Those who have followed my blog would know that I started investing about 3 yrs back and built my portfolio from scratch in early 2014. I started as a day trader in 2012 but eventually evolved to investing in growth stocks using a techno-funda approach. Since then, patiently holding onto decent companies has worked wonders for me rather than trying to bet on which hot stock may move big today or tomorrow. Now i am more concerned about finding stable companies that I can invest in at a decent price which will generate enough growth in earnings over a period of time to take the price substantially higher. With this approach i have managed to outperform the markets substantially over 3 yrs. I was up by approx 50% in FY15, flat in FY16 when markets crashed and higher by 35% in FY17 over funds invested in stocks thus beating the benchmark Nifty index comprehensively in each of the last 3 yrs.
When I started investing, I followed simple strategy of capital allocation and invested almost equally in 5 major sectors- Autos, Tech, Pharma, Banks and FMCG along with minor investments in metals & power and oil. FY 15 was a dream year for me with all 5 sectors where i had invested going up simultaneously with few stocks even doubling for me. Even though power,oil and metals continued to be laggards with fall in commodity prices, i wasn’t bothered as I had exited most of them because of poor earnings. It was indeed a great time as most of this upside came from well known large companies like Yes Bank, Indusind Bank, Axis Bank, Lupin, AuroPharma, TechM, Emami to name a few.
FY16 too started off fairly well and i was cautious enough to exit pharma names like Sun & Lupin near their all time highs as stocks were running way ahead of their earnings growth. I had also reduced exposure in tech stocks because of lack of growth an was doing fairly well. But things took an ugly turn one random Monday morning in August 2015 when Nifty fell 400 points all of a sudden with several of my stocks falling even 10%. And from August of 2015 to Feb 2016, every time I bought a stock , most of them went even lower in a matter of weeks. Around Feb 2016, i was almost fully deployed after continuously averaging down and Nifty even undershot my worst case target of 7200 for a while with some TV experts predicting even 3900 and 4300 for the index.
By this time i had stopped thinking anymore about how much more we may fall but was focusing on adding to quality stocks where I had utmost faith in the management. I fully exited big pvt banks that were struggling with surge in NPAs and instead increased holding in Indusind Bank near 800 and Yes Bank near 700 around this time. I also started accumulating Capital First around 400 and Caplin Point near 200 (adj), Kalyani Steel sub 150 those days. I even increased holding in Eicher and Bharat Forge which are now among our top 5 holding. Even Motherson Sumi and Voltas have done extremely well where I’ve been consistent buyer from lows of 2016 . An expensive stock was CanFinHome which we bought around 1200, where I’ve been trading in & out has now hit 3200 and we still have half our initial shares.
There was also this cheap stock called RECLtd, where i had built a small holding before the market crash. As markets keep on going down, i kept adding slowly to this as valuations got even cheaper while the company maintained superior asset quality than peers. The stock fell all the way from peak of 2014 around 190 to 80 in Feb 2016 and was trading at a P/E of sub 3. I however stayed invested as stock was at dividend yield of 11%. From such a point either it could be a multibagger or else go to nil if my investment hypothesis went wrong. But in the end I was proved right and it is currently our largest holding after doubling from the lows.
However, it has not always been smooth sailing .We suffered big percentage losses in port stocks and also when we fully exited the textile sector. Even our MFI picks bombed post DeMon. We started buying pharma stocks again in H2FY17 again believing sector was due for a turnaround, but things went further downhill for a few of them. However, in absolute terms, most of these were manageable and haven’t caused huge impact on portfolio as a whole because of capital allocation. Then there were the two big crashes caused by Brexit and DeMon which had transitory impact on portfolio.
But over the long run it has been immensely rewarding as we managed to overcome challenges, behave rationally in times of crises which allowed us to capture the index move from 6900 last year to 9900 this year. I remain optimistic about the Nifty hitting previously discussed target of 11000. by year end.