Business Synopsis’I am not a crazy risk taker, I need consistent compounding stocks. I need stocks that do well even in difficult times.’ETMarkets.comFor most successful investors, 80% of the wealth is only created by 20% of the stocks and it is this ability to pick stocks which differentiates. There is no one golden bullet for sureshot success. just keep the risk under control, says the Founder & CEO, Marathon Trends-PMS.
Is there any one stock or sector which has maximum correlation to the way the Nifty is going to move? Is there anything that you spot in particular?I am not a chartist in that sense in the term but I do combine them with fundamentals and what really is very visible is obviously because of the general state of the economy coupled with the kind of numbers that are coming out. There are companies that are still managing to buck the trend and the next quarterly numbers that come will be a handful and these are going to disproportionately reward investors.
One can mention about Reliance’s being a very good proxy like in the US, people use Apple as a proxy for many years. I guess people were looking at the Bank Nifty as a proxy to the Nifty but I feel that at the moment technology, Reliance are the kind of plays that will give leadership to the market and they will give us a lead sense into the direction of the market. I must disclose that I have a vested interest, I have Reliance in my portfolio, I am overweight in technology. So, please do your own research.
If there is one stock that you had to recommend on how to get rich which one would you pick out?I do not know, nobody knows. That is a question which we all wish we had the answer to. There is a beautiful line we think we know but we know we do not know so the fact is that you know let us not be so sure about these things. Markets are a game of probability if anyone says that I know that stock that is going to make you rich believe you me he is lying or he is dumb. The fact is after having spent so many years in the market, you know this is a game of probabilities. You have a few bets — be overweight, underweight, somewhere and you ride the trend, that is what I have really learnt. There is no one silver or golden bullet there. You just have to keep the risk under control.
People think creating wealth is all about picking that one stock or some tip but it has so many more components. Picking stocks is one part but how do you allocate? You can be wrong and you are going to be wrong half the time in this market. Where do you exit? Managing a portfolio or creating wealth is a sum total of all these. When you study the biggest investors or the most successful investors you really get a shock that how the 80-20 principle works that 80% of the wealth is only created by 20% of the stocks and it is this ability which differentiates.
If there is one such stock idea or if there is one sub strategy, it is this whole 80-20 principle. You repeatedly hear George Soros talk about it all. Even the great Warren Buffett, the biggest wealth creator. Ultimately you will find that it is concentrated portfolios in his 90s. Maximum wealth he creates in a stock is in Apple. Just imagine what this market teaches us. So sorry to not give you a direct answer but give you a bit of gyan but that is the way I think. It is all about managing risk and riding the trend.
Which are the three stocks you are holding and when do you think that 20% period of the three stocks will come?Among my holdings, my largest allocation is in Divi’s Lab. Reliance is my second largest holding. I really classify the price movement or the upsurge in Reliance more linked to technology than the old petrochem business. And the third stock that I have in my portfolio which again is a technology related stock is Naukri or Info Edge, something which is technology facing and a beneficiary of the internet and digitisation.
So essentially, there is an overweight bias towards pharma and IT and underweight towards banks and financials. Six months ago, very different banks and financials dominated the portfolio but this whole fall in the Covid space and the kind of behaviours that you are seeing and the kind of scenarios that are emerging are making me more and more convinced that it is a decadal pendulum that is shifting away from banking and finance towards technology and healthcare.
A lot of these so called hope trades, which bought into recovery or balance sheet repair they have come down — be it Tata Motors, Zee or Indigo. What do you make of this trade?There was a hope trade. Ultimately it has to translate into numbers. Yes we will find a vaccine and yes, the world will restart but there are a lot more twists in this game. The airlines, travel industries are getting clobbered globally because suddenly they feel that a second wave of Covid-19 is coming and there are fears of shutdown. There will be a happy ending that once a vaccine comes. These hope trades are good if you have that immense time horizon and then immense risk taking ability which most people do not.
Whether or not the Robinhood traders were actually trying to play because x bought, y bought and because there was a momentum, wealth will be created in these if you buy them in absolute distress and you have that kind of time frame. When they will move and they will ultimately move, when they show the numbers and one does not know what will be the ultimate outcome.
So I would rather play certainty, I would rather play companies which are delivering even in difficult times and where there is clarity when they restart. You could be lucky, you could be great and pick some crazy multibaggers at distressed valuations which are available right now but you are also likely to be very, very wrong. So rather than visualise a post Covid scenario, I would rather look at this as a work in progress and bet where companies are able to deliver in difficult times. I am not a crazy risk taker, I am not 1:100 kind of player. I need consistent compounding stocks, I need stocks that do well even in difficult times whether draw downs are low and that keeps my style.
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