Sumit's Portfolio

Q&A: Questions & Answers Portfolio Q&A
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Hello everyone,

I’m Sumit Sinha, a 33-year-old entrepreneur who has transitioned into full-time investing. I dedicate 80-90% of my time to public equities, with the remaining 10-20% focused on angel investing. My journey began in 2014 when I founded an e-commerce company specializing in selling print merchandise to the U.S. market. The success of this venture provided me with the capital to retire early and fully commit to investing, a decision I made in late 2022. I’ve been involved in the market since 2012, initially part-time, and have learned valuable lessons through the many mistakes made along the way.

Investment Philosophy:

My broad investment philosophy is to invest in high-quality businesses run by competent and honest management with high growth potential, available at a reasonable price. I believe that this approach provides a solid foundation for long-term wealth creation while minimizing unnecessary risks.

Portfolio Overview:

I’ve structured my portfolio with a significant focus on Small and Mid Cap stocks, which make up 77% of my investments, while the remaining 23% is allocated to SME stocks. Below is the detailed breakdown of my portfolio, along with a brief thesis for each stock:

Category Stock Allocation (%) Thesis
Small & Mid Cap Caplin Point 20.90 A leader in generic pharmaceuticals, focused on emerging markets with strong financials and growth potential.
Small & Mid Cap Anand Rathi 14.31 A key player in wealth management, benefiting from India’s growing affluence and demand for financial advisory services.
Small & Mid Cap Five Star Business Finance 11.95 Provides secured loans to micro-entrepreneurs, with a focus on underserved credit markets.
Small & Mid Cap Ugro Capital 11.87 Focused on SME lending using tech-driven solutions, tapping into high-growth sectors.
Small & Mid Cap Home First Finance 9.88 Targets the affordable housing finance segment, well-positioned to benefit from government initiatives.
Small & Mid Cap Aditya Vision 5.31 A consumer electronics retailer, with a strong presence in underserved Tier-2 and Tier-3 cities.
Small & Mid Cap SJS Enterprises 1.51 A leader in decorative aesthetics for automotive and consumer durables, with strong design capabilities.
Small & Mid Cap Awfis Space Solutions 1.43 A pioneer in the co-working space segment, leveraging an asset-light model for scalability.
SME Beta Drugs 9.96 Specializes in oncology pharmaceuticals, with a strong focus on R&D and a growing product pipeline.
SME Macfos 3.42 An online retailer for electronic components, well-positioned in the growing DIY and electronics market.
SME All E Tech 1.89 Provides tech solutions in AI, IoT, and blockchain, operating in a high-growth, innovative industry.
SME Vasa Denticity 1.82 Focuses on dental care products, benefiting from increased awareness of oral hygiene.
SME Infollion Research 1.38 Offers research and consulting services, tapping into the growing demand for data-driven insights.
SME Concord Control System 1.24 Specializes in manufacturing and supplying coach-related and electrification products for Indian Railways. With strong growth in revenue and profitability, it benefits from being an approved vendor by RDSO.
SME Annapurna Swadisht 1.21 Operates in the FMCG sector, focusing on packaged foods with a regional niche market.
SME Srivari Spices Food 1.19 Specializes in the spices market, capitalizing on strong domestic demand and export opportunities.
SME SJ Logistics 0.73 Provides logistics and warehousing solutions, benefiting from India’s e-commerce and manufacturing growth.

I’d greatly appreciate any feedback or insights from the experienced investors here at ValuePickr. Your thoughts would be invaluable as I continue to refine my investment strategy.

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I think all your stocks have been doing very well over last few years…much better than markets…so congratulations on picking the right stocks!

Can you tell how long has been your holding period in these stocks and some other details about your strategy. Just stock names & allocation percentage shows that your stock picking & capital allocation skills are good. Hope that has been transforming to equally good wealth creation in last 12 years or so?

As you are in markets since long & many cycles, would be good to know your mistakes as well.

Lastly, what strategy you follow specifically for SME stocks…what are criteria to form your universe & ultimate buying decision. How do you track them and finally sell? As most of these SME stocks I randomly checked have Nil PE and I would assume thats because currently the earnings is negative?

Good to have you in the forum. Thanks

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Hi Sumit - Looks like you are a daredevil who takes decisions which are not generally taken by common man. Hats off to your guts for retiring at pretty young age and I would assume you have done well in the early stage of your profession or you are wealthy from the childhood. Hats off to you once again to have the guts to invest in all unknown names in the market. I wish you all the best in your investment journey. I have been an investor for the past 4 decades and my thesis of investing is be where the growth is. I see presently the growth in Defense, Railway, Power, Telecommunication & Data Centre. I have picked up the best couple of stocks in each of these sectors in the past couple of years and riding the growth. This has been my strategy for the past 3 decades or so and it has helped me in multiplying my wealth many fold.

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Great @sumit11sinha
Your portfolio shows your courage and belief in your investment thinking. I am sure it will do extremely well going in future, with deep hiccups in between. You need belief in your philosophy to navigate these inevitable hiccups.
I found almost all your picks interesting, however I am invested meaningfully only in Macfos and Srivari. I have also started a thread on these picks here. Have a look, you can contribute there for the benefit of all.
Wishing you the very best.

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I sincerely thank you all for the encouraging words and feel grateful that I could share my portfolio for critical evaluation.

My Journey and Lessons Learned

My journey before COVID, when I was investing part-time, was filled with many mistakes. The following are some errors I made during my investment journey (though this is not a comprehensive list):

  1. Over-diversification (Deworsification): I bought up to 50 stocks without developing conviction in any of them.
  2. Paying Attention to Just Numbers and Not the Narrative: I used to only look at historical numbers and invest if I found them to be good enough.
  3. Selling Winners Too Early: I was an early investor in companies like Vinati Organics and Persistent Systems, but I sold them with only marginal returns. They went on to become multibaggers.
  4. Over-concentration: At certain points during my investing journey, I held fewer than four stocks. It was concentration for the sake of it, not because I had great conviction in the story.
  5. Not Having an Investing Philosophy: This was a big one. I used to invest purely based on past performance without an investing philosophy.
  6. Not Tracking: I hardly used to read quarterly calls or annual reports of my holdings, foolishly believing that I should simply hold stocks for the long term regardless of how the underlying companies performed or are performing.
  7. Not Being in the Market: I used to check out from the market for several months, thereby missing some crucial bull runs.

Immediately after COVID, I liquidated all my holdings and was sitting on cash for a year or so. At this point, I was trying to automate my business so it could run without me. This led me to miss the massive bull run that happened after COVID. This remains one of my biggest regrets. When I realized I had made a big mistake by not being in the market, it was a wake-up call for me, and I decided to dedicate myself full-time to investing, swearing never to miss another bull run again.

I started building the above portfolio in mid-to-late 2022. Investing in SME stocks is a recent phenomenon, except for Beta Drug and Macfos, which I have been holding for more than a year, the rest of the SME stocks were purchased recently (less than six months). I am new to SME investing and hope to increase my allocation as I gain more confidence in the space.

So far, in the last 1.5 years, my portfolio has returned a little over 100%, with Anand Rathi returning 4x, Aditya Vision returning 3.5x, Caplin Point returning 2.7x, and Beta Drugs returning 1.5x.

About Me

I was born into poverty, and growing up with limited means inspired an aspiration to build great wealth. I figured out very early on that in order to be truly wealthy, one either needs to be a celebrity or a business owner. I lacked the talent to be a celebrity, so I focused on becoming a business owner. I figured you can be a business owner either by creating your own business (entrepreneurship) or by buying pieces of businesses other people have created (investing). Since my 12th grade, I dabbled in various business ideas, trying as many as seven businesses until I found success in the last semester of my college. Meanwhile, I always considered investing as my Plan B should I never succeed in my ventures. I soon realized that business was always a means to an end for me and I was never truly interested in entrepreneurship. Investing, on the other hand, always fascinated me, and I am glad that eight years later, I was able to build enough capital base to not have to work and focus full-time on what I truly love.

My (Current) Investing Philosophy

I invest in businesses with the intention to hold them for the long term (5-10 years). I am not very comfortable with churning my portfolio very often. I am comfortable holding a stock even if it hasn’t performed price-wise, as long as the business stays good (case in point: Ugro Capital, whose performance has been muted for a year). I am comfortable because I have observed that most of the returns in a stock come in just a few trading days, and if you miss those days, you will miss a massive portion of the potential returns. Also, once a stock breaks out, it more than compensates for the period of no returns (case in point: Caplin Point, which didn’t perform for several years and suddenly broke out to give 2.7x returns in less than 1.5 years, with most of those returns coming in about 20 trading days).

This buy-and-hold approach forces me to look for long-term growth stories, where market opportunity and size are huge. It also means I must have able and honest management running those businesses, and the financial health of the company must be strong to ensure their survivability across various cycles. This means I invest in companies with management that are good at capital allocation, are financially prudent enough to not take on too much debt, and always balance growth with fiscal discipline.

I have a return expectation of ~25% CAGR from my stocks and only invest in those businesses where I believe this kind of return is possible.

I believe in diversification only when a stock meets my return expectations. This means I will only invest in a new stock when it matches or surpasses my return expectations, and since such ideas are hard to come by, the result is a fairly concentrated portfolio. This kind of diversification helps me sit through times when some of my stocks are underperforming because other stocks often compensate, and the overall portfolio tends to do well.

When I Sell My Stocks

I sell my stocks when:

  1. I realize there are holes in my thesis that I initially overlooked.
  2. My perception of the management changes for the worse.
  3. The future returns from the companies aren’t meeting my return expectation.
  4. I find a new idea that has much better prospects than an existing one.

I don’t sell when:

  1. My stocks have appreciated a lot.
  2. There is fear or greed in the general market.
  3. My stocks have underperformed relative to the general market.

My Approach to SMEs

With respect to SMEs, the main priority is growth with good management. Since they lack history, I simply optimize for companies growing at 40-50% where management seems to be competent and ambitious. I am willing to pay a little higher valuation for such stocks, although my allocation in such companies will be small.

PS : I am not a momentum investor, nor do I follow a sectoral or top-down approach. While these investment philosophies intrigue me, I haven’t fully delved into them yet. For me, the fact that a sector is currently out of favor—such as the financial sector right now—doesn’t deter me from seeking opportunities within it. In fact, I often find my investment picks in these undervalued sectors, where valuations tend to be more reasonable. My primary focus is on sectors with significant growth potential, irrespective of whether they are currently attracting capital.

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Excellent philosophy Sumit. I am sure it will do great.
Investing in SME sector requires real confidence in one’s own analysis (I largely invest in SME sector only). I prefer that for the following reasons:

  1. Unlike earlier days when information was not readily available, now information is easily available even about SME companies.
  2. When a widely known stock is looking undervalued, most probably it is because market knows something I don’t know. I have experienced these in many value stocks like DHFL, ITNL.
    When a SME stock is undervalued, it is more likely to be a value pick.
  3. New developing sectors start in SME only… We have Macfos, the first electronic e com operator, Anlon technology- the first listed service provider to airports, Zeal Global- the first listed GSSA… And we can give many examples. Probably I love to analyse new businesses, and try to guess it’s competitive advantage.
  4. Theoretically, small stocks does better than index in long run.
  5. Further volatility is higher, and thus we get more opportunity to buy at discounted price.
    Thus, to an entrepreneur investors, SME does give a good opportunity. Once these stocks are recognised by market or bigger HNIs, it gives good return.
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Thanks, Sumit for sharing your journey.

I feel your investment philosophy matches mine to a very high degree (maybe because we share similar starting points of poverty, entrepreneurship, capital accumulation and then allocation – hopefully to wealth preservation over decades to come).

Although I am not brave like you to share my identity since I am still actively running my startup and don’t want attention to the investing part of my life.

But maybe someday I will have the courage to do so and share more insights into building a product to running a multi-million $$$ platform business in India using venture capital :slight_smile:

However, would love to gather your feedback on my journey and investment philosophy from a fellow startup founder and now an active investor.

Thanks a ton in advance and all the best to wealth creation and preservation from compounding.

Your cheerleader from a distance :beers:

PS - I would love to learn more from you about portfolio concentration and your thought process, if that makes sense. Thank you!

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This is an excellent reason and way of looking at SME stocks

Problem is I have not even heard of any of the names you mentioned as “the first” or they must have done very well in their areas…How did you know or rather begin to know about these names and businesses?

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I totally get where you’re coming from—those reasons are exactly why I got into the SME space myself! But lately, I’ve found myself a bit more cautious, and here’s why:

  1. Quality of Information: Sure, there’s more information available today, but with SMEs, I’m not always confident about how accurate or transparent it is. Sometimes their financials feel a bit shaky or inconsistent, and that makes it tough to really dig deep and trust the numbers.
  2. Liquidity Issues: The low trading volume in these stocks can be a double-edged sword. It’s great when you’re buying undervalued stocks, but not so much when you want to sell, and there just aren’t enough buyers. That can make exiting a position tricky and potentially costly.
  3. Governance Risks: I’ve noticed that corporate governance can be hit or miss with SMEs. There’s always that worry about the alignment (or lack thereof) between the promoters and the minority shareholders. It makes me think twice, especially when it comes to trusting the management’s decisions on how they handle money or related party dealings.
  4. Funding Constraints: Many of these companies struggle with access to capital, especially during tough economic times. This can limit their growth and, in some cases, even threaten their survival. I’ve also seen instances of frequent equity dilution to raise funds, which can really hurt returns for those who got in early.
  5. Sector Risks: SMEs tend to be concentrated in a few sectors, which can be pretty cyclical. I’ve seen this especially in manufacturing or real estate—one bad turn in the economy or policy shift can hit hard. So, there’s a bit of a risk in being overexposed to these fluctuations.
  6. Hype and Overvaluation: In bull markets, it’s easy for some SMEs to get caught up in the hype and end up overvalued. It’s exciting at first, but I’ve seen corrections that are brutal when prices snap back to reality.

Don’t get me wrong, I still believe there are hidden gems in the SME sector, and I love finding them! But I’m trying to be more selective now, looking for companies with solid governance, a real competitive edge, and a sustainable growth path.

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Hey, thank you so much for your message. A cursory look at your journey tells me we are very aligned in our investment philosophy, except you have much more courage than I do, given that you have a significant sum invested in private equity. As a fellow angel investor, I can only stomach about 5-10% of my over all net worth in startups. I have started angel investing very recently and have managed to get into BluSmart, Zypp Electric in their later funding rounds.

I totally get why you’d want to keep your identity under wraps for now. Running a startup takes enough focus as it is, and I respect that you want to keep the attention on that. But whenever you’re ready to share, I’m sure you’ll have some incredible insights about scaling a platform business with venture capital. Would love to hear that story someday!

I am very inspired by Pulak Prasad’s book, same as you. Thinking in bets is another favourite read of mine. It seems we have a lot in common and a lot to learn from each other.

I’m looking forward to more conversations with you down the road. :beers:

Cheers to compounding, both in business and in wealth!

P.S. Anytime you want to chat more, just let me know—I’d love to hear more about what you’re building!

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Portfolio Update:

I’ve made a slight adjustment by reducing my exposure in Caplin Point, bringing it down from 20.90% to 19% following the recent run-up in its price. I’m reallocating this capital to acquire a small position in Transteel Seating Technologies Ltd, an interesting SME stock.

Brief Thesis:

Transteel Seating Technologies Ltd. operates in the office furniture space, particularly focused on ergonomic seating solutions. With the increasing trend towards hybrid and flexible work environments, there’s a growing demand for quality office furniture that combines comfort with durability. Transteel has a solid reputation for delivering innovative and affordable products, and they’ve recently shown strong growth in both revenue and market presence.

What excites me about this company is its potential to scale, given the ongoing shift towards remote and hybrid work setups. More companies are investing in ergonomic office solutions for their employees, and Transteel seems well-positioned to capitalize on this trend. Additionally, their focus on design innovation and direct-to-consumer sales channels could help them maintain competitive pricing while expanding their market share.

While still a small player in the overall furniture market, Transteel has the potential to leverage its niche positioning, innovative product line, and a growing brand presence to achieve substantial growth over the coming years.

I’ll continue to monitor their performance closely and look forward to seeing how they execute on their growth plans.

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@Investor_No_1
I do my own research, and therefore avoid widely known stocks. I understand that every widely known stock is researched by hundreds or thousands of full time analysts working on those stocks only. With my a few hours of research, I don’t think I can learn anything market don’t know. So there is no advantage in studying those stocks. Even theoretically, market is much more efficient in widely known stocks.
SME sector is different. When I research there I feel I am one of the few person researching that, and if I find anything good, probably I will be among the very first to enter there. Now a days annual reports of all the companies are easily available and what more one can read even if you are researching SBI!!
How to find those SME stocks? Well, I don’t know those companies. I just use screener to find stocks having certain quantitative attributes… May be high profit margin, good ROCE, Sales growth etc etc. Some of those stocks look interesting. Then I visit their website and try to understand their business, specifically if they have some competitive advantage or pricing power. If yes, I go to whatever document is available on their filing, investor link etc. If things look good, look for valuation, expected growth, scalability. Look at market cycle, sector headwinds/tailwinds etc. Do some scuttlebutt if possible.
Some sort of competitive advantage is a must before I pick up any SME stocks.
Liquidity is not a problem for small investors looking for a few lots. Further, one can always wait for the market downdays to pick them at a good discount.

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Of course those risk are there. But with experience one can easily find if a company is declaring false numbers; particularly in SME stocks where business is simple. It is more difficult to identity false numbers in complicated large businesses.
Operators play are there, hype is there. But one can avoid that through strict valuation yardstick.
I am not saying that researching SME stocks is easy, all that I am saying that researching SME stocks is more likely to be useful.

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Nice Sumit… looks an aggressive as well as well researched portfolio… Few more SMEs looking good for investment namely : Cellecor Gadgets, Techknowgreen Solutions, Sathlokhar Synergis and RBM Infra… Any views on these ??

Also wanted to know from where to check the minimum lot size to buy SME Stocks from the secondary market…

Regards.

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Among these, I’ve looked at TechKnowGreen and Cellecor Gadget.

With TechKnowGreen, I think they’re in a pretty exciting space, and they seem to have a strong promoter driving things forward. However, it’s been a bit hard for me to understand their business and its nuances. So, I feel it definitely deserves a deeper dive to really understand what’s going on there.

Now, with Cellecor Gadget, it strikes me as a bit of an undifferentiated player in the crowded consumer electronics market. At their current size, that might not be a huge deal, but I think it could become a serious hurdle as they try to scale up in the future. Since I’m really interested in companies with solid long-term growth stories, this lack of uniqueness and potential scalability makes Cellecor less of a fit for my investment approach.

So, while I’m keeping TechKnowGreen on my radar for further study, I’m not so convinced about Cellecor Gadget given my focus on long-term plays.

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In general, I tend to stay away from infrastructure stocks, mainly because of some hard lessons learned from my past investments in companies like Dilip Buildcon and PSP Projects.

My experience with these companies showed me just how unpredictable the infrastructure sector can be. It’s heavily influenced by factors outside the company’s control, like government policies, regulatory hurdles, and economic ups and downs. Issues like project delays, stretched working capital cycle, cost overruns, and funding challenges can hit hard, making it tough to get consistent returns.

With Dilip Buildcon, I realized how quickly cash flow problems and high debt levels can spiral, especially when a company relies heavily on government contracts and timely payments. PSP Projects taught me that even a strong order book doesn’t always mean smooth sailing, there can still be challenges like thin profit margins and long working capital cycles.

These experiences have made me cautious about investing in sectors where the growth depends too much on external factors. I now prefer to focus on areas where companies have more control over their growth, better pricing power, and fewer surprises.

While I know there are exceptions in the infrastructure space, the risks don’t align with my investment approach anymore. I’d rather stick to sectors where I feel more confident in understanding and predicting the growth potential.

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Hello Sumit ,

This is so inspiring for me as, i am new into the markets with 1 year of experience tried swing trading as per minervini book and tried different ways like momentum trading but later that year i have not gained any money neither i lost. So i decided to start learning and thinking like a long term investor though, i am still selling stocks after holding for 3-4 months once i dont see any move i sell it which i learned because one my stock moved up just when i sold it… Good news is that i am happy after all that i gained 10% with in 2 months of investing.

Call me immature but i still dont know how to built conviction. I have 10 stocks in my portfolio sooner or later i am going to concentrate it to 5-6 stocks but i just have this fear maybe lack of confidence because i dont know anybody near me or in my family or friends who are into markets…i have nobody to talk to regarding stocks or market i just sit on my laptop all day… That is how i learned the basics and other things.

Your story is quite like me i am 30 yrs old did job for some years changed 6-7 companies within 4-5 years i realised job is not for me i went to study abroad did job there couldnt understand why i am not being able to do job then came back to india started a bussiness(not startup) with a close family member…that family member took control of bussiness because of relationship and situation as i am the youngest one i had to bow down…Gave running bussiness to them ended relationship with them got the money in return…money is sitting safe and giving okayish returns in fixed deposit. So took very little amount of money out of it and started investing and realised that this is what i want to do it is just fun and passionate i dont know how to eleborate to you…

After reading your post i felt inspiring that may be one day i will get returns like you…i am dreaming

As you mentioned Transteel Seating Technologies Ltd now i am gonna analyse it as per my little knowledge…

Feel free to message me(Talk) or you can give me some work(Analysing) so that in that process i can learn from you…

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that’s the process you use for all sorts of companies?

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In Teansteel, I am not being able to recognise any competitive advantage or pricing power… And investigation over.

Many a times we are not able to recognise an advantage which is there, but it does not matter. What is important is existence of advantage, where you recognise one.

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When it comes to investing in SMEs, the process is a bit different because they usually have a limited track record and often don’t have a strong moat. But you can spot early signs that a moat might be forming. My approach is pretty straightforward: I look for ambitious management, a big opportunity size, and proof that they can execute. I think of SME investing a lot like startup investing — there’s a chance for big, asymmetric returns, but I also know that many of these bets might not pay off. The big difference is, with SMEs, I have the flexibility to exit when I feel my original thesis isn’t holding up, unlike in startups where you’re often locked in.

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