Hi Friends,
Attaching the presentation that I did at the VP Conference, 2017. The idea was to share why we follow diversified investing approach and why do we feel its important to widen your circle of competence/knowledge in markets. Also, it helps generate new ideas and spot the next winners.
Regards,
Ayush
I am an admirer / follower of Mittal Family. Presentation is fanstastic.
But here is opposite take from Munger /Pabrai…
Fantastic presentation from Ayush. I am sure it would have been 100 times
better for someone who was physically present.
Regards
Fantastic presentation Ayush. Food for thought.
@ayushmit Great presentation as always Ayush ji… Can you post SP Mittal Sir’s Video which we hear was played on the event. Its a rare chance we can to listen to him
Excellent presentation, Ayush !
Over the years my investment style is slowly moving in the direction as you presented. However the biggest challenge I face is constraint of time (full time day job), keeping track of 15-20 new ideas in addition to the core portfolio.
Any thoughts or inputs on how effective we can become in tracking these positions and keeping up to date with relevant developments?
Every beginning investor should read and adopt this method. As mentioned, 70-80% of the portfolio could be concentrated on 10-15 companies. Rest should be a long tail of potential/experimental ideas…anybody not doing this is intellectually lazy and not interested in understanding the various businesses. This applies to all armchair investors like me (without expert sector knowledge or industry contacts) who make up their minds by reading annual reports, CM or ET news item.
Loved the presentation…don’t miss the notes at the bottom of each slide. It encourages you to think of investing as a skill (to be developed/honed) and not just a means to make money.
The most important question to ask on the job is not ‘What am I getting?’ The most important question to ask on the job is ‘What am I becoming?’ - Jim Rohn
great ayush bhai it always interesting to read your thread/ppt.
Thank you Ayush and my note of thanks and regards to your father for sharing your family’s investment philosophy and thoughts.
So much to chew on!
Thank you for providing a new way to think about portfolio construction.
Thanks everyone for the appreciation.
Hi @Amit009,
I think its not tough to track as there are so many tools now. We use websites like - www.screener.in to create watchlist - which alerts us on any corporate announcement etc by the company + get email alert on good results or screens created earlier + google alerts help you not to miss any related news items. Similarly, we get alert of any new discussion on the stocks we are interested in from valuepickr.com. We use researchbytes for concalls etc. All this covers most of the updates related to the company and this all doesn’t take too much of time. The more important part is to be able to think about your company and the future prospects and as we shared in presentation - we are not very good at this part. So we give more importance to the numbers etc being declared. Also, other insights come from tracking other companies in the same or related field.
Regards,
Ayush
@ayushmit Hi, I went through your presentation. I could understand your reason for diversifying the portfolio and having a long list of companies where initial allocation could be low and future allocation could depend based on performance. However, as you would know many of such companies could have past history of corporate misgovernance issues. In light of past history of frauds how long do you think we should give such companies to realise the potential gains that could arise due to the transition. Case in point the companies for which it didn’t turns out as anticipated. How long do you recommend holding these stock ideas before eventually moving on or replacing them with something better
Hi
Could you elaborate a little on how you choose the 15 companies and when do they move to main portfolio
Thanks
Thanks very much, Ayush. You have hit the root with this statement. We live in an information overload age and believe it is very important to to de-clutter and think in detail about company and future prospects. And this is where VP forum plays a key role. It gives us an opportunity to reach out to seniors/mentors and have a more productive discussion. May be I need to put more focus in this regard.
Thanks again!
Usually, after the initial buying, as we do more work and get confidence, we buy more. Many often the feedback or discussions over forums or with peers help to remove doubts and increase confidence. Buying is mostly done in phases and spread over sometime.
It also happens that stock doesn’t move much or falls despite consistent performance and one gets chance to increase allocations.
Dont you see a risk though of a confirmation bias coming in such an approach? I have tried to take a similar approach but more often than not, one tends to look for positives for a stock where you have taken an initial position. It becomes difficult to continue the analysis with an unbiased mind. Has that been the case and if yes, how do work around this issue?
Hi ayush
I had a question for you from your slide deck : Concept of dis-conforming evidence eg. Ajanta, Chamanlal, Premco …what do you mean by this ? can give a few points what evidence you saw which made you buy more or exit the stock ?
Great presentation, it gives good insight
Hi @rohitc99,
By the concept of dis-conforming evidence I was sharing my thoughts that it often happens that one is not confident about a story or one is negative or concerned about something…but when one sees contra data for the same, one should change his hypothesis and jump in…for eg: in the case of Ajanta, in the starting I was very skeptical as the past was poor…in the market there were lots of stories about the poor past track record of management and business…the balance sheet was bad - debtors used to be about 25-30% of turnover, so used to be inventory…so I was not ready to accept the idea. However, the company kept performing and in one of the balance sheet I noticed that all these concerns were going away - debt was reducing, along with reduction in working capital. That was the time to change the past view (dis-conforming evidence) and jump into the story and try to find the reasons for change.
Same thing was there for Chamanlal - everyone used to reject the idea as the income was majorly by way of trading so people thought its un-sustainable. But when the better margins sustained for 2-3 qtrs, I thought, there would be reasons for such better margins and we should try to find the same. Since then the margins have further improved along with surplus cash generation in balance sheet. This company has a very different business model as compared to any of the peers (most of the companies have lot of inventory and debt while it was reverse in the case of Chamanlal). So even without knowing much, I started investing and kept making efforts to find more.
By Premco example I shared that - initially when the company came out with fantastic numbers and the stock was very cheap, it could have been easy to discard the idea thinking its one-off and profit increase may be due to fall in rubber prices. But we made some entry. And as the company kept performing and posting better results with sustained margin expansion, we invested more. We feel that in today’s competitive times, superiors margins don’t sustain for too long (more than 2-3 qtr) until n unless there is some fundamental change. So its better to adopt the change and try finding more about it rather than keeping previous theory stuck in mind and missing on the idea (especially when valuations are cheap)
Regards,
Ayush
Hi @sandeep17,
Yes, it does bring confirmation bias. At the same time I think investing is a lot about being positive and one gets lucky with this mindset.
One has to be careful to get out where the things start to pan out opposite to what one is dreaming. Its tough and at times one has to pay losses. But this is how one can expose to interesting ideas and get few big winners.
