Simple Investing

Investing Strategies
102

Markets is such a unique, risky and multi-faceted place! On one hand we have growth, momentum, value investing and on other hands we have some stocks where its impossible to fathom when and why they rise or fall.

After getting intrigued by this Tata group stock TTML and having seen its stupendous rise from around Rs 2 to Rs 35, I took a tracking position at around Rs 35. This was also because of a change I brought about in my investing strategy - NEVER TO WRITE OFF ANY BUSINESS OR SECTOR OR COMPANY. ALWAYS BE OPEN TO RE-EVALUATION.

Within few months, this stock started flying like no tomorrow, giving me no chance to build a position but it kept flying and I kept onboarded till its peak of Rs 290, when it formed around 2% of my portfolio from an insignificant tracking position.

At around Rs 290, there were some news around its business when then started the dramatic fall.

Meanwhile I forgot to mention that a dramatic fall happened in between this journey also when I tried to sell at around Rs. 150 but could not because of circuit and then it again started rising.

So, from Rs 290, i was convinced that I should sell it now but coudnt yet again as it was in ckt for 2 continuous week only to give an opportunity at same around rs 150 when I made the exit.

Some Learnings

  1. Never to write off any business
  2. Remember why you bought - I did not buy for momentum or to ride the up move. I simply bought due to improvement in business because of a clear direction and execution from Tata group. Maybe thats why I could held it from 35 to 290 in around 3 months
  3. This one is new for me - Even if you bought for fundamental long term investing and not to trade, but if in case you get caught up in a company whose share price movement is not driven by pure fundamentals - then have a quick exit strategy.
  4. I have no clue had I followed above point 3 learning then I would have exited around the top or even earlier - So, no matter what the learnings, what the strategy - You dont know what you do in such bizzare cases.
  5. Such cases, events and results should have absolutely 0 result on our way of looking at markets or expectations from it. A 4 bagger in 3 months is in no way important or significant or of any meaning to me as it was not in my control and neither why I made the investment in the first place (Also, I could have got stuck at the losing end and that should also not make me complaining of the market as market has plenty of other efficient companies). Rather, if this same company after these roller coaster rides goes on to become one of jewel of Tata group in a decade or more, then I am on the losing end by making the exit.
  6. This brings me to Point 1 yet again - Never to write-off any business…ever.

Disc: Had tracking position in TTML and sold. Tracking again, hence biased. This is no buy/sell recommendation. I can be wrong in all my assessments

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103

What a fall!

4% mid & smallcap and 3% Nifty reminded my of the 2020 crash.
Volatitlity is extreme over last couple weeks

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104

What’s your reasoning behind selling TTML & Tejas…

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TTML - I had bought this share as a turnaround of business. Transformation from a pure telecom/voice focus to a SaaS and service oriented model. I had bought it for the next decade. The stock moved too fast from 35 to 290. Mcap crossed that of Tata Communication, Trent, Voltas etc. on one hand but was still less than loss making Zomato, PB Fintech etc. along with plethora of new SaaS products for SME launched by TTML.
The turnaround would and should surely happen in business but the same was happening in its stock price every day. Honestly, I rode it till 290 (and back again till around 150) but the sudden flow of contradicting news and subsequent price actions made me uncomfortable.
This Q results were also not very comforting with revenues almost stagnant (if I am not wrong). Also, a 5% ckt is IMO making price discovery very difficult for this stock and I am no expert in that area, so I gave it a pass. However, I will still track it and could take small position later as well.

Tejas - I had an insignificant position here. I got interested after Tata took majority position here. 5G, semiconductor story, Electronics story, manufacturing in India etc is great and works for this company…but will that majorly happen through Tata Electronics, Tejas or any other company in Tata group…I do not know…hence I currently see tejas as a Telecom network component player…I have very limited knowledge of this area…hence sold but will keep tracking due to the Tata ecosystem story…

Disc: Not a buy/sell recommendation. Above views purely personal and I can be completely wrong in all my assessments.

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106

This has been a very unexpected couple week for me, as I do not track macros and global news as much as one should.

Even if I were tracking, the result would have been similar as current.

The turmoil has no doubt extended beyond my initial imagination. It is usually when my limits are stressed, market finds bottom so I hope the bottom is near now. Nothing is in our control though and for the global good, hope a solution is reached soon.

My Portfolio, specially today, has been battered badly. Being FMCG heavy, inflation was already troubling and current global situation has only added to the Inflation - both its severity as well as its expected duration now.

FMCG, Consumer discretionary/Durables - All badly affected by inflation. Retail - Not so much. QSR - Not so much but stretched valuations hammered. IT - Not so much, relatively stable after being hammered due to ok ok results. Life Insurance - Do not see any direct impact, except possible rate hikes but that was always expected but still valuations hammered.

I have been a significant buyer yet again in FMCG, Consumer Discretionary/Durables & Retail in decreasing order. Few months salary helped here as I had not been buying significantly for quite sometime. As I am buying same old stocks I have been holding since many years, I have to over-ride mental block of price anchoring by considering as if I am building a new portfolio instead.

Also, was able to raise capital by rotation of stocks within portfolio. Sold the likes of Colgate, P&G Health, ABB India (very stable ones) to buy likes of Tata Consumer, Dabur, Godrej Consumer, HDFC Life (All hammered and I have been already holding since many years). Have now started Sipping to the ones who never fall - Asian Paints, Pidilite.

Usually when these two are hammered, bottom is near…but you never know what’s in store this time…

Disc: Invested in all above names & hence highly biased. This is no buy/sell recommendation but mere random thoughts shared for feedback & discussion only. I can be completely wrong in all my assessments.

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107

I am reading your thread from start. Very nice and simple Investing strategy…FMCG heavy Portfolio and Long term approach. But I always wondered, why your core portfolio never included Asian Paints, Berger Paints, HDFC Bank, Kotak Bank, TCS, Infosys, Nestle, Britannia, HUL…I have seen that these stocks have better earnings ratio as well as better long term performance, business wise as well as stock price wise, compared to Tata consumer, Godrej etc…I would like to know your perspective about why these stocks are not part of your core as well as potential core portfolio? Am I missing something here or my study is on wrong track? please guide

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108

My core portfolio does have a hint of Asian Paints, Nestle, Britannia & HDFC Bank among above. I am building on Asian paints, Nestle and HUL very slowly in deep corrections.
The reason for not having these in significant percentage has been -

Asian paints - I accept it to be a miss. I do have a Pidilite in top 3 holdings, but agree Asian Paints is Asian paints. Intend to correct this miss gradually.

HDFC Bank/Kotak Bank - This is intentional to have very less exposure to financials (Lending). I added a little of HDFC bank only in first deep crisis I saw in march 2020. Not in a rush to correct this. I am taking the risk of financials via Life Insurance by having a very high percentage exposure to HDFC Life + SBI Life.

TCS/Infosys - Both huge misses as I did not believe in Indian IT story until March 2020 crisis and this Pandemic. Have corrected this by including midcap IT. My thought process here is that I have already missed these large caps and I have option to invest in faster growing midcaps from best business houses in India in same IT space so chose the mid-cap space. It is an attempt to play a catch up but yet again my allocation was not as much as it should have been to begin with.

Nestle/HUL - Gradually adding in every major dips. I did not chose them to begin with as they were highly valued as compared to home grown FMCG and had expected lower growth in the niche areas where homegrown FMCG operated. More details will provide below.

It is precisely what you mention above is the reason my highest allocation has been Tata Consumer. Nestle/HUL are perfect companies in the way they operate, margins etc etc. - Tata’s, Godrej etc. have a gap to bridge. When I first invested in Tata Consumer, it was a big laggard as Tata global beverages…no focus, only beverages, international ambitions taking front seat than huge India opportunity. I could always see the huge potential and glad that Tatas saw them too eventually…my allocation was again not as much as I wanted to begin with but could not blame myself here as it was before the Tatas began focus on this company…this is what I am correcting in every deep correction… Tata Consumer has the potential to be the Indian answer to Unilever and P&G of the world. It has a huge huge gap to bridge…and I would take this risk in my FMCG portfolio as probably I am not just investing here for safety…

Godrej Consumer has not performed the way it should but lets see how new leadership works for it…Dabur has been an Ok ok performer…However I am hugely impressed by how Marico’s business has transformed. Along with Tata, Marico has also been bridging the gaps beautifully so far…and its stock price should also eventually follow…

So to sum up my FMCG investing strategy…although I have chosen the so called lesser risk sector but have intentionally not chosen the least risk stocks among them. It is because the MNC leaders here are already a generation ahead…my rationale to chose home grown companies is to ride on their ambition to grow bigger and better…it is riskier but may be more rewarding if things work out…so far it has been satisfactory in some cases but not so in others…

Disc: Invested in all above names & biased. Not a buy/sell recommendation. I can be completely wrong in all my assessments

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Thank you for clarifications. It cleared my confusion. I am also in same boat. More or less all the stocks, I have mentioned are in my PF too. I liked your idea that the tracking time reduces a lot when you are with big established companies. And also returns are also not less than any growing compay of midsize. My expectations are around 20% CAGR for long term. I dont want to double my money every 2 years. Certain things about your earlier posts, hope you put your thoughts on it. I value your opinions highly because I see you as my mirror image in keeping things simple and uncluttered.

  1. You had mentioned in one reply that you have around 35 stocks including core and potential core and you track them weeklly…So does it require to be tracked that frequntly if you with biggies? I mean, nothing is going to happen to Asian paints and Pidilte over 6 months to 1 year also…and even if something happens, their able management will sort it out…My brooding over their problems, will not solve their problems, right? paints are made out of Crude oil derivatives…so if crude reaches to 150 dollor per barrel, what I can do in that? My point being, can I have passivity in such stocks?
  2. These stocks have given around 20 to 25 % CAGR over long time…So am I missing all those small caps like Alkyl Amines, Deepak Nitrite and Navin Flourine types, Returnswise? I am Ok with lower returns but volatility has to be low…
  3. I have read Philip Fisher and he says that if we are investing into Blue Chip stocks with proven track records, then even 5-6 stocks or 10 stocks at maximum is also OK…But if we are investing into Midcap and high growth small cap then number of stcoks should be doubled to get the diversification. So even I also have 30 stocks in my portfolio, despite it being into bluechip stocks. When i took Asian Paints, I also took Beger paints too…When I took HDFC Banks, i took Kotak and ICICI bank too to reduce company wise risk…Is That right? or should i restrict myself to just 1 leader in each sector, instead of 2-3 leaders per sector. I m not going into debate about Concentration vs Diversification…But if I am into Bluchip, does it makes sense to restrict to just 1 leader per sector and thus have 10 to maximum 15 stocks at most?
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I agree, regular weekly tracking may not be needed with established names. The reason I track them regularly is because I like to read about the business, how its shaping up and most importantly how the company is reacting to challenges. It is not to take any buy/sell decision or benefit out of the news. It is only to get a constant feel of the business we own and the character of the company, so that when opportunity arises, which ones are to be added and which ones to be exit, if needed.

Very few people would be able to have an absolute allocation in Asian Paints equal to an Alkyl Amine. If 4-5 of my picks with 10% allocation each of portfolio provides 15% CAGR over multi years, I think that is much better than having a 5% allocation tripled in 2 years and then look for another Tripler for next 2 years.

I think there is no right answer to this. I can share only my thoughts. I think, we can chose a Basket approach in sectors which we do not understand much or see as higher risk but feel the sector is important for our portfolio growth. I have done this in cases like Midcap IT and QSR. So if we feel higher risk in lenders then its perfectly fine to have a basket approach provided the basket does not reduce the overall quality. For eg. HDFC Bank and Federal Bank are not of same quality.

Also, sometimes the number of shares can increase if we see potential and another company passes all our criteria…I call these companies the “potential core” and not “satellite” portfolio. The benefit this may present is that in times of crisis, if our universe of stock is slightly bigger, we can chose the better option to add depending on the opportunity the market presents…

For eg. had I chosen only single FMCG company HUL, it hardly fell during March 2020 and neither rose much in the raging bull run thereafter. So, in cases of opportunity - my universe is limited and adding on to HUL may not have been that rewarding than adding on to Tata Consumer. But as said before, the quality of the stocks must not be compromised when adding it to our universe. If we see any issues, timely exit would help here.

So, having more than 15 stocks would help at time of Portfolio building. Once the Portfolio is built, we can exit those which do not possess the character we want and add on to the rest. Intention would not be to reach the right number of stocks…but rather be with right “character” of stocks…

Hope I am able to express clearly.

Disc: Same as above

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111

awesome reply…Really liked you clarity of thoughts…very helpful. Thanks a ton

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113

Last few months Market have been testing patience. Even a simple investor like me got a little impatient this week by seeing market behavior in India/US over last few days. 2% up one day, followed by 2% down next, followed by 1% up, then 5% down, then etc. etc.

Looks like one of the article rightly mentioned - “Mood Swings”. In my time in markets so far, I have not witnessed greater mood swings like this unless of-course during melt downs - but that is one way and not both ways…and hence the name “swing” :slight_smile:

Now, coming back to Portfolio - It has been battered badly. FMCG is in pain. Retail is in pain. Consumer durables never recovered after pandemic, QSR have been battered. IT - lone saving grace, which I considered a long term core holding (and not momentum) completely destroyed from peak. I always knew the risk in IT but never knew it can come so fast and on such a small pretext.

Some significant actions I have undertaken - Increased holdings significantly in Tata Consumer and Trent.
Added decently Asian Paints, Voltas, United Spirits, Restaurant Brands, IT - LTI/Mindtree.
Completely exited Nazara Technologies, Westlife Development, Sapphire Foods, Nelco, Xchanging Solutions and few other tracking positions.

I was rather quick to add on to IT with 20-25% fall from peak. In hindsight I should have waited more. Maybe in few days, I might feel I should have waited even more…but you never know where the Mood swings take you :slight_smile:

Disc: Invested in above names & biased. Not a buy/sell recommendation. Post only for academic purposes.

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114

same here. One learning i took from recent fall is, no matter how good a company is, it will always come to cheaper level if you wait long enough…LTI, i never thought , will come to this level, and invested fully long back …and now at such attractive level, its already around 6% of my portfolio, so cant add more to it…I remeber charlie Munger saying something resembling this…“u need to have a strong character to sit with cash…I (Charlie) didnot reach where he reached, by investing at mediocre levels”

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115

Any specific reason sir for exiting sapphire and westlife and not RBA. I also exited sapphire based on the conditions in Sri lanka right now and I think it will take some good time for that country to recover. I was also adding RBA but I’m confused now after their Indonesia merger. Would like to know your views as well.

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Pls don’t call me sir as we are in same boat :slight_smile:
My reasoning for the actions, I can be very well wrong in my assessments -

Sapphire competes with Devyani for its KFC & Pizza hut in terms of pan India presence. I came to know about its international issues much later (was not very exhaustive in research as I was still tracking). It is PE controlled and I do have small exposure to Devyani, which I have kept intact. I remember some discussions where Sapphire’s better valuations were cited as reasons to exit Devyani and add on to Sapphire but guess it doesn’t work that ways…

Westlife - Again does not have Pan India rights and the governance I am not sure about if its as professional as PE controlled or not. Also, their royalty might increase significantly in few years but that’s a part of the game…overall I know very little about management & promoters to add at lower levels or continue holding.

RBA - Again has its own share of issues, specially the recent capital allocation in Indonesia…but on plus side have read good things about its management & execution and also liked the fact that they have pan India exclusive rights for BK and also parents have equity stake…(at least at present)…The BK cafe would add on to margins & the contract is, if I am not wrong, very long term till 2039…so its a calculative risk where I can certainly go wrong…if there were no such issues and BK India parent was available at around 4k cr mcap…I would have probably added to at least 10-20% of portfolio…but these are just baseless wishes…

So, to answer you in brief, I had a basket exposure to QSR space earlier with Burger king, Jubilant, Devyani, Westlife & Sapphire in decreasing order weightage. In recent crash, I have consolidated it to 3 at present - Burger King, Jubilant and Devyani…

I may further consolidate the QSR holdings or exit this space altogether going ahead if I see significant ongoing issues in corporate governance/capital allocation/corporate structure…because the other piece - Growth - will anyhow come back and be good…

I must admit, it has been a difficult space to crack, build position & remain invested…something I really hate to do is to make things difficult. I looked at this space for tremendous growth opportunities and the Jubilant story of last decade (which of course I missed while eating Pizzas)…

Need to evaluate if this space is really for a simple investor like me or not…My current weightage for QSR basket is around 3-4% of portfolio…so certainly I could not scale it up the way I would have liked and this means that the conviction & comfort in this space has not been apt…

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117

Thank you for the elaborate response. It actually helps. I also thought that this sector would be as easy as eating a Pizza but it isn’t. I’m also planning to have a basket approach with Jubilant, any one b/w sapphire and devyani and one b/w rba and westlife. The points that you mentioned against westlife are totally true but the only conundrum I’m in is I like their burgers wayyy to much as compared to burger king’s…hence the dilemma.

Also, as a proxy to this space have you ever thought of adding Zomato or Swiggy(when it lists) to your basket. I feel zomato can be a game changer but I’m not very comfortable with their capital allocation strategies as of now.

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118

Glad it helped!

I did look at Zomato, but not as a proxy to QSR space…I see Zomato as a new age tech company…you never know what this company may look like 10 years down the line. It might have its revenue & profits from totally new/unrelated areas in future…that is if they are successful…

So, I see it as a company trying new cutting edge things which can either go extremely right or extremely wrong…add to that the huge mcap at which these new age companies listed…

I always wanted to be a part of such stories but you need to have the muscle to add to your positions in cases of sharp falls and keep holding…for this reason I think I can at max try to focus on only one such company…

I liked Nykaa & Zomato…and ultimately chose Nykaa among all and currently hold only it as part of new age businesses, because I know if it crashed 50% from today’s level also - that is without any business setbacks but because of de-rating, then I would be happy to add more at lower levels…

Disc: Not a buy/sell recommendation. I maybe wrong in all my assessents

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119

Writing this post in the middle of market hours meltdown where NIFTY & Midcap indexes are down anywhere between 1-2% and small cap down by approx 3.5%…and this is after maybe 10 days of continuous 1-2% drawdowns…the real and only danger which I had been mentioning again and again to myself has finally played out - which is Inflation.

For IT, it has been probably attrition.

Portfolio should be down by approx 13% from its peak in Oct 21. (I dont track YTD or annual. I track peak values only for now as Peak values is what really matters to me). NIFTY is down around 13.5% and BSE Midcap index down by 18% from their respective Peaks in Oct 21. Considering most of my picks are midcaps, I am not doing that bad compared to Indexes is what I can see…

Few things going on in my mind last 10 days and I have firmly decided now - To discontinue the so called “Basket approach” in sectors which we either do not understand completely or not clear of which leaders to go after.

I pledge to make my Portfolio lean & clean again now in next year or so. Last 2 years, lot of flab has been added in pursuit of gaining access to higher growth sectors of economy.

When the market stabilizes, I need to have a clear roadmap to consolidate these baskets to 1 or max 2 holdings per sector or completely get out of those sectors.

Key learning:

Basket approach is good for bull run momentum investing but not so good for a long term investor during bear market. They create confusion & resource crunch of both time & money. Impossible to handle if we follow this in multiple sectors.

At present, I have basket approach in IT, QSR & Consumer Durables…

QSR: Have taken firm first step and consolidated QSR from 5 to 3 holdings this week…When market stabilizes would consolidate to 1 or max 2 holdings. Not worth more…need to even evaluate complete exit of the sector

Midcap IT: Had Tata Elxsi, LTTS, LTI, Mindtree, OFSS & Birlasoft. Completely exit from Birlasoft today. LTI & Mindtree would consolidate to 1 position by merger, so would be left with Tata, L&T & Oracle…Can try to live with this…

Consumer Durables: Had Voltas, Whirlpool, Hitachi AC & Havells. Completely exit Havells today as it was smallest position. When market stabilizes, need to consolidate this to 1 or max 2 position.

The saving grace has been that al these 3 sectors combined form 15% of my portfolio. Although 15% is good enough to cause significant damage but you can still stand on your feet, survive & come back with required returns in due course…

The pursuit of diversifying from core FMCG, Insurance, MNC, Paints/Adhesives has proved unworthy/costly/complex & finally unnecessary to me…

Lastly, I must remember that these are transient thoughts and coming at time of extreme pessimism in market with all these newly invested sectors getting battered badly…

Nevertheless, the learning to refrain from Basket approach and keep portfolio lean is very important & real to me…try to look for opportunities in new sectors but DO NOT follow basket approach…it may look simple & rewarding when going is good but back fires when going is not so good and if I am not a momentum investor, it absolutely makes zero sense for me to go for this approach…

Disc: Not a buy/sell recommendation. Invested & Biased. Post only to track thoughts and academic purposes

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120

Is it not possible that, due to your basket approach, you are down by just 13% compared to overall Midcap Index down by 18%?
Is it that , you are finding fault at wrong places?
Basket approach is adopted, when you are not sure of one clear cut leader and also since its not your area of competence, you dont want to take chances with just 1 or 2 players. It sounds a good strategy at risk reduction.
Also if we assume a thinking position that we will invest only in our core competency area and ignore other sectors then most of us are barely competent in 1 or 2 sectors , that too is relative. Then with such a limited competency, its impossible to construct a good, diversified portfolio of 20-25 companies?
Your Thoughts please.
My 65% portfolio is in large cap and still its down by 11%…So its not much of a factor of mid cap or large cap or basket thing…May be its overall meltdown and equally damaging. Had you been not adopting this basket approach and invested in asian paints, pidilte and HUL, Nestle, you may be down by same amount, as I am, since i hold all these stocks…

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121

Appreciate your looking at this in a balanced way and trying to check on my thought process!

Would answer some very important aspects that you have brought forward -

No, I am down little less because of other core holdings doing better. The entire basket in various sectors are down by much more, although I have not calculated exact percentage. So I would not give the credit to basket approach as even without that, my portfolio is well balanced in chosen FMCG, Life Insurance, Adhesives & some MNC holdings

This is a very balanced head speaking. I really like it. I think you should really stick to your approach of investing. You seem to have chosen right companies and also see things very objectively & in a balanced manner.

Now imagine if my basket would have been greater than 15% or if the carnage continues to a real melt down, then you would do much much better.

Well, I would know this only in hindsight but appreciate your bring over this point. I myself had mentioned that these thoughts are transitionary and written at time of extreme pessimism, however - The learning on basket approach is real.

I would not call it finding fault though, would call it a continuous learning. Inspite of being in market since longer time, I started this basket approach only couple years back. If you have read earlier in my thread, unlike many others, I used to call these newly invested stocks as not “Satellite Portfolio” but rather “Potential Core”.

My point is that as far as going is good, Basket approach works fine, but during metl downs, a basket approach will not save you. Well the other important aspect of - Allocation Percentages might, but certainly not a basket.

Also, it is my first significant meltdown in terms of percentage and duration (I would consider duration as starting from around Feb 22, with a deceiving rally in between) after starting this basket approach.

A Basket should never be a core holding, so in a way I was right calling them “potential core” but only 1 or max 2 per basket can become your core and it is better that we do this weeding as early as possible.

Basket is also an easy way out sometimes. I missed the pharma rally in 2009-15 or so inspite of believing in pharma story because then I could not identify clear winners and did not follow basket approach. Hence, I wanted to this time. But one must remember the fate of the Pharma basket once FDA issues cropped up.

So, in a bear - a diversified, well chosen & well pruned core helps in terms of - Holding strength, ability to identify the ones to add and utilize your limited time & funds resources and come back both financially & emotionally stronger after a meltdown.

I am not saying that I only invest in core competency sector. I am just saying that in pursuit of gaining access to few more sectors for higher growth, I would avoid a basket. I would do more introspection & hard work to prune or leave a sector all together. I am sure, we would gain sufficient knowledge over time to prune leaders in most secular sectors…

Also, if at all I follow a basket approach at subsequent stage of my investing career when I might play momentum, I must realize that the basket is not my core and is for purpose of Momentum Investing…

Hope my thoughts are clear and I am able to answer your very apt questions!!

Disc: As above. All these thoughts are transitionary and may change with my continuous learning & market situations and I may not be able to write it here or express them correctly here.

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122

Thank you for your elaborate answer. I have understood your point, that If at all while enlarging your core portfolio, you will try to do in-depth research instead of going for basket approach.
What I wanted to say, i will elaborate by two examples pertaining to my own portfolio. Please correct me, where I am going wrong.

  1. Initially I invested into HDFC Bank and Kotak Bank in banking space as my core portfolio. But during last 3 years, ICICI Bank performance started improving under new management. I had earlier rejected ICICI bank, as I never liked that bank. But in last 6 months I couldnot stop myself but to invest into it. Now I was in dilemma. I cant replace My HDFC bank or Kotak with ICICI bank…so I have to add it as another member in my banking space of the portfolio. Will you call this basket or not?
  2. In NBFC space , i initially invested into 3 varieties
    Gold NBFC Muthoot, Auto NBFC Chola and Consumer NBFC bajaj Finance. But over time, comapred to Muthoot and Bajaj, i felt , chola is not upto the mark, so i dropped it…Does this type of investing also come under Basket?

I have one more such example in Chemical sector, where my understanding of the sector is limited, so i chose
Deepak Nitrate from Bulk chemicals, P.I Industries from Agro-chemical, Alkyl Amines from amines and SRF from flourination thus diversifying into different chemical business segments. kindly shed light, is it basket approach or how I should look at it? This will clear my thought process immensely. Also since my PF is around 50 L, I cant take risk of investing only into 10-12 stocks , since my major investments are into equity.
Also one way of looking at this is : With dud companies , some even loss making companies included in Nifty 50 Index, Index is giving 12 % CAGR, If I am able to “CURE THE INDEX” by just dropping those dud names, my "curated index"will definately give me additional 3 to 4 %…so reaching 15 to 16 % CAGR…Please point out flaws in my approach. Thanks a ton.

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