Model Portfolio 2020

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Under stock advisory service, we share attractive handpicked stocks for regular investments which should over time lead to a well diversified portfolio of quality companies. This is a well suited service for investors looking to deploy monthly savings or capital in a staggered manner.

However, after getting series of queries/requests to advise on deploying large capital at once, we took the initiative to launch a model portfolio where an investor will be able to deploy a lump-sum capital at one go.

Deploying incremental capital in 2015 is a challenging task. As we all understand, the current bull market which started in Mid 2013 has led to an incredible re-rating in all quality stocks. Most of our preferred picks like Relaxo Footwear, Page Industries, Ashiana Housing, Repco Home, Honda Power have gone up 4-10 times over last three years and have got re-rated substantially (40-90 price-to-earnings multiple). Similarly almost all other quality stocks, like a Cera Sanitaryware, Symphony Coolers or Kitex Garments are trading at exorbitant valuations. Amidst this, an investor always has an option to go down the quality curve for deploying incremental capital, buy cheaper valuation stocks, and get into businesses with below average business models like B2B businesses, PSUs, Cyclicals like Infra/Steel or businesses run by managements of questionable integrity.

It is indeed challenging but we believe it is best to avoid both these extremes for deploying incremental capital. This implies we do not suggest to go down the quality curve at all and at the same time do not suggest buying quality at any price; 80-100 P/e. Instead, we believe one has to keep a longer term view of at least five years and cherry pick some select quality names where earnings visibility is decent, business models are attractive, management is visionary & ethical, and valuations, if not cheap, are at least reasonable.

With this idea in mind, we have designed a portfolio called ‘Model Portfolio 2020’ implying that while cherry picking the stocks we have had at least a 5-year view on the underlying business.

Following are the salient features:

  • 15-25 hand picked quality stocks
  • Conviction based allocation in each stock (rather than equal-weighted)
  • Secular stories with an intention to hold for next 5 years or longer
  • Aim to make 18-20% CAGR without taking too much risks
  • Diversified across sectors (avoids over dependence on any single sector/space)
  • Spread across market-cap (includes small cap, mid cap as well as large cap stocks)
  • Minimal churning
  • Quarterly updates (along with suggested changes, if any)

Model portfolio could be a great value add for those who are not able to find time to manage portfolios on their own. Portfolio management after all is a very different art than stock picking.

Please read FAQs on Model Portfolio for more details and to have a better understanding of our thought process.


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