As of today, I have re-added HDFC AMC to my portfolio (position size: 3%) and reduced the position size of Nippon Life AMC to 3% from the earlier 6%. This switch is because of the much more reasonable valuations of HDFC AMC than when I sold it (in July, August 2019). Whenever I sell/switch a position, I keep a track of how the sell/switch transaction worked. Let me illustrate how.
I first bought HDFC AMC at its IPO in August 2018 (1100 price), added more shares in October 2018 (at 1300 price). Market then re-rated it very quickly and I sold the position between July-August 2019 at prices ranging from 1960 to 2400. As it usually happens, the stock was in a very strong uptrend and went up to ~3800. With near term uncertainty around mutual fund flows, the stock is now back to much more reasonable valuations. Now lets evaluate if my switch actually worked. I sold my last shares of HDFC AMC on 27.08.2019 at 2400. Since then (i.e. 27.08.2019) the overall portfolio has given absolute returns of 13.5% (and IRR of 18.1%) whereas the stock has gone down from 2400 to 2180. So, I did much better in selling the stock then and buying it back now (how future plays out is anyone’s guess). Buying quality is not enough, we need to have growth and valuation support.
With the sharp re-rating in IT companies recently, I have sold some shares of HCL Tech to bring back position size closer to the model portfolio. I have also some shares of PI Industries to bring back the position size closer to model portfolio. The model portfolio is shown below
