My Stock Portfolio Update

First of all , Wish you all a very very Happy Independence Day  !!!!!!!!

Entered in the following stocks mentioned in the yesterday's tweet.

1)Sirca paint India ltd  ( Avg 161)

2)Sterlite technologies ( Avg 340)

3)Vimta Labs  (Avg 215)

  Last year a lot of readers ask about new picks but due to high valuation, I avoided to discuss any new pick. After correction market became attractive but not many are seems to be interested in stock picks now. That is the market psychology of the crowd.

Still holding Fomento , ADI Finechem Limited ( Fairchem Speciality Ltd. ) and Blue Chip Tex Industries Ltd . Blue Chip Tex Industries Ltd last quarter was flat but It has ROE of more than 25 and available on throwaway PE of just 6 . 


Dics : Do your own analysis with your qaulified financial adviser if interested.  

Trait of Great Investor

Sharing great article on trait of great investor . If you want to read whole article then read it at
http://www.athrasher.com/what-makes-a-great-investor/

Mark goes on to describe how some of the greatest investors of our time have produced annualized 20+% returns during their careers, a feat few have come close to accomplishing. He notes that it’s still possible to have success in investing, but just realize it takes more than a high IQ.

On the bright side, although most of you will not be able to compound money at 20% for your entire career, a lot of you will turn out to be good, above average investors because you are a skewed sample, the Harvard MBAs. A person can learn to be an above-average investor. You can learn to do well enough, if you’re smart and hardworking and educated, to keep a good, high-paying job in the investment business for your entire career.

Mark then describes the things that won’t provide enough of the necessary edge needed to become “great.”

Everyone reads.

There are 8,000 hedge funds and 10,000 mutual funds and millions of individuals trying to play the stock market every day. How can you get an advantage over all these people? What are the sources of the moat?

Well, one thing that is not a source is reading a lot of books and magazines and newspapers. Anyone can read a book. Reading is incredibly important, but it won’t give you a big advantage over others. It will just allow you to keep up. Everyone reads a lot in this business. Some read more than others, but I don’t necessarily think there’s a correlation between investment performance and number of books read.

Everyone can get an education or earn an investment credential.

Another thing that won’t make you a great investor is an MBA from a top school or a CFA or PhD or CPA or MS or any of the other dozens of possible degrees and designations you can obtain. Harvard can’t teach you to be a great investor. Neither can my alma mater, Northwestern University, or Chicago, or Wharton, or Stanford. I like to say that an MBA is the best way to learn how to exactly, precisely, equal the market return. You can reduce your tracking error dramatically by getting an MBA.

Everyone can get experience.

Experience is another over-rated thing. I mean, it’s incredibly important, but it’s not a source of competitive advantage. It’s another thing that is just required for admission. At some point the value of experience reaches the point of diminishing returns. If that wasn’t true, all the great money managers would have their best years in their 60s and 70s and 80s, and we know that’s not true. So some level of experience is necessary to play the game, but at some point, it doesn’t help any more and in any event, it’s not a source of an economic moat for an investor.

So what are the keys to developing a competitive advantage in investing, at least according to Mark? You’ll notice that what’s not included is a Twitter follower count threshold, The number of presentations made at the SALT or Delivering Alpha conferences, owning homes in multiple zip codes or secretly knowing Bobby Axelrod’s character is based on you. Instead, Mark notes a great deal has to do with the psychology beyond investing, breaking it down into seven traits that previous great investors have shared.

#1: Not panicking

Everyone thinks they can do this, but then when October 19, 1987 comes around and the market is crashing all around you, almost no one has the stomach to buy. When the year 1999 comes around and the market is going up almost every day, you can’t bring yourself to sell because if you do, you may fall behind your peers.

The vast majority of the people who manage money have MBAs and high IQs and have read a lot of books. By late 1999, all these people knew with great certainty that stocks were overvalued, and yet they couldn’t bring themselves to take money off the table because of the institutional imperative, as Buffett calls it.

#2: Being obsessive

These people don’t just enjoy investing; they live it. They wake up in the morning and the first thing they think about, while they’re still half asleep, is a stock they have been researching, or one of the stocks they are thinking about selling, or what the greatest risk to their portfolio is and how they’re going to neutralize that risk.

They often have a hard time with personal relationships because, though they may truly enjoy other people, they don’t always give them much time. Their head is always in the clouds, dreaming about stocks.

#3: Willingness to learn from past mistakes

The thing that is so hard for people and what sets some investors apart is an intense desire to learn from their own mistakes so they can avoid repeating them.

Most people would much rather just move on and ignore the dumb things they’ve done in the past. I believe the term for this is repression.

#4. Having an inherent sense of risk based on common sense

Most people know the story of Long Term Capital Management, where a team of 60 or 70 PhDs with sophisticated risk models failed to realize what, in retrospect, seemed obvious: they were dramatically over leveraged. They never stepped back and said to themselves, “Hey, even though the computer says this is ok, does it really make sense in real life?”

The ability to do this is not as prevalent among human beings as you might think. I believe the greatest risk control is common sense, but people fall into the habit of sleeping well at night because the computer says they should. They ignore common sense, a mistake I see repeated over and over in the investment world.

#5: Having confidence in their convictions

Great investors have confidence in their own convictions and stick with them, even when facing criticism. Buffett never get into the dot-com mania though he was being criticized publicly for ignoring technology stocks. He stuck to his guns when everyone else was abandoning the value investing ship and Barron’s was publishing a picture of him on the cover with the headline “What’s Wrong, Warren?”

#6: Using both sides of your brain

I later learned that some really smart people have only one side of their brains working, and that is enough to do very well in the world but not enough to be an entrepreneurial investor who thinks differently from the masses.

On the other hand, if the right side of your brain is dominant, you probably loathe math and therefore you don’t often find these people in the world of finance to begin with. So finance people tend to be very left-brain oriented and I think that’s a problem. I believe a great investor needs to have both sides turned on. As an investor, you need to perform calculations and have a logical investment thesis. This is your left brain working.

But you also need to be able to do things such as judging a management team from subtle cues they give off. You need to be able to step back and take a big picture view of certain situations rather than analyzing them to death. You need to have a sense of humor and humility and common sense. And most important, I believe you need to be a good writer.

#7: the ability to live through volatility without it impacting your process

This is almost impossible for most people to do; when the chips are down they have a terrible time not selling their stocks at a loss. They have a really hard time getting themselves to average down or to put any money into stocks at all when the market is going down. People don’t like short-term pain even if it would result in better long-term results. Very few investors can handle the volatility required for high portfolio returns.

They equate short-term volatility with risk. This is irrational; risk means that if you are wrong about a bet you make, you lose money. A swing up or down over a relatively short time period is not a loss and therefore not risk, unless you are prone to panicking at the bottom and locking in the loss.

Mark concludes with a point that I’m not entirely sure I agree with, which is that these seven traits are all learned before reaching adulthood or not at all. While I agree that many of our foundation attributes are molded and formed during childhood, the idea that we become mentally and psychologically immutable is inaccurate. Must an investor or trader have all seven of above mentioned attributes if they are to have a fighting chance of having success in this business? Many would argue no, but I would challenge that I do think there’s a glimmer of truth to each of the seven – but also that being successful in anything can not be boiled down to an equation or list of traits.

Taking on the uphill climb of investing, an arena that thousands have failed at is no easy task. Personally I take the idea of being included on the list of the most successful investors as a challenge rather than a deterrent. So I say to Mark – Game On!

Annual Update Letter

It is long back that I have not updated my blog, I was not getting enough time. We follow a lot of big investors reading their annual Letter so why not I should also write some annual letter even though I don't have enough knowledge, still learning but no harm in trying

Indian stock market has less than 1% quality stock where you can buy and forget. Another 99% of the stocks we need to understand their aukat (limit)  I have always five known and proven quality stock. I give the weightage of 30% to those stock and rest 70% in small and Mid Caps.
I have added Bajaj finance to list a few months back. Other existing are
Eicher motors
Britannia Industries Ltd
Pidilite Industries Ltd
3M India Ltd.
HDFC Bank and Kotak Bank ( Both reduced after entering in  Bajaj finance )

Rest 70% I will have around 25 stocks. So, I don't have a concentrated portfolio but these 25 stocks proportionate to conviction.
Top 5 holding might have 70% of 70 %.

Value investing can be divided into two parts.
1) Quality Value investing
2) Value trading
If a stock is from the first category then we don't need to churn it, just hold it till your earlier assumptions about quality, growth and business changes.
But if a stock from the second category then one needs to know aukat (limit) of that stock. And always be on toes. Continuously watch it and take appropriate action.
Since I am not a full-time investor and working in IT firm, even need to work sometimes on the weekend, it is difficult to keep the continuous eye on business or meet management. But, luckily I have two big exposure stocks (Intrasoft and Olympia) in my portfolio where I can sense business performance online.

You hate me or like me but I am one of the few who not only discusses buy calls but even sell calls. Mostly you will hear only buy call from others.No one knows when they sell.
Intrasoft buy call discussed around 45-47 range and disclosed sell call on around 500. Because I could sense online. Now it is below 300.
http://value2wealth.blogspot.com/2017/09/profit-booking-call.html 

On Olympia also disclosed sell call around 300 (on Twitter), it is now below 50.

Everyone can understand from the just above screenshot, it is off track.
On another hand, I missed to sell TechnVission and it is now around 50. But it is concept stock instead of a value stock, I do see a lot of positive business news flow but the company is not able to convert into revenue.

• A lot of research report are predicting huge growth in next 5 years where Solix and Imagia subsidiaries of TechnVission are operating.
• Huge EU GDPR opportunity and similar opportunities in India and worldwide
• Veena Gundavelli, Honored as the Innovator of the Year at 2018 Women in IT Awards USA
• The launch of Artificial Intelligence device Gia which is similar to Amazon's Alexa 
• The launch of Solix Big Data solution for Data-driven Healthcare.
• any many more 

But the company is not able to scale on their financials front.

FOMENTO RESORTS I am still waiting for the expansion to complete.

Apart from above-discussed type I also invest in nursery type stocks, it is just on gut feeling and symptoms. Allocation is very low and I don't track them closely.

Everyone suggest one should not time the market. Agree, But I believe one should try to time the market by allocation. One should increase and decrease allocation by sensing a market.
Only a few suggested to have some cash in 2017, one name I can remember is Rohit Chauhan (@rohitchauhan). Even, I suggested cautions in 2017 not because I am good at predicting but my fearful and balance approach during high valuation period.

I don't invest in mutual funds but over the last one year, I invested in four type funds.

•  Liquid Fund (debt)
•  Ultra Short term fund (Debt)
•  Gilt funds (Debt)
•  Overseas Fund (Franklin us opportunities fund)

Learned about debt funds burnt fingers in Gilt fund. When I invested in gilt fund never thought I can get even the negative return. But, later figure out Ultra Short-term funds are more suitable for my requirement. Still, need to learn a lot of nonsense of the debt market.

 Franklin us opportunities fund so far has given me around 18% return in first half of this year. Reason for investing was two folds
1) Wanted exposure to worlds best companies.

2) Since small-cap valuation was very high and I was not able to find good value stock with a margin of safety. Even the US market was also trading high but I didn't want less than 50% exposure to equity (fearing missing out). So this fund was giving me an opportunity to remain in balance.  My thinking was US market is trading at high if US market corrects 20% then the Indian large cap will correct by anywhere between 25-30% but the small cap will correct more than 40 %. If the Indian market is going to correct like this then currency will depreciate by around 10 %. So, actually, I will have loss of only 10% on my capital and I can invest that capital in small caps which have lost more than 40%.
If the market moves up then I will not miss-out the equity gain.
My prediction was half correct, US market and Sensex both touching an all-time high. But, most of the small-cap down beyond 25% and rupee also depreciated around 10 %. Luck was favorable this time for me, nothing to do with any kind of skill. Surely, luck will not favor me again during buying time, I have to be very cautious.


Still , small cap stocks are not very cheap but lot of opportunities are emerging . Hope, Soon , I may find some good pick .