Originally posted by deepinsight
Basantji: Thanks for sharing also your misses with your gains. Its great learning. (what to do and what not to do)
Some questions on strategy
A) Do you have a system of adding to your holdings on a periodical basis? (or if you sell one of your holdings)
B) Do you choose price/value at that particular point as the main parameter to which holding to add to? or is it based on % of concentration? (i.e. adding more where there is less exposure)
C) How high in concentration do you let one company become of your holding? (I once had it that Infosys through appreciation become more than 70% of my total holdings)
Thanks |
Tried answering them below:
A) Yes, I keep adding to the better idea. For example I mentioned earlier on this forum that I exited Trent last year nearer to Rs 900 and bought Tv18 (prior to demerger) at about Rs 610. Now that price of TV18 (Rs 610) was almost 4.5 times higher then my first investment of Rs 145.
Earlier I had a mental block of not buying a stock at a substantially higher rate to my first buy but this changed one day in the course of discussion with a dear friend of mine who invests a very significant amount caross the globe - mostly into emerging markets.
That person (cannot disclose name) has a very good exposure to HDFC Bank and keeps adding to this every time he gets an opportunity. he told me that his first purchase of HDFC Bank was at Rs 30 and his last purchase was at Rs 450 so the last buy was at a time when the first buy was a 15 bagger!!!
That changed my concept of not buying something that has gone up in price. Unfortunately I removed that mental block only last year otherwise I could profited more from this strategy. Anyway we always keep learning!!!
C) The idea is simple. and I would quote what I wrote earlier on this forum:
" This is more of a portfolio check which I do. If I have 4 ideas in my portfolio all potential multibaggers I just check up to see if after 4 years the increase in price of one of them should be equal to my total capital as on today. I assume no returns from the other three - which if it happens is a super bonus."
So for 4 stocks the ideal is 25% for 3 it is closer to 33%. That is my concept of getting diversification in concentartion.
Sometimes I get worried whether this is the best startegy to follow but Buffet also kept American expres as more then 50% of his portfolio when the Bank got into a one off problem.
But 70% is a bit risky but certainly not incorrect. Now that 70% also has to be seen in the context of a person's overall assets. if a person has just got a job and after a few months puts 70% of his investment say Rs 70,000 into Infosys then there is no cause for worry but if after years of hard work and struggle he has a huge corpus which is skewed in favour of one company then it is surely risky.
So if Om had 100% in TCS and stocks was a small part of his overall assets (house, jewelleery) then it would not matter but after he gets a 20 bagger in Nucleus and then Nucleus makes up 70% of the portfolio then that weightage is risky but not wrong.
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