it can be seen almost 60% of portfolio composition is relatively older with FMCG (midcaps), Insurance & Adhesives - All decent performers so far.
Remaining 40% is built rather recently with significant exposure to Retail, QSR, Consumer Discretionary/Durables, IT & lastly Manufacturing/Energy.
I see approx. 50% of portfolio in FMCG (Midcaps) + Insurance providing stability and inflation beating compounding (Better than all other asset classes)
Remaining 50% can provide a better placement for riding any subsequent bull market.
In this part, conviction levels are strong in Retail/QSR + Consumer Discretionary + IT + Adhesives/Paints + Manufacturing/Energy (almost 45%)
Not sure about Consumer Durables part - Seems that they are incapable of handling the cost part well and lack superior pricing powers as well. Savings grace for portfolio may be if India becomes the manufacturing hub for rest of world for some durables - Then these companies can well be part of Manufacturing piece as well.
Action Items -
- To keep evaluating Consumer Durables piece
- Think of increasing exposure to Manufacturing/Energy
- Real Capital Goods is completely missing. Some real good companies in this space which I admire a lot but missed their decent rally till now because of my avoiding this sector…I was not so right in hindsight. Good companies, irrespective of sectors, are good companies and deserve a place. What better time when sector is not doing good…Need to find right time to get exposure to 1 Capital Goods company. I like tech players here as well…that is if there is any right time…
- Defense - Need to read more about this and look for opportunities, if any
- Lat but not least - Keep evaluating high exposure to FMCG + Insurance. Monitor the companies as these may be relatively slow growers going ahead.
Views welcome on sectoral composition and how well/not so well placed I may be to benefit from any bull market.
Disc: Invested in above sectors/companies, hence biased. Above views only for academic purposes. Not a buy/sell recommendation. Not eligible for any recommendation.
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No Pharma company? Not even API?
No chemical or agro-chemical companies?
No NBFC ( bajaj fin, Muthoot , Chola)
No FMEG ( polycab, Havells)
No jewellery companies ( Titan)
Also auto or auto ancillary
Not comfortable, never understand clearly, did some entry and exit earlier - mostly at wrong times due to inability to understand the companies/sector
Same as Pharma
L&T Finance was once my largest holding. With past experience, decided to focus on sectors that better suit my style.
I held Havells once not as FMEG but rather as Consumer Durables (Llyod piece etc.). Had to sell it in order to consolidate within the sector. I like Havells as a company and how it has grown. Never studies Polycab.
Have a very small holding in Titan added recently as part of Consumer Discretionary piece. In hindsight, should have added more.
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Auto is very cyclical and with EV seemed prone to disruption. I like Tata Motors and M&M in this space. I wanted to have exposure to these two and missed them in 2020 crash as kept waiting for better price. They have not given another chance since then…
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How to differentiate between consumer discretionary and durable? Which goods do you take as discretionary?
High exposure to non-performing sectors is hitting my portfolio. I have diversified into small caps to reduce the exposure. How do deal with sector underperformance?
I was also thinking of getting exposure to energy and auto companies. I found an interesting company by the name of Gensol Engineering Ltd. It is into solar power and will now make EV for its parent company BluSmart mobility. Only problem is that the cars will be on this company book and the parent will rent it and have an asset light model. The stock has started consolidating after a massive bull run. Please provide your thoughts on this one.
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This is personal only for my bifurcation - I consider appliances related stocks such as Voltas, Whirlpool, Hitachi AC as Durables because mostly they sell products which are now becoming necessary but people buy them in longer gaps…
While I consider companies whose products are not that necessary but rather aspirational/lifestyle related or maybe premium as well as discretionary like United Spirits, United Breweries, Titan.
I have faced this several times throughout and currently also facing in Consumer durables and relatively in some FMCG & Insurance as well. I think any long term investor who has diversified into few sectors would inevitably always face this. If I believe in the sector, I would use it in my stride to add on to top names there while if I no longer believe, then would take opportunity to adjust/consolidate as consolidation may help me exit easily once time is right.
Also, its rather a good thing to have at least one sector not performing well if someone is building their portfolio so that they can deploy funds at better prices…
Even one of the worst performing sector of last decade…Telecom which had all wrong things going for it with price wars, intense competition, huge debts, auctions, capital intensive, Jio disruption and what not …gave immense opportunities to accumulate Airtel at every fall near 200 rs to get a decent CAGR as on today. Had Jio been listed, it would have been a multibagger (RIL is, though not by huge times because of conglomerate nature).
I am not at all good at small caps analysis. Its very very difficult to know about them from information in public domain and I do not have the accounting as well as technical skills to catch red flags on time, so not eligible to even comment.
Although, I do like your another small cap - Swiss Military consumer in which you invested only because I know of and have used their products. Still can never understand its recent price movements…
Disc: Academic views only. Not eligible for any recommendations
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Although your question might be aimed towards @Investor_No_1 , I couldn’t resist answering. @Investor_No_1 please feel free to correct or add anything.
To be honest, NO Sector is non-cyclical in its entirety…
There are two components in each sector: Demand and Supply. Aim for sectors which have Non-Cyclical Demands, even though such sectors also undergo periodic Supply related cycles. Examples include: Essential Consumption like Soaps, Staples, Baby Food etc., either brands or retailers; Chronic medication from good branded Pharma companies; Diagnostic Labs; Affordable Hospital chains; Pharmacy Chains etc.
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The most useful way to recognise whether a company is cyclical or non-cyclical is to see its profit margins, more often gross profit margins. If these margins deviate a lot and sometimes go up, sometimes down, and its not increasing or stable that means , more or less the company is cyclical.
You are asking the question about a whole sector, whether its cyclical or not. But more practically, its better to focus on a particular company, whether its cyclical or not…because even at company level too, things are quite complicated and there are no straight , easy answers. Just to give one example, just was reading Annual Report of Balkrishna Industries, there in management discussions they have clearly stated, their off-highway tires find applications in agricultural, industrial, mining etc industries and out of these, only agriculture is non-cyclical area, wheras industrial, mining, earth movers they are all cyclical industries. So what i can deduce is, Balkrishna industries, on a company level, is a combination of non-cyclic as well as cyclic where some segments are non-cyclic and some are cyclic. Business world, just like life, is never black and white…its always grey.
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Retail is a non cyclical sector, Stocks under this are Trent, Dmart, Shoppers stop, AB fashion, Arvind fashion, Vedant, all footwear retailers. Organized retail will double its size by 2030, unaffected by Govt policiy, inflation as demand always persists. Consumer durables is another sector which is non cyclical
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Please unblock StageInvesting , his insights is very helpful for lot of members in this forum
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