Asset allocation is crucial for investors to grow their money while keeping the safety tab on. At Teji Mandi, it is an indispensable part of our investment strategy.
An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return
Benjamin Graham
In investing, It is advisable to avoid putting all eggs in one basket.
The aim is to grow with safety
For investors, the safety of their investment is as important as its growth.
Teji Mandi’s investment strategy melds tactical bets with long-term winners. Combined with disciplined rebalancing we ensure adequate risk management and return maximization.
This strategy helps investors in two ways.
1) protect their investments during volatile times And,
2) make use of the opportunities that emerge from time to time.
How we have built the Teji Mandi portfolio
Based on your risk level we will allocate a portion of the portfolio to tactical bets and a portion to long-term winners.
Tactical Bets
Tactical Bets are focused on taking advantage of short-term opportunities to improve risk-adjusted portfolio returns. These are from a 3-6 month perspective.
1.Industry Consolidation
A competitive advantage is seen for a larger established entity in a specific sector
Example: In the banking sector, large private sector banks will gain significant market share on account of conservative underwriting, aggressive provisioning and strong liability franchise
2.Government Policy
A change in government policy could create an opportunity for certain companies and sectors to innovate or expand.
Example: A government ban on electronic products from China would benefit companies in the Indian electronics sector.
3.Industry Tailwinds
External conditions could be favourable to specific stocks/sectors driving supernormal growth
Example: Due to above-average rainfall last year, the rabi crop was strong this year. Good crop production has led to tractor, fertilizer and agro-chem companies performing well.
Long-Term Winners
These resonate with the ‘Buy and Hold’ investment approach.
We focus on reducing risk and generating returns over a long period of time (3-5 years). We avoid frequent churning of stocks selected under this strategy. The portfolio is rebalanced only when it deviates significantly from the initially expected returns.
This is how we pick stocks under this strategy.
1. Proven Track Record
Companies with a proven growth track record of profits over the last 1, 3 and 5 years.
2.Strong Growth Triggers Ahead
A meaningful growth runway should be visible for the companies going forward.
3.Prudent Capital Allocation
In most cases, companies must display operating ROEs upwards of 15%. Even incremental ROEs should be north of this.
4.Beaten Down Stocks
Due to certain near term concerns, some high-quality stocks get beaten down disproportionately. The risk/reward ratio in such companies is usually an attractive proposition over the long term.
Disciplined Rebalancing
We will sell a stock when the initial hypothesis, with which we bought a stock, has run its due course. Or there are better opportunities available. Most of this happens under the tactical bets section. It is also possible a bet becomes a long-term winner.
1.Investment thesis is no longer valid due to
• Entry of a large competitor into the sector
• The company’s capital allocation policy has changed
• The company has entered into an unrelated industry
• The company has had a major management overhaul
2.Substantially better risk/reward opportunity in Companies or Sectors with better growth prospects
• Companies with better capital allocation policies
• An alternate sector that is seeing significant tailwinds
3.Too much noise
• There are situations where a specific industry/company is in a negative light
• When there is a concern in terms of earnings or a corporate governance issue
• There is a change in management or the current competitive scenario.
4.Liquidity Management
We hold a percentage of the portfolio in Cash or Liquid ETFs in extreme situations
• When the market is overheated (High Volatility)
• There is a negative global event/externality beyond our control (Pandemic / Political Events)
What do you think? Do you have any questions regarding our portfolio strategy? Email me at [email protected] with your feedback and questions.
