- Wealth PMS (50L+)
The Capitalmind Long Term Multicap was launched in Dec 2014. Since inception it had generated a CAGR of 9.2% compared to its benchmark Nifty 50 return of 8.7%. Let’s divide & analyze the portfolio into two time frames.
It was a stellar ride, where the portfolio was up 87.3% compared to 25.1% on Nifty 50. An outperformance of 62.2%!
The alpha was contributed by stocks like Supreme Petro (up 181%), Artemis Hospitals (up 164% including a demerger from PTL), Aegis Logistics (up 127%), PTL (up 106%) etc.
This was a rough roller coaster ride. We had seen two major drawdowns during this time period.
The drawdown was largely due to stocks like Strides, Sintex, Jamna Auto, Indian Hume (all down 60%) etc.
The portfolio return is a function of high alpha & low drawdown. While everyone focuses on the former, very few emphasize the latter.
Over the last couple of months, we reflected on two fundamental questions:
We tried to address these questions with the following portfolio changes.
Deliberate position sizing
LT Multicap was an equal weighted portfolio. Equal weighted portfolios are more volatile & are vulnerable to huge drawdowns in bear markets. And we had witnessed it in 2018 & 2020. To handle such challenging times, we are introducing weightages for individual stocks.
In such scenarios, we further increase our allocation to 9% to make it part of our core portfolio.
This gives us a flexibility to upsize & downsize the allocations as per the growth prospects of the company. It also allows us to move to cash as per market conditions.
*Click to enlarge
Technicals for Long Term Investing
Focus on Growth & Opportunity cost
1) When do the new changes apply for CM Focused (erstwhile LT Multicap)?
The new changes will be applicable from Apr 1st, 2021.
2) What is the current portfolio?
3) I am an investor in LT Multi cap from long time. My current allocations are different from the model portfolio. Should I rebalance?
There is no pressing need to rebalance the weightages of existing portfolio. The incremental allocation can be made as per model portfolio. Our suggested approach is to add money to this portfolio on a regular basis, which will bring weights in line over time.
However, if your highest allocation is more than 12% on any stock, we suggest it to trim it closer to the model portfolio.
4) When should I enter the mentioned stocks?
We would always suggest a portfolio approach – to have a position in all the stocks, and invest over time rather than all at once.
5) When should I exit the mentioned stocks, when there is an exit call?
There are two types of position changes that could signal an exit:
5) How frequently is the CM Focused portfolio rebalanced?
We closely track the companies & review our portfolios on regular basis. When a stock matches a pre-defined rebalancing criteria, we go for it. This will be communicated to our premium subscribers; on slack (#actionable) and on email.
6) Any change in the portfolio turnover?
This may result in a slightly increased number of transactions, but we don’t expect changes more than once a month or quarter.
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