Posting my portfolio for feedback and suggestions from the esteemed group.
I am a retired principal and was an academic too so goes to say I am very literate but also financially illiterate/outdated. I am new to equities and have been pouring hours into this forum reading the threads, learning technicals, reading books (some I get, some I don’t get at all so am back to being a student which is wonderful).
Oft repeated in this forum is for a book to be authored. I very strongly echo it as combing the forum and getting the information is a challenge and the train of thought gets cuts too often. I see the knowledge here as spectacular with language easy enough for anyone to understand. The top moderators and contributors (Mr. Hitesh , Phreak, Donald to name a few) are extremely patient with questions and answers are very detailed. Please bring the book out.
My rationale to investing is capital growth , inspire people to get into equity investing and keep the learning going. I do intend to hold the stocks for a longer period.
Some misses till now : have not been able to go in with big convictions and being too hung up on technicals
Stocks and rationale
Company name
% of Total
Rationale
DCB Bank Ltd.
5
Quality mid cap bank with good growth
Orient Refractories Limited
6
Top refractory comp (the lining needs to be replaced so insulates it from the steel cyclical)
NGL Fine-Chem Ltd.
9
Good R&D, foray into poultry , upcoming new prod launches
Transpek Industry Ltd.
10
Quality management, good customer base with contracts , chem play
ITC
10
FMCG/tobacco play, stock at 52 w low stable compounder
Havells India Ltd.
8
Leader in electrical components, good distribution, new product launches
Avanti Feeds Ltd.
7
Cyclical play
Natco Pharma Ltd.
4
Niche onco healthcare diversification
Hester Biosciences Ltd.
5
Optimistic company. I want to give it a go. Numbers are playing out well along with the results
HDFC Bank Ltd.
3
Finance diversification, great private bank, long runway
Asian Paints Ltd.
5
Leader in paints, Great distribution network, stable compounder
Balkrishna Industries Ltd.
1
Niche OHT space, low cost producer , global foray
Maruti Suzuki India Ltd.
8
Passenger vehicles leader, India’s go to car, easy repair and replacement
Hindustan Unilever Ltd.
2
FMCG leader, steady compounder
Britannia Industries Ltd.
5
FMCG , steady compounder
Eicher Motors Ltd.
4
Distinctive Motorcycles, new launches, promising pipeline
Cash
8
Tracking : HDFC AMC, HDFC life, PI, Pidilite , Bajaj Finance and Bata/Relaxo. I am waiting to buy these on dips
Welcome mam to the forum! You have indeed put together a decent portfolio with quality names across small cap, mid cap and large cap. You taking up a new journey and learning a new subject is really inspiring.
Few pointers below:
Average entry price and/or XIRR can help us understand the margin of safety in case of some of the pricey stocks from the list
While you have already mentioned that you would be investing for a longer period, given the retirement, you may want to quantify a timeframe for your equity investments basis your risk appetite.
I guess you would already know but just want to spell it out against rationale for few picks:
DCB Bank - I have certain reservations about the Aga Khan promoter group. However from financials perspective, the bank continues to be good.
Transpek - Faces customer concentration risk since has only 1 major customer. But mitigated to some extent because of contract and being a large brand. Capacity constraint issues may throttle growth.
ITC - Has not been a stable compounder in last 4-5 years
However, I believe both Transpek and ITC are decent picks given the margin of safety offered in their current market price.
Also, would want to understand as to how you are using technicals.
That’s great to hear . I am on the right path then. This is certainly very encouraging.
Entry price qtn - here goes the answer:
since I have hit upon a frowned flawed model (where I am averaging down ) its for e.g 245 for ITC, 1200 for Transpek, 658 for Havells etc.
My timeframe is around 2 years but culling if required in about a year. Does churn create better PF’s or does compounding over a longer period help? Some here have PF’s for a long time and some have a lot of churn so I am on a quest here.
As for the technicals, I am using candle sticks with Double bottom and 200 DMA. Figuring out a few more too.So essentially I have my list with the stocks ready and when the stock is below 200 is when I trigger the buy given these are long term stocks. From all the reading done here its a bad approach and I am working to see if I can work out a better algorithm which does not have me tinkering. Something very cold and calculative perhaps?
Churn of portfolio will be required if you use cyclical companies for short term profits. Long term structural growth companies should not be sold based on technicals and kept for long term for compounding to work.
As for technical indicator to buy, you can buy whenever the price is above 200 dma and sell below. Good companies should and would not fall below 200 dma quickly. Time will be wasted waiting for the fall. If they fall then you will have to judge whether the problem is temporary or permanent.
Because of the above reason it is better to average up then down.
As you already know, technical indicators try to catch the fundamentals with charts.
Only fundamentals move company share prices although people have made a lot of wealth for themselves using technical indicators.
When you use the 200dma break, it means there is something seriously wrong with the stock and people have started exiting the position. If you enter when it breaks 200 dma you might be in a situation of trying to catch falling knives.
If reading is your passion I would suggest you read all the recommended books you can get your hands on. Once the message in a new book seems like repeated then you more or less have soaked all that you can get from the books. There is still a long time until its practically of any use. One cannot learn how to drive a car by reading books.
You will also lose atleast some money initially and remember the lesson you read but forgot. Generally almost everyone would agree one year is a short time to learn and apply. Also do not under any circumstances invest more than you can afford to lose. As you said you’re retired and preservation of capital not huge returns should be your major focus. If a younger person loses his capital, firstly during his initial young years, he has lost only a small amount of his lifetime earnings specially since salary in initial years of ones career is lower and secondly and most obviously he has a constact stream of primary earning.
In a year you should not try to risk more than 4% of your networth until you have made many mistakes. It will generally be year 2 or 3 where you will be much more comforatable risking more after trying different styles and knowing the one style your personality feels comfortable with.
I would recommend being slightly cautious given your relatively short timeline. Agree with @edwardlobo that much of the timeframe may go in making mistakes and learning from them so you should appropriately safeguard your capital.
You seem to be sounding alarm bells and I will pay heed. Your experience shall guide me.
My thinking was to stay in the chemical, insurance and the rest in banking and FMCG. sectors The latter two for stability along with being recession proof and the former two for upcoming areas along with good growth. I will go back to reworking on this then.
@akash_das that clarifies the approach for averaging up. Thanks for that
@bargainHunter and @edwardlobo yes, i definitely agree with what you are saying and shall not be in a rush or reckless.
Welcome to the Forum. You have had a very good start. And kudos for learning up first and selecting a list of better quality companies.
As Warren Buffet said. The first and second rule of investing is not to lose money. So on that note, I would like to share the lessons I have personally learned.
Even if there are tempting stocks of "OK quality, it would be best to buy only well-know stocks with Good liquidity. Here is a sample procedure to follow.
Buy any company you like from the fourth year onward.
Have a clear strategy in mind. The current favorite strategy in VP is to pick up stocks using the Technofunda methodology using the 200 DMA.
Just like you are prepared with a story for buying and holding each stock. WRITE DOWN 2-3 reasons why you would sell each stock and check up on this every month/fortnight/week.
Have less than 10-20 companies in the portfolio. It would be best if you have higher conviction in your portfolio constituents rather than, have more of the “OK” or “Good enough” companies.
Please know that this strategy is meant to give a return of less than 15-50% CAGR over 5-10 years. I have put 15-50% because, regardless of what people might say, that value is mostly dependant on luck.
While the budget was being presented ,I so happened to talk about how we need more people getting into equities and the youngsters around looked at me like I have lost all my marbles !! . I will keep up the talking…hopefully they turn around. My quest remains
Here are some qtns I have. Could I please get some guidance ?
In technicals should it be a all checked for conditions (e.g. close to 200 DMA and good price because of the double bottom and more conditions etc) or do you see a few ( a little above 200 DMA so trigger buy?/ flag / ??.) Is there any standard for the number of technicals to be used or is it each to his/her own based on expertise and comfort?
And how do you go about for stocks that are on an uptrend with hardly any significant dents to the price? I am trying to get into PI and Pidilite and there is no end to the price uptrend. How do you decide what price is fair for such stocks? Good quality and cheap don’t mix but what is the approach?
Technicals may be used in addition to fundamentals - The more indicators in your favor, the better. Many times, the same chart can be viewed differently by different technical analysts with both bullish and bearish inclination, so being sure that your analysis is correct needs a lot of study and experience. Stop losses form an important component which are generally missed and then the portfolio keeps collecting duds.
For good quality stocks like Pidilite where you want to enter, you may do a sip-like allocation every month. Or enter basis a simple trendline analysis. Small dips happen every now and then. Though you would need to consider the margin of safety and your corresponding risk appetite.
Doing a rejig of the portfolio. I cannot credit this forum enough for the knowledge and gentle nudges.
Learning on getting a grip on the AR. Lot more comfortable with the technicals now. Selling was incredibly hard initially but has gotten better now. Working on streamlining and concentrating the PF (with a heavy tilt toward Pharma/speciality chem). Aim to bring the count to ~10-15. With that approach, looking to cull a few.
Sold Maruti, eicher and Britannia from my initial lot.
Added Alembic (980), Vinati Organics(950), Granules (315 ) and Divi( 2600). Want to add DRL and alkem too but missed it.Will add on dips.
Quite a few updates. Been in this for a year now. Was primarily invested in FD’s and nothing else. No MF etc so returns were around 7% across co-operative banks and nationalized banks.Then got into equities at a well let’s say an earth shattering moment. Few mistakes:
1.For a first timer I just picked names from what I saw around , bought and then posted here for feedback. Should have read, posted for feedback and then bought.
2.Was all over the place trying to make a diversified PF. Lesson - we need to be invested in the flavor of the season and not diversify just to check the box.
3. The forum continues to be a great source of knowledge. All questions are very patiently answered. Thanks for that. Some threads are very overwhelming but am way better now.
4.Understood numbers and technicals but not the business. Have gotten a lot better. Long way still to go.
5.Patience / should be able to ride stuff out. Sold early but have been good at cutting the losers.Seem to churn a little too much.Not an easy ask and this part seems the toughest.
6.On the bright side made a 20% return
7. Tinkering with the idea of some more capital allocation (from 40% to maybe 60%) as FD’s are practically useless.
Current PF is primarily allocated against Pharma/speciality chem ,fertilizers for the most part. PF is more concentrated as well
Company name
Avg entry price
Laurus Labs Ltd.
215
Abbott
12000
Dr Reddy
4500
Kopran
102
Pidilite
1500
Bayer Cropscience
4800
GNFC
213
Chambal
164
RACL
180
HDFC Bank
970
Ganesh Benzoplast
57
Deepak nitrite
850
Asian paints
1800
My thanks again to the VP forum for their ever readiness to share knowledge and the patience shown by all the esteemed members.
You mentioned that you were invested primarily in FDs and nothing else, then got into equities. Do you have a debt portfolio component too or are you totally invested in direct equities?
I am now fully into equities along with quant/smallcase investing. I have subscribed to Abhishek’s intelsense @basumallick which I find fabulous. I was able to get good returns with my analysis for long term investing but quant/small case is beyond my reach given how thorough it needs to be. (Their long term picks are very well researched as well which I have subscribed too). Returns are excellent for both with them.
Added to the fact that Buffet being in his 90’s is all into equities…being in my 60’s I am way younger in comparison and that paved the way to give me confidence
Buffett has been an investor for almost 80 years. He is a genius like Einstein or Da Vinci. Oracle as you may be aware they call him. His whole life is investing, there have been many great investors but none so popular like him. Like all great men and women, he was born for this and yet he had his share of failed investments.
I know that you are a pensioner and may not have any financial responsibilities and are not dependent on the returns from equities. And the returns from equity are enticing but the losses will be equally devastating if not more.
Have you moved all your debt (FD) to equities? What kind of a fall did you witness in your PF last year?
And this is no way to diminish your zeal but a gentle reminder.
Oh!! I think I gave the incomplete answer. Yes, my money/pension is in equities fully but my husband’s in not. His pension gets divided across FD’s and some in liquid form. We dip into that account for the expenses/health care etc which has a few years of our combined savings in it.
The excess we think we don’t see a need for gets moved to equities.
Sorry about alarming everyone. Thanks for the concern.
This is related to your savings account.
Information here is specific to SBI.
You can/should convert your saving account to MOD account. With this you get FD rates but on your savings account.With this, instead of the normal 2.x % of the saving account , you end up getting 5.x%.This needs to be explicitly asked. Operative word being tell and not ask else there is pushback for a traditional FD. A form needs to be filled out for the MOD conversion. You will need to define a limit for your SB account . As an example if the limit is say 10k anything beyond 10k gets swept in to the MOD account for which you get existing FD rates. It operates just like a normal account.
Conversion process was done in a few days. Confirmation is when you see the specific " Sweep in/out" in your account entry. With this, by default your SBI accounts are MOD.
. I am on the right path then. This is certainly very encouraging.
!! . I will keep up the talking…hopefully they turn around. My quest remains