Southern_Cross's Portfolio

I own the below mutual funds

SBI Small Cap Dir-G
Axis Mid-Cap Dir-G
Invesco India Contra Dir-G
Parag Parikh Flexi Cap Dir-G
Quantum LT Eq-Value Dir-G
DSP HealthCare Dir-G

My general take on mutual funds is invest in them when the sector/theme is out of favour and get the benefits when the tide turns over. It is preferable to glance at the top allocations,alpha,beta in the fund portfolio and also check the star rating about the mutual fund in valueresearchonline.com but they also get updated. Unless I am not already invested, I prefer only 4-star and 5-star funds. Please avoid sector funds if you are new to MF investments.

If your investment horizon is long-term and don’t want to track actively, it is better to go with SIPs and buy lumpsum delta amounts whenever there is a significant drop in market like in March 2020. This way, I think you will still be able to reach 15% CAGR.

Disc - At the moment, I don’t have SIPs running in any of the funds. I am not a SEBI registered investment advisor/planner and biased with my investments.

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Here is the latest portfolio.

Sr. No Company Sector Capitalisation Allocation % Rationale
1 LAURUS LABS LIMITED (XNSE:LAURUSLABS) Healthcare Mid Cap 12% Growth
2 BSE Limited (XNSE:BSE) Financial Small Cap 9% Financialization theme
3 AVENUE SUPERMARTS LIMITED (XNSE:DMART) Services Large Cap 9% Longterm retail play, debt free
4 DEEPAK NITRITE LIMITED (XNSE:DEEPAKNTR) Chemicals Mid Cap 9% Growth
5 HCL TECHNOLOGIES LIMITED (XNSE:HCLTECH) Technology Large Cap 7% Coffee Can
6 ASTRAL LIMITED (XNSE:ASTRAL) Chemicals Mid Cap 6% Coffee Can
7 ABBOTT INDIA LIMITED (XNSE:ABBOTINDIA) Healthcare Mid Cap 6% Coffee Can
8 HDFC ASSET MANAGEMENT COMPANY LIMITED (XNSE:HDFCAMC) Financial Large Cap 6% Financialization theme
9 GATEWAY DISTRIPARKS LTD. (XNSE:GDL) Services Small Cap 3% Promising sector for future
10 PSP PROJECTS LIMITED (XNSE:PSPPROJECT) Construction Small Cap 3% Asset Light business in construction
11 Zomato Limited (XNSE:ZOMATO) Services Large Cap 3% Growth
12 STERLITE TECHNOLOGIES LIMITED (XNSE:STLTECH) Communication Mid Cap 2% Promising sector for future
13 PAGE INDUSTRIES LIMITED (XNSE:PAGEIND) Textiles Mid Cap 2% Coffee Can
14 HDFC BANK LIMITED (XNSE:HDFCBANK) Financial Large Cap 2% Coffee Can
15 MUTHOOT CAPITAL SERVICES LIMITED (XNSE:MUTHOOTCAP) Financial Small Cap 2% Coffee Can
16 KAVERI SEED COMPANY LTD. (XNSE:KSCL) FMCG Small Cap 2% Promising sector for future
17 INDIAN ENERGY EXCHANGE LIMITED (XNSE:IEX) Services Mid Cap 2% Cigarbutt
18 SBI CARDS AND PAYMENT SERVICES LIMITED (XNSE:SBICARD) Financial Large Cap 2% Growth
19 NMDC LIMITED (XNSE:NMDC) Metals Mid Cap 1% Almost monopoly, debt free
20 TITAN COMPANY LIMITED (XNSE:TITAN) Cons Durable Large Cap 1% Longterm retail play, debt free
21 LIC HOUSING FINANCE LTD (XNSE:LICHSGFIN) Financial Mid Cap 1% Coffee Can
22 LUPIN LIMITED (XNSE:LUPIN) Healthcare Mid Cap 1% Coffee Can
23 KOVAI MEDICAL CENTER AND HOSPITAL LIMITED (XBOM:523323) Healthcare Small Cap 1% Cigarbutt
24 AMBIKA COTTON MILLS LIMITED (XBOM:531978) Textiles Small Cap 1% Promising sector for future
25 ORIENTAL CARBON & CHEMICALS LTD (XNSE:OCCL) Chemicals Small Cap 1% Cigarbutt
Stocks
Top 5 46%
Top 10 70%
Top 15 82%
Top 20 90%
Market Cap
Large Cap 29%
Mid Cap 45%
Small Cap 25%
Sector Split
Financial 24%
Healthcare 21%
Services 17%
Chemicals 16%
Technology 7%
Textiles 4%
Construction 3%
FMCG 2%
Communication 2%
Engineering 1%
Metals 1%
Cons Durable 1%
Energy 0%

Investing Objectives –

Return of Capital - :+1:
Beat BSE Sensex in terms of CAGR :+1:
Beat FD returns :+1:
Reach 15% CAGR :+1:
Beat MF(direct) returns (28% CAGR so far) :-1:

Changes - Sold off some stocks due to misunderstanding of norms and reduced some positions as part of profit booking. However, it gave me comfort of having good cash balance and do portfolio rejig. Apart from the existing list, added Deepak Nitrite and Zomato as new additions and increased position size in PSP Projects. Laurus Labs, Astral, NMDC, Gateway Distriparks and Sterlite technologies are all made at zero cost now.

Notes -

  1. The overall debt-equity balance stands at 31:69
  2. Played the metals cycle right and got off from JSW Steel and kept NMDC at zero cost
  3. Felt little emotional when selling good stocks like Dr. Lal Path Labs & LTTS recently
  4. Tracking gaming stocks but no positions so far. The risk reward can be disproportionate.
  5. The portfolio is overall green with a CAGR of 24%
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Here is the latest portfolio.

Sr. No Company Sector Capitalisation Allocation % Rationale
1 AVENUE SUPERMARTS LIMITED (XNSE:DMART) Services Large Cap 9% Longterm retail play, debt free
2 BSE Limited (XNSE:BSE) Financial Small Cap 9% Financialization theme
3 LAURUS LABS LIMITED (XNSE:LAURUSLABS) Healthcare Mid Cap 9% Growth
4 DEEPAK NITRITE LIMITED (XNSE:DEEPAKNTR) Chemicals Mid Cap 8% Growth
5 HCL TECHNOLOGIES LIMITED (XNSE:HCLTECH) Technology Large Cap 6% Coffee Can
6 ASTRAL LIMITED (XNSE:ASTRAL) Chemicals Mid Cap 6% Coffee Can
7 ABBOTT INDIA LIMITED (XNSE:ABBOTINDIA) Healthcare Large Cap 6% Coffee Can
8 HDFC ASSET MANAGEMENT COMPANY LIMITED (XNSE:HDFCAMC) Financial Large Cap 5% Financialization theme
9 NAZARA TECHNOLOGIES LIMITED (XNSE:NAZARA) Technology Small Cap 4% Promising sector for future
10 PSP PROJECTS LIMITED (XNSE:PSPPROJECT) Construction Small Cap 3% Asset Light business in construction
11 GATEWAY DISTRIPARKS LTD. (XNSE:GDL) Services Small Cap 3% Promising sector for future
12 INDIAN ENERGY EXCHANGE LIMITED (XNSE:IEX) Services Mid Cap 3% Growth
13 STERLITE TECHNOLOGIES LIMITED (XNSE:STLTECH) Communication Small Cap 3% Promising sector for future
14 PAGE INDUSTRIES LIMITED (XNSE:PAGEIND) Textiles Mid Cap 3% Coffee Can
15 Zomato Limited (XNSE:ZOMATO) Services Large Cap 2% Growth
16 HDFC BANK LIMITED (XNSE:HDFCBANK) Financial Large Cap 2% Coffee Can
17 MUTHOOT CAPITAL SERVICES LIMITED (XNSE:MUTHOOTCAP) Financial Small Cap 2% Coffee Can
18 KAVERI SEED COMPANY LTD. (XNSE:KSCL) FMCG Small Cap 2% Promising sector for future
19 OLECTRA GREENTECH LIMITED (XNSE:OLECTRA) Engineering Small Cap 2% Promising sector for future
20 TITAN COMPANY LIMITED (XNSE:TITAN) Cons Durable Large Cap 2% Longterm retail play, debt free
21 SBI CARDS AND PAYMENT SERVICES LIMITED (XNSE:SBICARD) Financial Large Cap 1% Growth
22 NMDC LIMITED (XNSE:NMDC) Metals Mid Cap 1% Almost monopoly, debt free
23 LIC HOUSING FINANCE LTD (XNSE:LICHSGFIN) Financial Mid Cap 1% Coffee Can
24 LUPIN LIMITED (XNSE:LUPIN) Healthcare Mid Cap 1% Coffee Can
25 KOVAI MEDICAL CENTER AND HOSPITAL LIMITED (XBOM:523323) Healthcare Small Cap 1% Tracking
26 AMBIKA COTTON MILLS LIMITED (XBOM:531978) Textiles Small Cap 1% Promising sector for future
Stocks
Top 5 42%
Top 10 65%
Top 15 79%
Top 20 88%
Market Cap
Large Cap 34%
Mid Cap 33%
Small Cap 33%
Sector Split
Financial 22%
Healthcare 17%
Services 17%
Chemicals 15%
Technology 10%
Textiles 4%
Construction 3%
Engineering 3%
Communication 3%
FMCG 2%
Cons Durable 2%
Metals 1%

Investing Objectives –

Return of Capital - :+1:
Beat BSE Sensex in terms of CAGR :+1:
Beat FD returns :+1:
Reach 15% CAGR :+1:
Beat MF(direct) returns (28% CAGR so far) :-1:

Changes - Added Olectra after increase of stake from promoter and buying from Nomura in the recent past. I am tracking this company from 2018 and the bet is on electric vehicles - city buses/inter-city buses/other optionality like trucks in future. The company is part of MEIL Group and supplies buses to EveyTrans company(another subsidiary of MEIL Group but not listed) which runs the buses on GCC(Gross Cost Contract). Added Nazara based on the this investment rationale.

Notes -

  1. There is no FOMO experience and happy with current CAGR(25%) as it is above my expected returns of 15%
  2. There was a massive selling seen in top weightage stocks like Laurus Labs and Deepak Nitrite which has reduced the returns a bit. I am planning to increase stake in both in the coming days.
  3. Healthy weightages across sectors with highest sector weightage of 22% and also market cap split.
  4. Services as a sector has given me great returns apart from Laurus Labs & BSE Limited - Avenue Supermarts, Gateway Distriparks, Indian Energy Exchange
  5. Closely tracking Nazara, Gateway distriparks and PSP Projects
1 Like

Here is the latest portfolio

Sr. No Company Sector Capitalisation Allocation % Rationale
1 HDFC ASSET MANAGEMENT COMPANY LIMITED (XNSE:HDFCAMC) Financial Large Cap 11% Financialization theme
2 BSE Limited (XNSE:BSE) Financial Small Cap 11% Financialization theme
3 AVENUE SUPERMARTS LIMITED (XNSE:DMART) Services Large Cap 10% Long-term retail play, debt free
4 HCL TECHNOLOGIES LIMITED (XNSE:HCLTECH) Technology Large Cap 8% Coffee Can
5 LAURUS LABS LIMITED (XNSE:LAURUSLABS) Healthcare Mid Cap 7% Growth
6 DEEPAK NITRITE LIMITED (XNSE:DEEPAKNTR) Chemicals Mid Cap 7% Growth
7 OLECTRA GREENTECH LIMITED (XNSE:OLECTRA) Engineering Small Cap 6% Promising sector for future
8 ABBOTT INDIA LIMITED (XNSE:ABBOTINDIA) Healthcare Mid Cap 5% Coffee Can
9 ASTRAL LIMITED (XNSE:ASTRAL) Chemicals Mid Cap 5% Coffee Can
10 NAZARA TECHNOLOGIES LIMITED (XNSE:NAZARA) Technology Small Cap 5% Promising sector for future
11 TITAN COMPANY LIMITED (XNSE:TITAN) Cons Durable Large Cap 4% Long-term retail play, debt free
12 DR. LAL PATHLABS Limited (XNSE:LALPATHLAB) Healthcare Mid Cap 3% Coffee Can
13 PSP PROJECTS LIMITED (XNSE:PSPPROJECT) Construction Small Cap 3% Asset Light business in construction
14 GATEWAY DISTRIPARKS LTD. (XNSE:GDL) Services Small Cap 3% Promising sector for future
15 PAGE INDUSTRIES LIMITED (XNSE:PAGEIND) Textiles Mid Cap 2% Coffee Can
16 INDIAN ENERGY EXCHANGE LIMITED (XNSE:IEX) Services Mid Cap 2% Growth
17 HDFC BANK LIMITED (XNSE:HDFCBANK) Financial Large Cap 2% Coffee Can
18 AMBIKA COTTON MILLS LIMITED (XBOM:531978) Textiles Small Cap 1% Tracking
19 KOVAI MEDICAL CENTER AND HOSPITAL LIMITED (XBOM:523323) Healthcare Small Cap 1% Tracking
20 LUPIN LIMITED (XNSE:LUPIN) Healthcare Mid Cap 1% Coffee Can
Stocks
Top 5 47%
Top 10 75%
Top 15 90%
Top 20 97%
Market Cap
Large Cap 36%
Mid Cap 33%
Small Cap 31%
Sector Split
Financial 24%
Healthcare 18%
Services 15%
Technology 14%
Chemicals 12%
Engineering 6%
Cons Durable 4%
Textiles 3%
Construction 3%

Investing Objectives –

Return of Capital - :+1:
Beat BSE Sensex in terms of CAGR :+1:
Beat FD returns :+1:
Reach 15% CAGR :+1:
Beat MF(direct) returns (26.8% CAGR so far) :-1: The difference is 1.4 now

Changes –

  • Removed stocks where conviction is less and wherever there is lesser allocation
    o Sold off Zomato, Cupid, Kaveri Seeds, LIC Housing Finance, Muthoot Capital Services, NMDC, Repco, SBI Cards
  • Increased allocation to Titan after Q2 FY22 results
  • Increased allocations in HCL Technologies, Abbott India & HDFC AMC when the market was trading in deep red
  • Sold off Zomato as it is more of a hope story and bought Dr. Lalpath labs during news of Omicron almost at the same price where I sold earlier
  • Increased allocation to Olectra based on the below rationale
    Olectra Greentech - Electric Bus Opportunity

Notes –

  • Understood that selling half of the shares once we the share price doubles is bad idea. In fact, selling decision should be taken based on the stock specific valuation or overall pf allocation for that sector
  • As I removed most of the tail(less allocations) , I deployed more capital into the high conviction ones
  • BSE Limited is more than 4x now
  • Increased allocation to defensives(IT,Pharma) to 31% and New Age(Nazara, Nykaa, Olectra) to 12%. The plan is to increase allocation to New Age businesses to 20% in future.
  • With 90% of allocation in Top 15 stocks, I will have more to do research per stock
  • Got Nykaa IPO allottment :blush:
  • Evaluating whether I am better off by moving equity to PMS or MF rather than direct investing. Looking forward to how I perform during bear market.

Interesting videos

  • Samit Vartak has beautifully explained about how to build a superior portfolio to generate 10x in 10 years
  • Another great learning about portfolio construction by SOIC
  • Very interesting discussion between Rakesh Jhunjhunwala and Akash Prakash from Amansa
5 Likes

Happy New Year !!

Here is the latest portfolio

Sr. No Company Sector Capitalisation Allocation % Rationale
1 HDFC ASSET MANAGEMENT COMPANY LIMITED (XNSE:HDFCAMC) Financial Large Cap 11% Financialization theme
2 BSE Limited (XNSE:BSE) Financial Small Cap 10% Financialization theme
3 AVENUE SUPERMARTS LIMITED (XNSE:DMART) Services Large Cap 9% Longterm retail play, debt free
4 HCL TECHNOLOGIES LIMITED (XNSE:HCLTECH) Technology Large Cap 9% Coffee Can
5 LAURUS LABS LIMITED (XNSE:LAURUSLABS) Healthcare Mid Cap 7% Growth
6 DEEPAK NITRITE LIMITED (XNSE:DEEPAKNTR) Chemicals Mid Cap 7% Growth
7 ASTRAL LIMITED (XNSE:ASTRAL) Chemicals Mid Cap 5% Coffee Can
8 OLECTRA GREENTECH LIMITED (XNSE:OLECTRA) Engineering Small Cap 5% Promising sector for future
9 ABBOTT INDIA LIMITED (XNSE:ABBOTINDIA) Healthcare Mid Cap 5% Coffee Can
10 DR. LAL PATHLABS Limited (XNSE:LALPATHLAB) Healthcare Mid Cap 5% Coffee Can
11 NAZARA TECHNOLOGIES LIMITED (XNSE:NAZARA) Technology Small Cap 4% Promising sector for future
12 TITAN COMPANY LIMITED (XNSE:TITAN) Cons Durable Large Cap 4% Longterm retail play, debt free
13 GATEWAY DISTRIPARKS LTD. (XNSE:GDL) Services Small Cap 3% Promising sector for future
14 PSP PROJECTS LIMITED (XNSE:PSPPROJECT) Construction Small Cap 3% Asset Light business in construction
15 PAGE INDUSTRIES LIMITED (XNSE:PAGEIND) Textiles Mid Cap 2% Coffee Can
16 INDIAN ENERGY EXCHANGE LIMITED (XNSE:IEX) Services Mid Cap 2% Growth
17 HDFC BANK LIMITED (XNSE:HDFCBANK) Financial Large Cap 2% Coffee Can
18 AMBIKA COTTON MILLS LIMITED (XBOM:531978) Textiles Small Cap 1% Tracking
19 KOVAI MEDICAL CENTER AND HOSPITAL LIMITED (XBOM:523323) Healthcare Small Cap 1% Tracking
20 LUPIN LIMITED (XNSE:LUPIN) Healthcare Mid Cap 1% Coffee Can
Stocks
Top 5 46%
Top 10 74%
Top 15 91%
Top 20 97%
Market Cap
Large Cap 35%
Mid Cap 36%
Small Cap 30%
Sector Split
Financial 23%
Healthcare 20%
Services 15%
Technology 14%
Chemicals 13%
Engineering 6%
Cons Durable 4%
Textiles 3%
Construction 3%

Investing Objectives –

Return of Capital - :+1:
Beat BSE Sensex in terms of CAGR :+1:
Beat FD returns :+1:
Reach 15% CAGR :+1:
Beat MF(direct) returns (26.9% CAGR so far) :-1:

Changes –

  • Increased allocation to Dr. Lalpath labs and a little to Astral when the market was down
  • Sold Off Quantum Long-Term Equity MF. With this, beating MF returns becomes even more difficult. Especially, I am no longer buying any SIP or lumpsum while I am doing some investments in direct equity

Notes –

  • The allocation to defensives(Pharma.Tech) is 33% now and New Age(Nykaa, Nazara, Olectra) at 10%
  • Samit Vartak’s words on superior portfolio construction(how to make 10x in 10 years) and always looking at future market cap of the stock while investing has made a profound impact on my current investing thought process
  • The portfolio is evenly balanced across market cap sizes
  • The top 10 allocations are now filled with high conviction ones and in most cases has a history about their narratives and numbers. To break into the top 10 now, is very difficult. The only rookie stocks I see are
  1. BSE Limited which I think can hold the place for it is a duopoly and will remain as long as stock markets are present in India. The optionality of 20% stake in CDSL and monetisation of BSE Star MF and India Inx(GIFT City) along with Cash Balance of 2200 Cr makes it more safer.

  2. Olectra Greentech is aggressively capturing the market share in Electric Bus segment. Its order growth and execution seems to be impressive. The way they are operating intercity buses between Pune to Mumbai only shows the intention that they are not just looking at State Road Transport Units. Its foray into EV 3-Wheelers and Electric Trucks will increase the opportunity size.

  • 2021 has been a great year in terms of learning as well as returns in direct equity. The portfolio 1 Year returns are 62.2% and overall CAGR is 25.5

Outlook for CY 2022

As per the below text, it is clear that ETFs may not be outperforming the Active Mutual Funds due to the fact that the rally is broad-based across sectors/companies in Nifty. Corporate India is at one of the lowest profit to GDP ratio and having very much de-leveraged(debt/equity ~ 1.6) with balance sheets displaying strength just like start of a bull run in 2003.

the below image gives us the direction that Nifty most probably will underperform the broader market(Mid and Small Caps)

Government of India along with RBI has been coming up with supportive fiscal and monetary policies, and hopefully will continue to keep the corporate tax lower at 25%. PLI schemes,China+1 in selective spaces like chemicals will also aid further growth in earnings.

With Covid-19 hitting much of MSME industries, I believe the organised players will aggressively increase their market share. It will be much more prevalent in Small Caps.

The key risks I see is the inflation which can spoil the party. Also, never in last 10 years, one asset class has been dominant for three years in a row. In fact, not even two years in a row. However, Covid itself is an exception.
https://twitter.com/gvkreddi/status/1476240907657646081

Based on the above rationale, I am continuing with 70% Equity( and 30% Debt) and having defensives as 33% within equity to give some comfort in case market turns bearish. I see the signs that in the near term, it does.

Interesting Videos -

  1. Ashwath Damodaran is hitting a nail in my head that I should firmly understand valuation. Our assumptions for valuation can go wrong but without valuation it is akin to shooting in the dark. This remains one of my key learning areas for 2022. Professor is so much for disruption in education that he has kept his entire valuation class recordings in YouTube.
  1. @basumallick in the below podcast has explained very well about how to become financially independent with calculations from 1:08:24 to 1:10:45. The entire podcast is very good - Thanks @vivek_mashrani and @basumallick for this. Now, if we can identify one 100x company in 15 years where we allocate say 10% of portfolio, our portfolio returns will itself becomes 10x with this one great choice. However, the catch as mentioned in the video, in India, generally, the 20+ CAGR growth may not sustain after 5 years for most companies. This is where some of the 100x companies of the past like Astral are expanding to other adjacencies(Adhesives, Tanks, Faucets etc) whenever they see limited scope for margin expansion with existing verticals. This theme is visible in other such multi-baggers like Page Industries, Deepak Nitrite and Pidilite Industries. Laurus Labs seems to exhibit these characteristics but we don’t have too much of history to ascertain. Now, the most important question is - Can I identify one such company in next 2 years and stay through it in thick and thin like Rakesh Jhunjhunwala stayed put with Titan? There will be long stagnations and also significant drawdowns resulting in short term opportunity costs. If I identify one and has the vision to stay long, the incentive is - I will be financially independent in 15-17 years.
  1. As usual, Motilal Oswal’s wealth creation study gave good insights on what worked and what did not work in last few years. The enthusiasm with which Raamdeo Agrawal presents the study makes it inquisitive to watch.
10 Likes

Interesting insights from this thread. Thank you @Southern_Cross for sharing your journey so far.

Would you please elaborate how the different MF you invested performed on CAGR wise as I do see MF was ahead of direct equity. Trust you are measuring CAGR for the same periods for both equity and MF.

2 Likes

@james_kerala - Thanks for dropping by.

From March-19 to December-20, I invested in the below MFs through direct route using SIP. I did one additional SIP in March-20 for all except DSP Healthcare. I did 3 extra SIPs for DSP Healthcare in March-20. SBI Small Cap is from July-18. I stopped all SIPs in December-20.

Fund Return
Axis Midcap 39
DSP Helthcr 43
Invesco India Contra 30
Parag Parikh Flexi Cap 42
Quantum LT Eqt Value 24
SBI Small Cap 37
Overall Mutual Funds 27

In my case, my capital is fixed and did not add any incremental amounts. Now, the reason why I was comparing between my performance as Investor_MF and Investor_Stock is to check the best pathway for my portfolio. In the case of MF, the best returns come when we invest during the down cycle. After watching the carnage of Mid and Small Caps in 2018, as seen in the above table, I invested in sector/caps which were out of favour. As I cannot time the market, I opted to SIP route. If you look into the below chart , it gives you the correlation between CNXSMALLCAP(Nifty Small CAP 100 Chart) with NIFTY 50. The Small Caps peaked in 2017 and then they were down till Apr-20. If we accumulate the SIPs during the downcycle, the returns will be maximum.

Now, I cannot compare between MF and Stocks as the best case for these investments are different. Like, the SIPs in 2021 will not yield great results compared to ones accumulated in 2020. Ideally, the best case for MF investor will be putting yearly SIP as lumpsum for each 1000 points drawdown in Nifty starting from March 2020. This is because in March-2020, some of the stock prices were similar to 2013/2014. However, I added only 1 extra SIP as I felt, I may do better as stock_investor.

In Small Cap MFs, I personally like SBI Small Cap.

Lets say you invest in SIP in SBI Small Cap, the amount did not show great returns till Jul-20 from Jan-17 but after that the returns will be disproportionate. If you have long horizon and able to top up in huge drawdown cases like March-2020, the CAGR of this small cap fund is very impressive.

Hope I answered your question.

5 Likes

Here is the portfolio update for January 2022

Sr. No Company Sector Capitalisation Alloc % Rationale
1 HDFC ASSET MANAGEMENT COMPANY LIMITED (XNSE:HDFCAMC) Financial Large Cap 10% Financialization theme
2 BSE Limited (XNSE:BSE) Financial Small Cap 8% Financialization theme
3 AVENUE SUPERMARTS LIMITED (XNSE:DMART) Services Large Cap 8% Long-term retail play, debt free
4 HCL TECHNOLOGIES LIMITED (XNSE:HCLTECH) Technology Large Cap 8% Coffee Can
5 LAURUS LABS LIMITED (XNSE:LAURUSLABS) Healthcare Mid Cap 7% Growth
6 OLECTRA GREENTECH LIMITED (XNSE:OLECTRA) Automobile Small Cap 7% EV theme
7 DR. LAL PATHLABS Limited (XNSE:LALPATHLAB) Healthcare Mid Cap 7% Coffee Can
8 DEEPAK NITRITE LIMITED (XNSE:DEEPAKNTR) Chemicals Mid Cap 6% Growth
9 ASTRAL LIMITED (XNSE:ASTRAL) Chemicals Large Cap 5% Coffee Can
10 NAZARA TECHNOLOGIES LIMITED (XNSE:NAZARA) Technology Small Cap 5% Promising sector for future
11 ABBOTT INDIA LIMITED (XNSE:ABBOTINDIA) Healthcare Mid Cap 4% Coffee Can
12 PSP PROJECTS LIMITED (XNSE:PSPPROJECT) Construction Small Cap 4% Asset Light business in construction
13 TITAN COMPANY LIMITED (XNSE:TITAN) Cons Durable Large Cap 4% Long-term retail play, debt free
14 GATEWAY DISTRIPARKS LTD. (XNSE:GDL) Services Small Cap 3% Promising sector for future
15 JBM AUTO LIMITED (XBOM:532605) Automobile Small Cap 3% EV theme
16 PAGE INDUSTRIES LIMITED (XNSE:PAGEIND) Textiles Mid Cap 2% Coffee Can
17 INDIAN ENERGY EXCHANGE LIMITED (XNSE:IEX) Services Mid Cap 2% Growth
18 HDFC BANK LIMITED (XNSE:HDFCBANK) Financial Large Cap 2% Coffee Can
19 Fsn E-Commerce Ventures Ltd (XNSE:NYKAA) Services Large Cap 1% Growth
20 LUPIN LIMITED (XNSE:LUPIN) Healthcare Mid Cap 1% Coffee Can
Stocks
Top 5 42%
Top 10 72%
Top 15 91%
Top 20 99%
Market Cap
Large Cap 38%
Mid Cap 30%
Small Cap 31%
Sector Split
Financial 21%
Healthcare 19%
Services 15%
Technology 13%
Chemicals 12%
Automobile 10%
Cons Durable 4%
Construction 4%
Textiles 2%

Investing Objectives –

Return of Capital - :+1:
Beat BSE Sensex in terms of CAGR :+1:
Beat FD returns :+1:
Reach 15% CAGR :+1:
Beat MF(direct) returns (25.4% Vs 23% CAGR) :-1:

Changes -

  • Increased allocation to Dr. Lalpath labs and a little to HDFC AMC, Olectra, Nazara, Nykaa and PSP Projects
  • Added JBM Auto and with this Auto sector allocation comes to 10%
  • Did some profit booking of BSE Limited
  • Sold off majority of tracking positions

Notes -

  • The MF portfolio CAGR is down by 1.4 where as stock PF is down by 2.5

  • The defensives Pharma and Technology have fallen the most

    • HCL Technologies, Dr Lalpath labs, Abbott India, Nykaa have fallen more than 10%
  • Read “The Warren Buffett Way” and really impressed with it - captured notes here

    • The book explains about the 12 tenets Warren Buffett uses to select a business to invest
    • The first principles are very important in investing and if we have them correct, much of the risk will be out of the way. The psychology of investing and value of patience are something as important as business analysis and valuation
    • The book makes a case for focus investing and also how long-term thinking reduces the risk of losing money and does best for wealth creation. To be clear, this is not the only way to generate wealth.
    • The efficient market theory says the stocks are valued perfectly and it is almost impossible to beat the market. If we translate this to individual investor case, System 1 thinking (Quick process based on intuition and general information) will not be sufficient to beat the market and to beat the market, you need to bet against the existing valuation which is possible with System 2 thinking(Slow process based on profound business analysis, connect the different mental models and should fall under investment category and not speculation). System 2 thinking needs one to dedicate more time to master the arts of valuation, patience, portfolio management, constant learning, investment psychology and lots of reading. So, if we cannot imbibe System 2 thinking, its better to go with index investing where your time is not much required and at the same time, you will be able to get satisfactory returns of 12-15% and if we can take advantage of some market corrections, can get 15% CAGR. In 30 years, it will translate to 66 times your capital. Now, with System 2 thinking, if we generate 18% CAGR, it gives you 142 times and for 20% CAGR, it gives you 237 times your capital. So, the incentive is there in System 2 thinking, whether you have the intent matters. As per Buffett and the author, you don’t need high IQ to beat the index but interest and hard work to beat the market.
  • Charlie Munger compares investing to Parimutuel betting

    • With a greater degree of certainty we can assume, Titan or HDFC Bank or Avenue Supermarts will generate 10-12% CAGR. However, the goal is to achieve15% or more. Hence, the need to take calculated risk in Mid and Small Caps. How can I reduce the risk? Understand more about the company and sector and enhance accounting skills, technical analysis and valuation.

Interesting Videos -

A thorough understanding of Indian diagnostic sector and Dr Lalpath Labs MD - Om Manchanda explains the business. If someone is holding Dr Lalpath labs, this gives a better understanding of their business model and moats. Saurabh Mukherjea has asked all the appropriate questions. The Return on Invested Capital(ROIC) is 90% for this business… and within a market of 80,000 Cr, the organised pathlabs like Dr. Lalpath labs are constituting only 6% market share.

Pranjal Kamra explains in this video about how things are going to change in metaverse world. It may or may not happen but there are cues on what else is possible in virtual world

In this video, Saurabh highlights the monopolist characteristics. Also,the incentive bias which differentiates a company which has higher technology, greater market reach losing to others inspite of great valuation comfort.

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I have some questions regarding your portfolio…

  1. How much do you think Covid played part in growth of Dr. Lal Pathlabs?
  2. What are your thoughts on FED rate hikes and its effects on high P/E companies in your portfolio?

Thanks for your questions.

Here is my attempt to answer your questions

  1. Covid has impacted the business of Non-Covid for Dr. Lalpath labs in the initial quarters of the pandemic. In Q2 FY22 revenue, 90% is from Non-Covid business which means it almost regained earlier revenue mix. What Covid has brought to us is the healthcare awareness apart from taking term insurance. Majority of the people will now go through the precautionary/yearly/half-yearly check-ups which will eventually benefit the diagnostic businesses. Dr. Lalpath labs has got the omni channel presence and so is the distribution reach. The company has consciously invested in technology(AWS case study) in 2017 to reduce the turn around time for a medical test result - most of the times within a day. During distress times like in the pandemic, the strong ones become even stronger. The management is also excellent capital allocator, they did not raise any capital from market till now and recently acquired Suburban Diagnostic chain in an all cash deal of ~1000 Cr. Many senior investors in valuepickr as well as Warren Buffett consider this to be one of the key tenet for a great business.

Further information…

The MD has mentioned a use case about how the patient medical data can help in differential pricing in case of insurance in the video link I posted. In fact, they also started the vertical Genevolve as next growth area. From what I understand, based on the past medical data, there is a 70% chance that they can predict the future possibilities. Now, here we have Dr. Lalpath labs ahead of other chains in technology and also understands the use cases of data and has the data.

Recently, there is a news of capping of RT-PCR test cost in Delhi.

The government reduced the RT-PCR price as well as asked the diagnostic chains to report the positive case information within 12 hours. The small chains could not break even as well as will not have infrastructure to report within 12 hours mandate. Again, the stronger ones like Dr. Lal will take more volumes now, which will at least compensate for their Covid revenue that is again only 10% of total revenue. I increased allocation gradually during this time.

  1. What are your thoughts on FED rate hikes and its effects on high P/E companies in your portfolio?

I am still trying to understand macros.
What happens when FED rate hikes?

  • The excess liquidity is taken out which means some of the FII/FPIs will reduce their share-holding in some of the stocks/ETFs they own as they need to rejig their asset mix balance. This can have some impact on the share-prices of stock where FII/FPIs hold more share-holding. In some cases, the DIIs and retail buy these in case they are of good quality. All through 2021, there was continuous selling from FII/FPIs. Most foreign inflows are indirectly based on MSCI Emerging Markets index. Now, for them to return, India should be in attractive valuation within the emerging markets space - India, China, Taiwan, South Korea and Brazil constitute ~80% of the MSCI Emerging Markets Index.

I don’t know when India becomes attractive in terms of valuation comfort. However, South Korea has been lobbying to get its position moved from emerging markets to developed markets index.This rejig decision will happen in FY24 and so the decision will be out in Mid-FY23. If this happens, a big majority of flows can move to India as it is one of the fastest growing economies in large countries in terms of GDP and also relatively stable. This can again bring in some flows to India.

  • Funds will be difficult for the capex heavy companies. Corporate India is very much de-leveraged now and banks are far away from NPA mess and in much comfortable position to lend. In case of interest rate hikes in India, the companies with debt, will have more interest outlay that will reduce PAT.

Here are the high P/E companies in my PF.

Company P/E
Fsn E-Commerce Ventures Ltd (XNSE:NYKAA) 2,227.64
OLECTRA GREENTECH LIMITED (XNSE:OLECTRA) 250.91
AVENUE SUPERMARTS LIMITED (XNSE:DMART) 184.95
NAZARA TECHNOLOGIES LIMITED (XNSE:NAZARA) 153.27
TITAN COMPANY LIMITED (XNSE:TITAN) 123.56
PAGE INDUSTRIES LIMITED (XNSE:PAGEIND) 109.31
ASTRAL LIMITED (XNSE:ASTRAL) 85.44
JBM AUTO LIMITED (XBOM:532605) 78.75
INDIAN ENERGY EXCHANGE LIMITED (XNSE:IEX) 74.16
DR. LAL PATHLABS Limited (XNSE:LALPATHLAB) 60.97

There is a history for Astral, Page, Avenue Supermarts, Titan and these companies will have elevated P/E as they demonstrated superior capital allocation, great management pedigree and consistent performance. They fall under consistent compounders and given my investment horizon, I don’t see any issue with them.

Nykaa and Nazara is at very high P/E but then there is no debt part to it. Both these companies do not raise capital for their operational purposes. These are new age and so will take more time to show numbers that justify their valuation.

Dr. Lal Pathlabs doesn’t have debt and market gives a premium P/E for these companies for their management pedigree and capital allocation

IEX is a long term bet on channelising the power/gas into exchanges from long-term contracts and it does not have debt or needs to raise capital from market

Olectra does not have any debt but it needs to raise capital for its growth. No problems here as the promoter is having money muscle and as mentioned in the Nov 21 ICRA report, they are in a very comfortable situation to support the growth plans of Olectra. The only company with reasonable debt(d/e ~1.44) is JBM Auto which forms 3% of PF. This is something I see as benefit of EV theme. The management guided that they will deliver 700 E-Buses by March 2022 and it is a play on CNG and E-Buses. At the moment, it is a risk I am willing to take.

Above all, in the case of massive drawdown, I will buy some more equity by reducing debt component further.

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A few months back I was watching the annual iPhone launch event and when I saw the latest features of the Apple Watch, it got me thinking about the inherent strength of the business model of Dr Lal Path Labs.

Apple Watch initially introduced heart rate monitoring, then a year later it added irregular heart rhythm notifications. Another year later it added the ability to take an ECG (for which we currently go to a diagnostic imaging center) and now in the latest avatar it has also added the ability to measure your blood oxygen saturation levels (for which medical devices up to Rs 3000 have been widely purchased in the past 2 years necessitated by Covid). Every year, a new medical feature is being introduced on the Apple Watch. But this is not about the Apple Watch.

This is about the business model of Dr Lal Path Labs. What is the business of Dr Lal Path Labs? It’s nothing but taking different kinds of human body samples (blood, urine, etc.) and giving you a diagnostic report of your body’s key metrics (example - blood glucose, cholesterol, haemoglobin, thyroid, vitamins, etc. etc.). And I have just 1 basic question for this business.

Why is this business not an ideal candidate for technological disruption and why will technology not progress enough in 8-10 years that most key/common metrics of a human body are available at the click of a button on a watch or some kind of smart medical device?

The only answer I can think of is that the blood samples need to go through multiple different tests in an accredited laboratory which would not be feasible in a normal medical device.

The whole future of Dr Lal Path Labs hinges on this question according to me. Because once technology advances, most health care / diagnostic businesses will see a sharp sharp decline in revenues apart from very advanced/complex tests which can only be done in a laboratory.

This sole question is why I didn’t pile on to Dr Lal in the recent correction else it’s a fabulously well run company.

PS: If somebody comes back saying the Apple Watch costs 40-50k or those medical devices would be exorbitant, then please just think about the pace at which technology becomes cheap as well. The same watch would be available at less than half price in 3 years. Anyways, we all know how Chinese competitors work at lightspeed to copy latest technology and making it democratic for the entire world to use.

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Its already happening , https://bluesemi.io/ IITH incubated startup has non-invasive device to measure many vital parameters.
BlueSemi launches non-invasive consumer healthcare gadget EYVA
Many other healthcare innovations are being bootstrapped in IITH .

Not everything in this space might get disrupted , there will be some test which will need labs .

Not tracking or invested here .

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You need to check your labs regularly if.you have chronic issues. Maximum people generally go to lab when doctors tell them to go. Doctors will always tell you to go to lab. Apple will not certify the results of their devices but a lab will do.

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Here’s a doctor for you using technology for a patient check-up

The threat is not imminent, certainly not in the next 3-4 years but from a long term cash flow discounting perspective there are grave threats in my view.

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Dr. Lalpath labs or for that reason any diagnostic lab is a facilitator for the doctor to understand the condition of the patient’s current condition by providing medical reports. The first thing to note here is the accreditation from government as that is one of the sole reason why not anyone can set up a lab. If we look at the bigger picture, there are devices to measure the diabetes level but then doctor asks for a report from a diagnostic lab only. The other way to look at is, whether there is any reduction in opportunity size in the market.

During its IPO, the MD mentioned the diagnostic market was 37000 Cr and growing about 16-18% which is fastest within healthcare sector. The reason why it is growing this fast is due to rise in incidents related to lifestyle disorders, practice of medicine is becoming more evidence based and as healthcare awareness goes up, people are going for preventive healthcare check-ups.

All the above points are relevant even now and as per capita income increases, the market size also expands. Based on the below article, the domestic diagnostic industry estimated at $9 billion (around Rs 675 billion), would grow at a compounded annual growth rate (CAGR) of ~10 per cent over the next five years. The pathology segment contributes ~58 per cent of total market revenue, the bulk of this sector. In a market where diagnostic chains command approximately 16 per cent market share, the Edelweiss report predicted consolidation, with national players increasing their market share.

https://www.expresshealthcare.in/news/testing-times-for-indias-diagnostics-sector/429422/

Now, within the 16 per cent market share of diagnostic chains, the bigger ones - Dr Lalpath labs, Metropolis, Thyrocare and SRL diagnostics together constitute only 6%. My understanding is, there is going to be lot of consolidation left in this industry and the overall market opportunity itself is expanding. Like in IT, automation reduced some work load and it did not hinder the market as consultants are focusing on more productive work, I assume, in the diagnostic industry as well , the less complex ones which are substituted with better technology, gives way to next level of tests.

Especially, the government is looking at creating digital health records which is announced as part of the current budget. The diagnostic labs have a role to play here and only the certified records will be maintained as sanity of data is of utmost importance here. In fact, Om Manchanda(MD) is aware of the technology disruption based on the talks in Marcellus team video. The companies which are looking at consistent 35% ROCE growth, cannot afford to miss revenue visibility for next few years so soon. Even if they do, they will be reminded in the quarterly concalls. In the video, they showcased Dr Lalpath labs gained market share during Covid compared to others.

In the end, Saurabh Mukherjea after his channel checks, will meet the management and share his observations, before dropping Dr. Lalpath labs from Coffee Can Portfolio stocks…

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Here is the portfolio update for February 2022

Sr. No Company Sector Capitalisation Allocation % Rationale
1 BSE Limited (XNSE:BSE) Financial Small Cap 12% Financialization theme
2 HDFC ASSET MANAGEMENT COMPANY LIMITED (XNSE:HDFCAMC) Financial Mid Cap 11% Financialization theme
3 AVENUE SUPERMARTS LIMITED (XNSE:DMART) Services Large Cap 9% Long-term retail play, debt free
4 HCL TECHNOLOGIES LIMITED (XNSE:HCLTECH) Technology Large Cap 8% Coffee Can
5 LAURUS LABS LIMITED (XNSE:LAURUSLABS) Healthcare Mid Cap 8% Growth
6 OLECTRA GREENTECH LIMITED (XNSE:OLECTRA) Automobile Small Cap 6% EV theme
7 DR. LAL PATHLABS Limited (XNSE:LALPATHLAB) Healthcare Mid Cap 6% Coffee Can
8 DEEPAK NITRITE LIMITED (XNSE:DEEPAKNTR) Chemicals Mid Cap 6% Growth
9 ABBOTT INDIA LIMITED (XNSE:ABBOTINDIA) Healthcare Mid Cap 5% Coffee Can
10 ASTRAL LIMITED (XNSE:ASTRAL) Chemicals Mid Cap 5% Coffee Can
11 NAZARA TECHNOLOGIES LIMITED (XNSE:NAZARA) Technology Small Cap 4% Promising sector for future
12 TITAN COMPANY LIMITED (XNSE:TITAN) Cons Durable Large Cap 4% Long-term retail play, debt free
13 PSP PROJECTS LIMITED (XNSE:PSPPROJECT) Construction Small Cap 4% Asset Light business in construction
14 GATEWAY DISTRIPARKS LTD. (XNSE:GDL) Services Small Cap 4% Promising sector for future
15 Fsn E-Commerce Ventures Ltd (XNSE:NYKAA) Services Large Cap 3% Growth
16 INDIAN ENERGY EXCHANGE LIMITED (XNSE:IEX) Services Mid Cap 2% Growth
17 HDFC BANK LIMITED (XNSE:HDFCBANK) Financial Large Cap 2% Coffee Can
Stocks
Top 5 48%
Top 10 76%
Top 15 97%
Market Cap
Large Cap 26%
Mid Cap 43%
Small Cap 31%
Sector Split
Financial 25%
Healthcare 20%
Services 17%
Technology 13%
Chemicals 11%
Automobile 6%
Cons Durable 4%
Construction 4%
Defensive 32%
New Age/Theme 14%

Investing Objectives –

Return of Capital - :+1:
Beat BSE Sensex in terms of CAGR :+1:
Beat FD returns :+1:
Reach 15% CAGR :+1:
Beat MF(direct) returns (23% Vs 20% CAGR) :-1:

Changes -

  • Consolidated holdings further and currently 97% of holdings in top 15 stocks

  • Sold off JBM Auto at 5% loss on the day of Q3 results as conviction is not very high

  • In the textiles category, sold off Page Industries(2% of PF) at 42.5k and bought Ambika Cotton Mills(3% PF) on the day of its results. I sold off Ambika at 20% profit within few days as my understanding of its business is very less. In the future, I will buy Page Industries again

  • Bought Nykaa at 1330, taking allocation to 3%. I don’t know how to value it properly but fundamentally it seems to have a characteristics of a compounder

  • I increased allocation to Dr. Lalpath labs further

  • Bought the same amount of stake in BSE Limited which I sold in January after results and increase of stake further by Zerodha

Notes -

  • The MF portfolio CAGR is down by 2.4% where as stock PF is down by 3%

  • Stock PF is down by 10% from All time high in Oct-21 and also YTD

  • HDFC AMC is categorized to Mid Cap from Large Cap and so the weightage of Mid Cap is higher at 43%. HDFC AMC was focus stock of the month and I am still convinced about investing in it after doing some more research.

  • There was a lot of temptation to buy GPIL after following the excellent analysis presented in the VP thread at around 260. I stayed away from it as I can get immediate profit however without efforts and understanding of that sector will have a long term impact on my PF performance as well as the confidence. One of my client asked me whether we have any prediction capabilities, I asked him whether they have a strong business case and sponsor who can support it. Here in this case, I am the sponsor and I am not yet ready. In general, discretion is the theme of February.

  • Changed my job in the best interests of raising capital as well as prudent capital allocation of my time

  • I connected with some seniors in VP and their views and counter arguments have opened the doors further on investment analysis. Networking is one of the key benefits of Valuepickr and an essential element to lessen the unknowns in investing. Couldn’t find enough time these days…

  • I did tax harvesting by selling 30% of my PF on March 4th. I will deploy the proceeds slowly in coming weeks. Incidentally, it coincided with continuing war reaching the nukes.

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Here is the portfolio update for March 2022

Sr. No Company Sector Capitalisation Alloc % Rationale
1 BSE Limited (XNSE:BSE) Financial Small Cap 15% Financialization theme
2 HDFC ASSET MANAGEMENT COMPANY LIMITED (XNSE:HDFCAMC) Financial Mid Cap 12% Financialization theme
3 AVENUE SUPERMARTS LIMITED (XNSE:DMART) Services Large Cap 8% Long-term retail play, debt free
4 HCL TECHNOLOGIES LIMITED (XNSE:HCLTECH) Technology Large Cap 8% Coffee Can
5 LAURUS LABS LIMITED (XNSE:LAURUSLABS) Healthcare Mid Cap 8% Growth
6 DR. LAL PATHLABS Limited (XNSE:LALPATHLAB) Healthcare Mid Cap 8% Coffee Can
7 OLECTRA GREENTECH LIMITED (XNSE:OLECTRA) Automobile Small Cap 6% EV theme
8 DEEPAK NITRITE LIMITED (XNSE:DEEPAKNTR) Chemicals Mid Cap 6% Growth
9 ABBOTT INDIA LIMITED (XNSE:ABBOTINDIA) Healthcare Mid Cap 5% Coffee Can
10 ASTRAL LIMITED (XNSE:ASTRAL) Chemicals Mid Cap 5% Coffee Can
11 TITAN COMPANY LIMITED (XNSE:TITAN) Cons Durable Large Cap 4% Long-term retail play, debt free
12 PSP PROJECTS LIMITED (XNSE:PSPPROJECT) Construction Small Cap 4% Asset Light business in construction
13 GATEWAY DISTRIPARKS LTD. (XNSE:GDL) Services Small Cap 4% Promising sector for future
14 Fsn E-Commerce Ventures Ltd (XNSE:NYKAA) Services Large Cap 4% Growth
15 INDIAN ENERGY EXCHANGE LIMITED (XNSE:IEX) Services Mid Cap 2% Growth
16 HDFC BANK LIMITED (XNSE:HDFCBANK) Financial Large Cap 2% Coffee Can
Stocks
Top 5 51%
Top 10 80%
Top 15 98%
Market Cap
Large Cap 25%
Mid Cap 47%
Small Cap 28%
Sector Split
Financial 29%
Healthcare 21%
Services 17%
Chemicals 12%
Technology 8%
Automobile 6%
Cons Durable 4%
Construction 4%
Defensive 29%
New Age/Theme 9%

Investing Objectives –

Return of Capital - :+1:
Beat BSE Sensex in terms of CAGR :+1:
Beat FD returns :+1:
Reach 15% CAGR :+1:
Beat MF(direct) returns (23.5% Vs 22% CAGR) :-1:

Changes -

  • Bought back most of the earlier holdings sold during tax harvesting except Nazara
  • Added more HDFC AMC and Dr Lalpath Labs

Notes -

  • The Equity Vs Debt is at 70:30 and within Equity Stocks Vs MF at 75:25
  • MFs entered at a favourable valuation of market, is a much safer investment option especially during transition to retirement phase than direct stock investments
  • BSE Limited share price has increased by 90% in last 6 months, it being one of the top holdings boosted the overall PF CAGR
  • It is better to buy stocks immediately after tax harvesting rather than giving time. Even though I still benefitted from it but lost some profit due to short melt-up after the sell off
  • Achieving 10 year CAGR of 15 is much tougher compared to one year CAGR of 60. I remember Zerodha CEO making a comment that only 1% of traders beat FD returns CAGR in a 3 year horizon.
  • HDFC AMC may become like Unilver of 2000s, which did not give meaningful returns for a long time before turning multibagger. With merger of HDFC and HDFC Bank, I think the distribution reach will be more for HDFC AMC however HDFC Life which is another group company is an indirect competitor with their pension funds. One interesting obervation is, standard life which is JV partner of both HDFC Life and HDFC AMC chose to keep more stake in HDFC AMC than HDFC Life. Can the current inflation dents investor’s confidence and make them go debt side where HDFC is the leader? Can HDFC AMC tap NR(Retail) opportunity with their GIFT city subsidiary? Have to see how things unfold here.
  • On abolute terms, PF is down by 2% in CY2022

Interesting video

Sankaren Naren from ICICI MF speaks(in English) about his experiences in investing of over 3 decades. One of the key things he mentioned is, usually the investors make best decisions during their 3rd cycle and it is that patience to wait till that 3rd cycle, creates wealth

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hello sir…In case of 30% debt, where you invest?
also in case of Mutual funds, kindly share the schemes of your preference. And do you think that these schemes will be performimg even after 5 to 7 years or you will reshuffle them to new performing funds…
Also instead of Tax harvesting …in case of monthly expenditures in future, we can withdraw as and when required from portfolio and thus withdrawal will not attarct much tax…thus avoiding the large taxes…Anyways we never need to liquidate the whole portfolio at one point of time…

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@Mudit.Kushalvardhan - I keep my debt part in FDs and savings account. I tried debt funds earlier but after Franklin Templeton’s debt fund fiasco, I stopped it even though I was not affected by it. I explained about my MFs here

I prefer to keep them as long as possible due to its safety and take advantage of compounding without paying much tax. However, I recently sold off Quantum MF scheme as its performance is not upto the mark. I do tax harvesting to also pay less tax in future.

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Here is the portfolio update for April 2022.

Sr. No Company Sector Capitalisation Alloc % Rationale
1 BSE Limited (XNSE:BSE) Financial Small Cap 15% Financialization theme
2 HDFC ASSET MANAGEMENT COMPANY LIMITED (XNSE:HDFCAMC) Financial Mid Cap 12% Financialization theme
3 AVENUE SUPERMARTS LIMITED (XNSE:DMART) Services Large Cap 8% Long-term retail play, debt free
4 HCL TECHNOLOGIES LIMITED (XNSE:HCLTECH) Technology Large Cap 8% Coffee Can
5 LAURUS LABS LIMITED (XNSE:LAURUSLABS) Healthcare Mid Cap 8% Growth
6 DR. LAL PATHLABS Limited (XNSE:LALPATHLAB) Healthcare Mid Cap 7% Coffee Can
7 DEEPAK NITRITE LIMITED (XNSE:DEEPAKNTR) Chemicals Mid Cap 7% Growth
8 OLECTRA GREENTECH LIMITED (XNSE:OLECTRA) Automobile Small Cap 5% EV theme
9 ABBOTT INDIA LIMITED (XNSE:ABBOTINDIA) Healthcare Mid Cap 5% Coffee Can
10 ASTRAL LIMITED (XNSE:ASTRAL) Chemicals Mid Cap 5% Coffee Can
11 TITAN COMPANY LIMITED (XNSE:TITAN) Cons Durable Large Cap 4% Long-term retail play, debt free
12 PSP PROJECTS LIMITED (XNSE:PSPPROJECT) Construction Small Cap 4% Asset Light business in construction
13 GATEWAY DISTRIPARKS LTD. (XNSE:GDL) Services Small Cap 4% Promising sector for future
14 Fsn E-Commerce Ventures Ltd (XNSE:NYKAA) Services Large Cap 3% Growth
15 INDIAN ENERGY EXCHANGE LIMITED (XNSE:IEX) Services Mid Cap 2% Growth
16 HDFC BANK LIMITED (XNSE:HDFCBANK) Financial Large Cap 2% Coffee Can
Stocks
Top 5 51%
Top 10 80%
Top 15 98%
Market Cap
Large Cap 25%
Mid Cap 46%
Small Cap 29%
Sector Split
Financial 29%
Healthcare 21%
Services 17%
Chemicals 12%
Technology 8%
Automobile 5%
Cons Durable 4%
Construction 4%
Defensive 28%
New Age/Theme 9%

Investing Objectives –

Return of Capital - :+1:
Beat BSE Sensex in terms of CAGR :+1:
Beat FD returns :+1:
Reach 15% CAGR :+1:
Beat MF(direct) returns (23% Vs 21% CAGR) :-1:

Changes -

  • No changes to PF

Notes -

  • Finished reading “One Up on Wall Street” by Peter Lynch. May be I will read this again in future.

  • The bull market really helped me in accepting stocks/MFs as dominant asset class . The market may go down but at least I know that there will be crests and troughs and proper preparation can give me 15+% CAGR in long term. In the book, Peter Lynch mentioned there are some generation of people(1960s) who could not look at stock market as a good asset class even though they were in higher designations like CEOs due to their family reminding about horrors of losing money in stocks. He also explained 1929-32 great depression happened because US economy was 66% in Manufacturing, 22% in Farming and only 12% in Service sector and there was no mention of pensions, medicare, unemployment benefits etc. There can be regular corrections but repeat of 1929-32 great depression may not be possible. In 1987 October when market corrected, 70% of US economy is coming from service sector and manufacturing was reduced to 27% and farming to 3%.

My PF stocks in Lynch Parlance

Stalwarts - HDFC AMC, HCL Technologies, Abbott India, Titan, HDFC Bank, Avenue Supermarts
Fast Growers - Laurus Labs, Olectra Greentech, Dr Lalpath labs, PSP Projects, Nykaa, IEX, Astral
Cyclicals - Deepak Nitrite
Turnarounds - Gateway Distriparks
Asset Plays - BSE Limited

Stalwarts give the portfolio the much needed stability. The usual quality displayed by these is giving dividends even in recession times. The growth may not be aggressive here but there is more safety of return of our capital. I miss TCS & HDFC in this list. Having been in IT and have first hand information on how TCS was leader in services in Europe and relatively low paymaster , this should have been in portfolio as it rightly fits in my circle of competence. The ship has sailed and HCL Tech is the lone tech company now.

The fast growers are the ones which can turn into potential multibaggers. As long as the growth rates are standing up, they are on track but can punish the PF in case of lesser growth rate

Cyclicals are better to be not touched without proper knowledge. Having got the confirmation that China+1 is happening on the ground, Deepak Nitrite is chosen. However, the tide may turn down anytime. I have a tracking position in Vinati Organics but did not add further as it increases the risk

Turnarounds are very rare. Lynch has mentioned about Chrysler about his one of the successfull turnaround stocks. Gateway Distriparks is going through restructuring and increasing its marketshare in rail segment which is also reported in last quarter earnings. It gives a decent dividend and significant insider buying was also seen in last few years especially by Mr. Sachin Bhanusali(~0.9%) who is the CEO of their Gateway Rail division. This can be that boring and not exciting stock which Lynch mentioned in the book…I have tracking position in Yes bank

Asset plays are about having some hidden asset/cash which are not reflected in the books or not discovered by market. I bought BSE Limited when it is selling below its book value and its hidden assets are BSE Star MF and India INX, BSE Building or BSE platform itself. 20% stake in CDSL makes it more solid to hold on. Zerodha holdings has 3.71% in BSE Limited as their treasury operation. The hidden asset value will come out soon… BSE Limited is my biggest winner so far

Interesting Videos -

The CEO of Vinati Organics talks about her journey in the company and also about the times of exuberance for speciality chemicals business.

This is not related to investing as such but in general about building a life…

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