I keep writing these columns once in a while to emphasize that this is NOT a portfolio management column. This is a blog by a Mumbai centric Tam brahm heavily influenced by the Gujarati community in his investment orientation. What are my biases (you should know it, so that you know how much to discount what I say)

a. It should come as no surprise that I am biased towards equity.

b. A firm believer of Value Investing, I personally run a very aggressive portfolio – and it might shock or stun financial planning students to see such a huge equity bias in my portfolio.

c. I do not understand technicals and even though I know some of the top tech analysts, I have very rarely held positions based on the charts.

d. When one of my companies pays  a dividend, I bank it – smirking at the Return on Cost of acquisition. This may actually cause YOU to miss opportunities. Having said this I have held positions in Bharti Airtel from Rs. 80 to Rs. 1200 – and I do think it was luck. I also sold Mahindra Holiday Resorts at about 540 – a share that I should not have bought at all based on my Value philosophy.

e. My portfolio is a long list – some held as a value investor, some as a speculator, some as a MNC buy back opportunity, some as …..so I do have contradictory styles in about 50% of my portfolio, but overall I am a value investor.

f. I do not agree with, and therefore do not read about why gold and real estate are growth asset classes. I still do hold real estate – as an investor, user as well as a lender.

g. I let my ego sometimes overpower my portfolio management skills.

h. I have been protected from complete disasters by my super able broker, and I am biased by his views.

i. I am biased by the brokerage house that puts a buy report. When I see a buy report  I probe whether it is from a merchant banker, broker, management. Then I am skeptical about the industry too. So when I get a report, it means I have to do research. Research reports are useful ONLY for the numeric data.

j. I am convinced that talking to 3 people is better than 3 days of number crunching. I am biased to think that I can get to them in 3 calls each. Not a bad effort – reward ratio,

k. I hate selling well performing shares – even over long term (say 3 years) of underperformance. However ignoring the media and holding on to HUL and Colgate, PnG, Gillette, Oracle….

l. I will NEVER leverage – I belong to to the old school of thought….Investment means with my own money.

m. If I spent 1 hour on a discussing a research report with a kid who has made it, I spend 45 minutes on the people running the business, 10 minutes on the nos. and 5 minutes on the macros. Not sure if this is right, it has worked for me.

n. Out of the 50-60 fund managers I have seen, met, spoken to, there are 10 whom I respect. 4 are with the MF industry, 6 are on their own. So the odds of finding a good scheme is close to zero. After 10 years it will be ZERO for me, as these guys would have retired. I presume.

o. I hate admitting to the fact that I have made money by picking up undervalued shit. I also like picking up shares which have been over punished by the market because the management is of dubious quality, but it would always be a trading position.

p. a very very very strong believer of the market cap: free cash flow ratio. Completely kept out of Adag, and feel good.

q. Huge, huge, huge regional bias. For a long term buy the company HAS to be located in Mumbai, Chennai or Bengaluru. Will NOT pick up a company with HQ in Hyderabad. Huge exception being Coromandel Fertilizer which is technically controlled from Chennai, not Hyd.  In case of MNCs do not care where the HO is, so ITC makes the cut.

r. I find changing myself difficult, but that is how i am…

s. I have a good clipping rate of outperformance of the sensex…the worry is I think I can repeat it……sheer arrogance perhaps.

I keep writing such stuff because in real life it is impossible to eliminate bias and vested interest. For example fund managers will keep telling you this is a good time to buy, BUT since they are paid on AUM basis, they will NEVER tell you when to sell.

A broker is interested in activity, YOU are interested in increasing networth.

A life insurance company is interested in selling ULIP, but you in Term plan.

UNDERSTAND BIAS. UNDERSTAND VESTED INTEREST. Utopian to think things will change. It cant.

 

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  1. Karthik Reddy Chintaparthi

    Hi Subra,

    Would you be able to provide us some good stock picks from your long list of stock portfolio ?

    Thanks,
    Karthik

  2. Karthik

    this is like asking me to share my medical prescription. If your profile is exactly like mine you can use it right? Stock picks in my case are tagged ‘forever’. Take EID Parry. I have this share bought at Rs. 17 (when it was a Rs. 10 share and making losses circa 1986). 5 months back I picked some more at 180 (btw it is a Re 1 share I guess). How useful was this info to you? I will surely exit partially at the sugar price boom….frankly looking at my portfolio is like looking at the medical prescription of the world’s best doctor’s prescription FOR SOMEBODY ELSE. Does not help at all.

  3. Subra..

    Getting a “super able broker” is next to impossible. Can i borrow yours if he is willing to work with a person with a small portfolio but wanting to make it into a big one.

    PS – I am gujrati myself and i am hoping this will “bias” you into helping me. 🙂

  4. No chance in hell Chirag. Sorry this gen wants everything online. I have an online acc with most brokers (Subra yaar ek acc khol de na)…have really used only once or twice. Prefer the goddamn phone model still. Delivery i do online. He prefers the phone, so it suits us.

  5. Thanks for your reply and sorry to hear that …. I am in Chennai and my broker is in kochi. I transact with him on the phone and payment and final report is done online .

  6. off topic rant

    I am writing this here because the powers that be hopefully read your blog. SEBI, pls.
    What is this new KYC thing, IPV? The poor idiot who was KYC compliant before 2012 is being made to run around. If you were MIN compliant, pre 2008– then too bad welcome to the party. The funniest is an entry termed “net worth in Rs.”– was someone sleeping when they typed this out?

  7. Everyone these days have bias. Nothing wrong. It is good to know what is our preference and dislikes. However Why not discolose the bottom line. The balance sheet is rarely discussed at personal level. How much RoR is generated thru our investments over a period of time? or Growth in personal income or % increase in investment etc..

    Without these numbers, it would be difficult to assess the performance. I am not able to get any clue from this article.

  8. Subra,

    As always pleasure to read your blog. I would love to hear your rationale (if there is any) behind avoiding HYD based companies. I sincerely hope its the management and not the people in general (prejudice I mean).

  9. not sure from where the bias started. Nagarjuna group perhaps, but till today CANNOT find one good reputed Hyd based company. Only exception being Dr. Reddy’s lab. Jupiter Oranics, gmr, gvk,…the list of cos. i will NOT touch is huge..hence the bias. Too late in my life to change that.

  10. Krish how does MY portfolio analysis help YOU? and SIZE? I have time and again said I am about 90% in equities, but the debt should see me through a 10 year bear run…beyond this I am not saying anything about the size of my portfolio. The equity portion beats the best fund managers by a decent margin because of long term holdings. Parts of my portfolio I keep writing about Colgate, Cummins, Hdfc, Gillette, ITC, Hdfc bank, Coromandel International, Cholamandalam, eid parry, Hero, Sundaram, Telco, LnT, tata power, tata steel, tcs, tata investments, indian hotels, carborundum universal, Bharti airtel, eid parry….et al

  11. Hi Subra

    Its a pleasure reading this blog and also the comments/responses to your blog. I should first have thanked you for it.

    I have a doubt – You say that you portfolio returns beat the fund managers by a good margin. Is it largely through buying and holding for very long periods of time above 5 yrs (which is suspect) or buying , holding for a comparitively shorter period of time (2 – 3 yrs) and selling.

  12. I have said this many times in the past as long as one is not a fund manager, he/she can do all combinations. So I have say 50,000 Tata power bought at a price of Rs. 10 – it does not mean i hold on to that for life. I did sell in 2007 simply bcoz i thought a p/e of 100 was not worth for a dividend yield stock. Same basis why LnT got sold. I have Gillette etc. in which I have traded. I have bought sold, accumulated and sold EID parry. Recently I bought lots at 180.

    So there is no ONE single method. Yes my ‘average’ holding would be in excess of 30 years…but many transactions would be 5 months, 8 months, 24 months. One cycle for a commodity, ‘forever’ for a HUL, Colgate, Gillette, PnG, Parke Davies, Glaxo….but picking up trading opp even in those. E.g. I had Apollo Hospital bought at 9 and sold at 150. I then again bought at 300+ and sold at 500. Now it is at 700+….so NO FIXED STRATEGY. Beating the fund manager is easy if there is no need to be 95% of equity ALL THE TIME. I can move from cash to equity to liquid fund to debt instruments – a FM cannot.

  13. Main aur meri biases aksar yeh batein kartein hain, equity hoti to aisa hota, debt hoti to waisa hota… main aur meri tanhaai..oops biases.

  14. subra,

    One question

    Just curious to know as to how much was your holding time for Apollo stock which you bought at Rs. 9 and sold at Rs. 150.

    thanks,
    amol

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