Sharing a brief summary of my investing strategy and how I pick stocks.
- The time horizon for investing in companies in my core portfolio (>3% allocation) is a minimum of 5 years. I top-up the investment over the first 12 months till it is sizeable enough, then let it run for 5 years.
- Selection of companies is done only from the set of businesses that I understand well a la Peter Lynch style. The company has to be among the top 3 players in at least one of the segments it operates in. This is for new entrants to the portfolio. The initial list of stocks was selected after multiple rounds of trial and error, monitoring earnings over 3 consecutive quarters (did this during my MBA) and reading at least 1 Annual report of each company that is part of the above list.
- I do not buy more than 4 companies per sector. If I cannot build conviction among the top 3-4 companies, the sector is probably an avoid for me.
- I do not time my exit from the companies based on the price/valuation. For entry, I initially allocate 1-2% of my portfolio. Since I have a full time job, I do not get a lot of time to actively monitor and hence, spread out the analysis over a year. If I miss the bus and the stock runs up a lot (like Laurus and Metropolis recently), I do not regret. Instead, I keep tracking through a 1% allocation and wait patiently for market drawdowns to add to the existing holdings