Most fundamental investors are against active portfolio management and rightfully so. Conventional wisdom says that we must reject 99% of stock ideas, build a concentrated portfolio, more decisions we take, more mistakes we will make, etc etc. These rules are ok for mature and developed economies where things are largely stable at the macro and micro level, but does it apply to a market like India? I don't think so.
India went through a long phase of stagnation but recent political change at the center has brought in a progressive and reformist government that is changing things in this country on a daily basis and for good. While most good businesses are capable of surviving policy changes, they will not necessarily be the best ones to put your money to work. We are talking about disruption and not just changes here. While good businesses will survive disruption we need to choose investments that will thrive and prosper in this disruptive environment and not just survive. Many companies will disappear and many will rise in this environment and some of them will become the good & stable businesses of tomorrow rewarding early investors and stock pickers multi-fold in the process. Stable businesses will on the other hand give you stable returns. But stable returns in a disruptive environment is at best under-performance .. hardly any fun.
How to make money in disruptive times?
Simple. Break the rules. Experiment. One such recent event in India was demonetization. One announcement and a country of 1.2 Billion changed in a day. With such a disruptive change can the investment themes pre and post demonetization remain the same? The stock market went into a tailspin post the announcement. Several so called stable businesses that were once long time favorites of investment gurus came crumbling down. At the same time several new investment ideas have emerged that are rising straight up non-stop in this market. Off-course many of them are new businesses, have untested management and little history to rely on. But this is a brave new country, change will not happen if we stick with the old. Change will happen if we embrace the new. Some will fail but many will also make it big. The big one's will continue to be big but real money will be made by investing in small companies that will make it big.
So what changes with demonetization?
Recently I have added 25 new companies in my portfolio and within a month my portfolio is back to near peak level pre-demonetization. A substantial part of these gains come from my new investments in a really short time. Compare this to passive investment portfolios which are down anywhere between 8-30%. So what are the changes? I have listed them down at a high level in terms of investment themes. These also take into account few more major events like Trump victory, GST & rise in oil prices post more collaborative approach between OPEC members, etc
Inclusions:
Exclusions:
What will be the next change?
Next is FED rate hike. Lot of changes are going to come from Europe in 2017. Besides we have budget 2017 and the biggest change will come from Middle East & African countries like Syria & Libya in 2017. Fortunately many of them are not directly related to India but there will be impact on India too. So be ready ..
** not interested in theory ... want some stock names ... i tweet them regularly @vikiitd .. usual disclaimers apply .. primarily do your own research :)
India went through a long phase of stagnation but recent political change at the center has brought in a progressive and reformist government that is changing things in this country on a daily basis and for good. While most good businesses are capable of surviving policy changes, they will not necessarily be the best ones to put your money to work. We are talking about disruption and not just changes here. While good businesses will survive disruption we need to choose investments that will thrive and prosper in this disruptive environment and not just survive. Many companies will disappear and many will rise in this environment and some of them will become the good & stable businesses of tomorrow rewarding early investors and stock pickers multi-fold in the process. Stable businesses will on the other hand give you stable returns. But stable returns in a disruptive environment is at best under-performance .. hardly any fun.
How to make money in disruptive times?
Simple. Break the rules. Experiment. One such recent event in India was demonetization. One announcement and a country of 1.2 Billion changed in a day. With such a disruptive change can the investment themes pre and post demonetization remain the same? The stock market went into a tailspin post the announcement. Several so called stable businesses that were once long time favorites of investment gurus came crumbling down. At the same time several new investment ideas have emerged that are rising straight up non-stop in this market. Off-course many of them are new businesses, have untested management and little history to rely on. But this is a brave new country, change will not happen if we stick with the old. Change will happen if we embrace the new. Some will fail but many will also make it big. The big one's will continue to be big but real money will be made by investing in small companies that will make it big.
So what changes with demonetization?
Recently I have added 25 new companies in my portfolio and within a month my portfolio is back to near peak level pre-demonetization. A substantial part of these gains come from my new investments in a really short time. Compare this to passive investment portfolios which are down anywhere between 8-30%. So what are the changes? I have listed them down at a high level in terms of investment themes. These also take into account few more major events like Trump victory, GST & rise in oil prices post more collaborative approach between OPEC members, etc
Inclusions:
- Digital Payment/Fin Tech/e-gov
- Banks (new age banks with no NPA problems)
- Organized retail/e-commerce
- GST & Mkt consolidation
- Budget'17 & Housing for all/Smart City
- Rural development & inclusion
- Specialty Chemical Manufacturing
- 24 hours power & electrification
- Defense modernization/FDI
- Road, Infra, in-land water transport development
Exclusions:
- Real Estate
- Oil price dependent industries (paints, plastic, airline, etc)
- Jewelry & Luxury items
- Discretionary consumer goods
- Media
- Telecom
- Old technology/cash dependent/land bank companies
- Tata group
- Gold/Cash/Fixed Deposits/Hard Assets/Black Money
What will be the next change?
Next is FED rate hike. Lot of changes are going to come from Europe in 2017. Besides we have budget 2017 and the biggest change will come from Middle East & African countries like Syria & Libya in 2017. Fortunately many of them are not directly related to India but there will be impact on India too. So be ready ..
** not interested in theory ... want some stock names ... i tweet them regularly @vikiitd .. usual disclaimers apply .. primarily do your own research :)
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