Q1FY21 – Portfolio Performance

The Nifty 50 TRI posted a 23.6% gain in Q1FY21 while the midcap 100 TRI posted a 28.7% gain and the smallcap 100 TRI posted a 31% gain in the same period. The Alphamultiple portfolio was up 20% in Q1FY21.

Alphamultiple Performance

Q1FY21 Performance

Portfolio Performance

While you read this and stare at the numbers on the screen, a +20% and -20% look just normal market movements. But that very moment when your portfolio had melted 30% in just few weeks would have been scary, right? The numbers capture performance but don’t even come close to capturing the volatility.

Alphamultiple Advisors performance review

Performance for the last 4 quarters

Our portfolio fell lesser than the markets fell in Q4FY20 and also rose lesser than the markets rose in Q1FY21. The Q1FY21 surprised most investors as the markets recovered sharply after the crash of March-April 2020. Investors are still wondering what drove the markets up despite the economy being at it’s worst in decades. Countries which had survived the 2008 global financial crash have also contracted because of the lockdowns.

Portfolio Changes

We used the lower prices in March and April to add some bluechip names to the portfolio. We did not make any transactions between 20 April and 20 June, except for taking exposure in the pharma sector. There were a lot of factors which made us stay away from taking up fresh positions in those two months, but the visibility is better now. We foresee a lot of churn in the portfolio coming up in Q2FY20 as we look to book losses in stocks that we have held for the last 2 years. One reason we could add stocks in March and April was CASH.

We had almost 35% of our portfolio in cash before the markets crashed as we believed the market valuations were stretched. In the coming quarters, we are looking to add quality small and midcap names to the portfolio. We believe that over the next 3 years, the small and midcaps would deliver higher returns. The small and midcaps are at cheap to fair valuations. Many largecaps look expensive now.

Note on the economy

We have been getting a lot of queries about the economic outlook, sector performance, impact of Aatmanirbhar Bharat and other geo-political factors. As much as we wish to predict outcomes, these topics are outside our scope of understanding. We will stick to what we believe in – Buy quality stocks at cheap to fair valuations.

Q4FY20 – Portfolio Performance

The Nifty Total Returns Index (TRI) has posted a 25% return for FY20 basis while the midcap and smallcap TRI are down by 35% and -46% respectively. Our portfolio is down -20% on a YTD basis.

Alphamultiple Performance Review

FY20 Returns

Portfolio Performance

Our portfolio has not escaped the market carnage. From the portfolio peak in January 2018, our portfolio is down by -30%. Ours is a predominantly small-midcap portfolio and it has fallen less than the TRI of the largecap, midcap and smallcap.

Alphamultiple portfolio review

5 quarter performance

For Q4FY20, the Alphamultiple portfolio fell by -20.59% which is much less than the Nifty, Midcap and Smallcap. We had a high cash allocation in our portfolio and we have utilized some portion of it in the recent market correction. While this is a great time to increase allocation to equities, one has to be careful because the stocks that did well in the previous bull market may not do well in the next one.

Our focus will be on high ROCE generating businesses that are generating cash flows from their business and have the opportunity to grow. The sweet spot would be the Rs 1,000 Crore to Rs 10,000 Crore market cap companies here.

Markets at fair vaulations

While the earnings growth is depressed and the FY21 EPS set to get a huge dent, the PE ratio will appear distorted. We have discussed this earlier on our blog (Read: April 2020 Market Valuations). This is a very good opportunity to invest in equities and we are confident that over the next 3 years the Indian markets will deliver 12%+ CAGR.

If you are doing your SIPs for the last 3-5 years and are sitting on negative to NIL returns, it would make sense to continue them for another 2-3 years. You will most probably see very good returns. We have back tested data January 1995 onwards and have observed that 17% of the instances have negative returns on SIPs for 5+ years. However, if these are continued for 2+ years, then the returns move up significantly.

Don’t try to time the markets

Historically, during depressed markets the PE ratio of the Nifty has fallen as low as 10-12. In the current scenario a PE of 12 would mean levels of ~ 5,500 on the Nifty. Everything is possible in the markets but getting the bottom right is not possible. So focus on reading reports, analyzing fundamentals instead of worrying about the market bottom. Also, invest in a phased manner. Don’t rush to deploy your cash at once.

We will come out of this bear market and look back at this period as a golden opportunity to have made investments in equities.

Q2FY20 Portfolio Performance

The Nifty has posted a 5.17% return on a YTD basis while the midcap and smallcap indices are down by 10.44% and 13.63% respectively. Our portfolio is down 2.55% on a YTD basis.

YTD Performance

Portfolio Performance

5 quarter performance

The Alphamultiple portfolio fell 2.03% for the quarter. We under-performed the Nifty but out-performed the midcap and smallcap indices. From its peak of Jan 2018, the portfolio is down ~ 18%. As our portfolio is primarily concentrated on smallcaps, we have maintained high cash allocation in the portfolio over the last two years. But, now our allocation equities has increased to 63% (Read: Live Portfolio).

Our investments in a credit rating company and a media-entertainment company have performed dismally but other investments have balanced out those drawdowns. Some stock picks of ours are up by 40% to 60% over the last one year which has reduced the overall drawdown.

9 out of 11 stocks that we own in the core portfolio have a market capitalization of less than Rs 5,000 Crores. This makes our portfolio pre-dominantly smallcap.

Changes

We closed the Wipro buyback with a profit of ~ 1%. However, many clients bought the shares of Wipro at higher prices (above Rs 290) and thus incurred a loss of ~ 3% to 5% on the buyback. Our expectation was to earn a 5% to 9% return on the buyback but the acceptance ratio was much lower than anticipated.

We have recently added a company operating in the healthcare space. We have changed our outlook on the markets and are looking to increase equity allocation in the coming months. Earlier we wanted to stay heavy on cash.


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Q3FY19 – Portfolio Performance

Market Snapshot

The Nifty posted positive returns on a year-to-date basis in 2018 while the midcap and smallcap index saw a deep correction. The earnings growth remained in single digits and the PE Ratio continues to trade at expensive levels.

Nifty 2018 Snapshot

Most of the retail investor’s portfolio was in midcap and smallcaps. This is where the pain was in 2018. A lot of stocks had corrected by 50% (Read: Sentiments – Market correction and more) and popular names have trapped investors.

Portfolio Performance

The Alphamultiple portfolio rose +0.67% for the quarter. We outperformed the Nifty 50 TRI but under-performed the mid & smallcap TRI. On a YTD basis, the Alphamultiple portfolio fell (9.04%). We maintained high cash positions in the portfolio throughout the year and have recently increased allocation above the 50% mark (Read: Live Portfolio).

Changes

This quarter, we had one exit – Dewan Housing. The stock crashed more than 50% in one day and we exited immediately. However, we had partially booked profits in June and the allocation to the portfolio was low.

We added two stocks to the portfolio in this quarter. Both the stocks have a different client base (B2B and B2C) and we have a 3-5 years view on each of these stocks. The companies are debt free, cash rich, generate high ROE and have a long runway for growth in the years to come.


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Q2FY19 – Portfolio Performance

In this post, we detail the Q2FY19 Alphamultiple Portfolio performance for the quarter ended 30th September, 2018. We document our portfolio performance on a quarterly basis for the benefit of our readers and those who are interested in knowing the performance of our advisory service. This post focuses not on the company results but on the price performance.
Q2FY19 Alphamultiple Portfolio Performance

Q2FY19 Alphamultiple Portfolio Performance

While the quarter was a great one for the largecap indices, the small & midcap indices performed poor by delivering -5.19% and -13.68% returns respectively.

Q2FY19 Alphamultiple Portfolio Performance

The largest drawdown on our portfolio will be ~ 17% from the peak. However, for most investors the drawdown is in the range of 10% to 15% from the peak due to low allocation to equities and high cash position of the portfolio. We have been on more than 50% cash in the portfolio since early 2017. The cash will be utilized to add good companies at low to fair valuations.
We booked out Dewan Housing and Muthoot Finance in June by nearly 50%. Thus, our portfolio did not take a major hit in the recent NBFC crisis. We have avoided NBFC space over the last few years except for the above mentioned companies. Investors will appreciate that we do not follow any thematic investing and avoid chasing trends.

Are we satisfied?

Yes we are. Markets have their own seasons and at present we are going through a steep correction in small & midcaps where the valuations were astronomically high. We feel that our defensive stance is now paying off as our portfolio is withering through the market correction without any major drawdown.

Is this a good time to invest?

Absolutely. If you are a serious investor, you have to face all the market conditions with confidence and patience. You cannot always be successful in trying to time the market by buying at the lows and selling at the peak. Investors who start now might not see consistently high returns over the next few months but they will be more disciplined than those who start investing when the bull market’s momentum is high.

Where are we investing?

Our approach is not thematic but it is company specific. Ideally, we look to buy companies which can offer an expansion in valuation multiples as well as earnings growth. Also, it is important to Own what you know and know what you know.

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Q1FY19 – Portfolio Performance


In this post, we highlight the performance of the portfolio for the quarter ended 30th June, 2018. We document our portfolio performance on a quarterly basis for the benefit of our readers and those who are interested in knowing the performance of our advisory service.
This post focuses solely on the performance of stocks and not the company results.
Performance

Our portfolio has under-performed the Nifty 50 (Total Returns Index), by delivering a +1.39% return against the Nifty 50 TRI’s +6.41%. While the quarter was a great one for the largecap indices, the small & midcap indices performed poor by delivering -2.97% and -6.94% returns respectively. We have out-performed both these indices by a convincing margin.

The strongest performing stock of our Portfolio was Tata Elxsi which has a high allocation in the portfolio and has done very well since we purchased it in August 2017. Our portfolio is still below it’s lifetime highs although the drawdown has not been severe – primarily because we have a big chunk of the entire portfolio parked in liquid funds.
To see our portfolio for new members, click here – Live Portfolio.
Are we satisfied?
Yes we are. Markets have their own seasons and at present we are going through a steep correction in small & midcaps where the valuations were astronomically high. Over the last one year, we have been defensive by having a high cash holding in the portfolio instead of trying to play the momentum. We feel that this stance is now paying off as our portfolio is withering through the market correction without any major drawdown.
Is it a good time for fresh investments?
Absolutely. If you are a serious investor, you have to face all the market conditions with confidence and patience. You cannot always be successful in trying to time the market by buying at the lows and selling at the peak. Investors who start now might not see consistently high returns over the next few months but they will be more disciplined than those who start investing when the bull market’s momentum is high.
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Q4FY18 – Portfolio Performance

In this post, we highlight the performance of the portfolio for the quarter ended 31st December, 2017. We document our portfolio performance on a quarterly basis for the benefit of our readers and those who are interested in knowing the performance of our advisory service.
This post focuses solely on the performance of stocks and not the company results.
Performance
Q4FY18 was a wild quarter for our portfolio. We lost ~ -6.36% on the portfolio against a – 3.96% fall in the value of the Nifty index between 29 December 2017 and 28 March 2018. This was an under-performance of 2.4% and this is first quarter of under-performance from our side. For new investors, the allocation to equities is 45% to 50% and for those associated with us since end of 2016, the allocation is now touching 80%. This was a tough quarter for the markets and PC Jewellers was a big reason of our under-performance despite having a very low allocation.
As you can see, there was a wild swing in our portfolio from it’s peak in the 2nd week of January to it’s lows in the 3rd week of March. Our overall portfolio drawdown was 13.18% vs the Nifty’s drawdown of 10.72%. If your portfolio fell by more than 20% in this fall, you should be concerned about the risk profile and health of your portfolio. We are also satisfied that our portfolio has risen back faster than the broader market.
For new members, we do not have Shakti Pumps, Bajaj Corp, Ambika Cotton, Indo Borax in the portfolio. Even the allocation of Tata Elxsi has been reduced to 4% of the portfolio from previous 8%.
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