I’ll be completing five years in the stock market this weekand this post is part reminiscing of the journey and partly some more thoughts on what’s happening around us.
In mid February 2017, my father bought for me the first stocks of my own money- HUL, Asian paints and Sun Pharma. Thanks to him, I knew trading was out of question and they’re to be held for long term. Beyond that, as someone from engineering background, I knew next to zero about accounting or finance. All I knew was if everyone sells, you buy and when everyone buys, you sell. It’s more or less a variation in buy low, sell high strategy.
I was then in Imphal, already working and preparing for my last attempt of UPSC on the sides. So for entire 2017, I didn’t pay much heed except buying small quantities of shares with whatever money I had. After I flunked my mains, in early 2018, I asked myself as to what I wanted to do in life and then developed a craving to study for CFA charter. So I brought some books and began to teach myself everything about finance and accounting I could lay my hands on. Around this time, I also had begun to read investing books and was under the thrall of Ben Grahamic style of investing, religiously looking at PE and PB of the stocks I covered. Around that time, as I learnt to appreciate the balance sheet and P&L statement, I also read about the biggest names in value investing such as Graham, Buffett, Howard Marks etc.
One man and his style did influence me and it was Rakesh Jhunjhunwala. His story always inspired and continues to inspire me. Since I was single and had plenty of time, I began to read all the books I could and did what is call the dirty works- learning to read the balance sheets, reading quarterly and annual reports of companies I owned, reading for CFA taught me basics of F&O, portfolio management and everything the professional investors do. As I was alone, I began to hear a lot of YouTube videos of all the investors I could find- both domestic and international. Talks at Google series, videos of Rakesh Jhunjhunwala, Ramdeo Agarwal etc all helped me a lot to understand the nuances of the market.
Knowledge as we know is cumulative and by the time 2018 ended, my portfolio was inching towards ten lakh mark. However, this was a very polarised market and doesn’t matter what happened, I was always down 10-20% on my stocks. Tata motors had already collapsed from when I began to buy at 435 to 250. I couldn’t fathom it but all I did was to buy. However, in late 2018- early 19, I decided to not pursue CFA as I realised 1. The portfolio management theory and DCF methodology is junk and 2. I can’t buy 100 stocks and claim to beat the market and 3. I wanted to be an individual investor.
So by 2019, I decided to go full throttle and become an individual value investor. I sold my HUL at 1700, Asian Paints at 1100 and Reliance at 1100 types and converted all to IOC, Tata Motors, and of all things Yes Bank. I kept adding to my positions and realised some key things- quantity matters, dividends matter. However, my biggest learning was yet to come. It was when I sold both Reliance home finance and yes Bank and booked a total loss of over 2.25l when I realised Quality matters the most. Looking back, it’s a small price to pay or otherwise, I won’t have achieved what I did last year because I would have still been buying junk like Jet Airways, PNB etc.
So by Covid lockdown 1.0, I had lost over 2l , read almost all investing books I could find, built a sizeable portfolio, learnt to read and understand basic accounting statements, and began to breathe market day in and day out. And during the lockdown, I went all in and bought whatever I could as much as possible and this paid off brilliantly. JP Morgan says- you buy when there’s blood on the street, even if the blood is yours. From covid low, my portfolio is up 6x, ofcourse with incremental capital but this has been hell of a ride.
Also, my biggest learnings have come in the past year when on August 31, 2020, I finally broke even on my portfolio for the first time. Yes, for 3.5 years, I didn’t even break even on portfolio basis but held on. Patience pays off in the market and hence they say, time in the market is more important than timing the market. I learnt that selling HUL, Asian paints and Reliance was not smart but dumb, not averaging up was dumber and buying junk is the dumbest. Hence my current philosophy is something like this- don’t buy junk, buy growing companies which are on the right side of technology and the India story, be doubly sure of quality ( I have zero exposure to Adani group, I just can’t figure the price movement) and have not more than 10-12 stocks. Top 3 holdings in my portfolio are over 60% and top 5 over 80. Quantity, quality and price, they all matter.
Now let’s see what’s happening to my favourite stocks:
1. BSE- it’s back to its life highs and here’s a very big lesson. From 2014, nifty is up 3x, Nestle 4x, HDFC BANK 4x but Bajaj Finance is up 50x. I heard someone say a very important thing- in a market, some stocks will have their own mega bull runs, irrespective of the overall market. So even if the market goes nowhere, these stocks will be up 10-20-100 times. If you spot one of them, and hold it, don’t fall for the quick buck but just hold and let the home runs count.
Tata motors- The stock is holding in a weak market but the best part is that people are still not buying in the story. They’re still buying Maruti and Mahindra while the company sells more EV month on month. Since FII are selling, Tata motors DVR is artificially down an extra 30% to 240 and is a lip-smackingly good buy. In three years, I see Tata Motors selling huge number of cars and the stock going up atleast thrice from here.
Icici securities- This is a no brainer ten bagger from here. The stocks growing 30% plus year on year, return on equity 70% is trading at 15 times earning is a ten bagger on sale. I won’t be surprised if it goes to 5000 plus in three- five years or less.
Happy Investing!
Life is all about Compounding! 