Pls see below my portfolio (limited to those stocks which constitute at least 1.5% of the portfolio):
% of Portfolio
As before, for Canfin Homes, KRBL, Shilpa and Bajaj Finserv, the % gain is after including profits on sales carried out.
The only sales since the last portfolio disclosure have been in EClerx. This has primarily to do with the rise in the price due to Buyback announcement. I fully intend to purchase back the stock once the buyback record date is over.
There has been a sharp rise in the price of Oberoi Realty, IDFC Bank and IDFC. This accounts for the relative percentage increase. Similarly, there has been muted performance in Balkrishna Tyres. All of these are long term stocks, so the relative performance is not, per se, especially interesting.
My current portfolio is extremely diversified, but the top holdings (which constitute approx 80% of the total portfolio) is disclosed here.
Pls note that the total return here does not include dividends. In a few stocks-NMDC, AkzoNobel and HindZinc, accounting for dividends would have changed the return considerably.
In a few stocks, the purchase value is reduced by the profit booked. This is true of CanFin Homes, Shilpa Medicare, Bajaj Finserve and KRBL. This is why the return seems absurd. In any case, each of the stocks has returned around 10-15X, even if I don’t account for profits booked.
Below is a graphical representation of my investing performance upto July 2017. Further below is a table of returns.
First, some housekeeping. You will notice that this graph is different from earlier ones, where I had also mentioned my trading performance. The reason for this change is simple. The trading performance in July was simply crazy. So if this line is also added to the above graph, then the range on the axis changes in such a manner that there is no possibility of distinguishing between the various investment benchmarks. In addition, there is difficulty in understanding what the exact trading capital is. As a result, it is best to look at trading and investing performance separately, and maybe, once a year or so, revisit a comparison. In any case, below, I also present a table which details the returns on trading along with investing benchmarks.
As can be seen from the graph above, and the table below, the trend established earlier still continues. The mutual funds outperform my investment performance, which outperforms the PMS schemes from Motilal Oswal and Centrum. All of them outperform index benchmarks, except the Bank Nifty Index.
My investment performance continues to be marred by underperformance of my biggest holdings-IDFC, IDFC Bank and Oberoi Realty. On the other hand, Bajaj Finserv continues to outperform, as to other stocks like Indiabulls Housing Finance.
In July, I also converted about 4% of my portfolio to cash. I also made a concerted effort to pare down the number of stocks in my portfolio (from around 100 to around 75). I will continue this exercise of bringing down the portfolio size to around 30-40 stocks over the next one year. Among my larger holdings, I have completely exited Muthoot Capital Services (and have partially switched to Muthoot Finance), Munjal Auto (and partially added to Munjal Showa), Alkyl Amines and Bayer Cropsciences (and have partially switched to PI Industries and also added Tata Chemicals). I have further exited IL & FS Investment Managers. I have also exited Tata Steel (and switched to Vedanta and Tata Investment Corportation). I have exited Sobha Developers and added to NESCO. I have exited Vardhman Acrylics and added to Vardhman Textiles. I have also exited JP infratech and JP Power and added to Jain Irrigation. I have further added to IRB infra and Pokarna. I continue to slowly accumulate Pharma Stocks (Sun and Dr Reddy’s). I have completely exited my small positions in Hindalco, EIH, IL&FS Transportation Networks, Federal Bank, Laxmi Vilas Bank. Finally, I have finally exited MPS ( a large holding) and added to EClerx.
All of these switches have been done more to reduce the number of stocks I want to track, than any fundamental reasons. In some instances (like MPS), I did not like the business prospects. In some cases (Bayer or Munjal Auto), I just felt that the price had run ahead of the business.
Here is a table of my investment returns compared with various other benchmarks.
The following stocks constitute at least 1% of my portfolio as on March 31, 2017. These 39 stocks amount to 81% of my total investment portfolio.
Some discussion is warranted. The average age of my holdings is around 2 years, and as can be seen, there are very few stocks in the red. These include United Spirits (McDowell), ILFS Investment Managers (Which has given great dividends though), IDFC and IDFC Bank Combo (Which on the other hand is a looong term bet). NMDC has barely broken even. Even with NMDC, the dividends have been great.
Where have the best gains come from: Clearly Can Fin Homes, KRBL and Oriental Carbon have given the best percentage gains. I bought all of these when the markets were at a trough in September 2013. The largest absolute gain has come from Bajaj Finserv, which was again bought in the same period.
I am reasonably happy with the overall portfolio mix. It consists of realty (Oberoi and NESCO), MNC (Cummins, United Spirits, Akzo, Grindwell Norton), Pharma (Shilpa and Ajanta), NBFC (Bajaj Finserv, Canfin Homes, IndiaBulls Housing Finance), Banking (IDFC and IDFC Bank), Great Indian Mid to Small Cap Companies with an export focus (Balkrishna Tyres, Bharat Forge, PI, Aarti Industries, Polymedicure, Mayur, OCCL), and IT (Eclerx, MPS). There is considerable diversification. However, I am comfortable with the diversification.
Again, I would like to emphasize that over a period of time, I expect to see the allocation to real estate decreasing, and the exposure to trading equity increase. I would also like to steadily add to the stock of bullion and low yield instantaneously redeemable debt in the portfolio to increase, to add to the stability of my trading business.
My goal is simple: To derive a 15-20% return on investment over the long run. I shall be quite satisfied if over several years, I am able to achieve this goal. Portfolio composition is very critical to achieving this goal. Too much exposure to “safe” low yield debt, and I would not be able to achieve the goal. On the other hand, too little exposure to instantaneously redeemable low yield debt would mean that I would not have the opportunity to invest in the market when it is down and out.
While much of the discussion here is on financial markets, my personal investments are more diversified. More than 50% of my investments are in real estate (including my self occupied house and office*). My equity investments (including PMS, Equity Mutual Funds and Direct Equity) amount to less than 25% of my total investment. Trading Equity(**) amounts to less than 7% of my entire set of investments.
Over time, I expect to see movement in this portfolio composition, with the relative allocation to equity increasing, the allocation to indian real estate investments decreasing, the role of overseas real estate investment increasing (from zero presently), the allocation to angel investments increasing and the role of bullion rising to around 2% of porfolio.
P.S. * I debated whether to include my self occupied house and office in my total investments. The reason for the debate is that you are unlikely to sell your house or office, so why include them in the mix. I eventually included them, because both are really too large for my long term needs. They are fungible, because I could also move to smaller spaces at a much lower cost.
P.P.S. ** While the amount of trading equity is only 6.7%, in reality, it is larger, if I include the cash I hold in reserve for drawdowns, and the stocks that I can give as margin for trading.
What is the difference between Getting Rich and Staying Rich. The link has a great article on staying humble to stay Rich. I would also add that remaining teachable is also a good way to staying rich. It is hubris that can make the difference between Getting Rich and Staying Rich.
The wealth creation journey is not a slow and steady one. If one wishes high returns, one must be prepared for high drawdowns as well. The drawdowns are both in terms of money and in terms of emotions. Here is a great article which talks about the importance of stoicism in the wake of large drawdowns, and why reacting with equanimity to a large drawdown is critical if one wants monster returns.
Here is an extraordinary article on how to rationally evaluate the different returns that different asset classes obtain, and how to diversify away risk and volatility by constructing a portfolio. The conclusions are not great for someone seeking Alpha, as the author suggests that because diversification is extremely easy these days, and because there is a long history of markets, stock market valuations would rise to a point where the differential in return between stocks as an asset class and other asset classes like government bonds will narrow or disappear.
Here is a great post on different levels of investors, and how one can progress (if at all) from being a good investor to being a great investor, and from being a great investor to being a legend.
Here is a new edition of my portfolio composition. The last two months have not been particularly kind to my portfolio performance, as can be seen in the next post. In fact, partly due to the fact that I was travelling, and partly due to procrastination due to my relative poor performance in September, I missed putting up my portfolio at the end of September.
But here I am, with my portfolio at the end of October 2014. As usual, this is not a complete disclosure of my portfolio. This list is only of those scripts which constitute more than 1% of my portfolio. Nevertheless, I am also disclosing in the text below if there were major changes in the rest of the portfolio.
Overall Gain %
Oberoi Realty (64)
eClerx Services (18)
Indian Hotels (20)
Selan Explore (28)
IRB Infra (18)
Mayur Uniquoter (11)
Balkrishna Ind (11)
Kaveri Seed (13)
Bharat Forge (9)
Munjal Auto Ind (11)
PTC India Fin (6)
Oriental Carbon (9)
Muthoot Cap (11)
Ajanta Pharma (14)
Sesa Sterlite (3)
Sun Pharma Adv (19)
EID Parry (13)
Poly Medicure (7)
PI Industries (11)
Hind Zinc (18)
RS Software (11)
Grindwell Norto (7)
Sobha Developer (14)
Akzo Nobel (5)
Tata Inv Corp (13)
ICICI Bank (9)
The movement towards consolidation continues. However, this is also tempered by the fact that I have bought new scripts in the last two months. Nevertheless, the number of scripts which have at least a 1% contribution to my portfolio is 37 (compared with 33 at the beginning of September 2014), and together they constiture 71% of my portfolio. As before 32% of the portfolio was invested in the top 8 scripts.
What have I been buying in the last two months? And what did I sell?
Well, I continued to purchase IDFC, Oberoi Realty and IL&FS Investment Managers, averaging down as the stocks fell all of September, and most of October. It requires great guts or folly to keep buying in the face of negative outcomes from a stock price point of view, and sometime in November, I hope to have a post which will talk about these dilemnas.
I also purchased a significant quantity of L&T and TCS, again as they fell. In addition, I added a small quantity of Jaypee Infra, Sobha Developers and DLF, when they fell rather sharply because of a weak real estate environment and negative news flow.
In general, I have also resolved to improve the quality of my portfolio, from a cap goods, finance and realty bias to more quality names with better moats. To this end, I made significant purchases of Indian Hotels (Convertible Debentures) Akzo Nobel (which now is in the list of 1% stocks), United Spirits (which is almost there), and Dr Reddy’s Labs.
In terms of my older themes, I bought significant quantities of Reliance, Bayer CropScience, India Bulls Housing Finance, Gujarat Pipapav Port, and Vardhman Testiles.
What did I sell? Only RS Software at a time when the stock really shot up. At that price of 730 or so, the stock is more expensive than say EClerx, and EClerx has a superior track record of governance, disclosure, earnings, and dividends. I still own significant RS Software, and given my purchase price, I will evaluate my position only after a quarter or two.