Reflecting on 2017 Investment Decisions
I am back on this blog after a long time. I wanted to write one since January 1st and it is happening now. As we can clearly see, my resolve to write a new post every week waned pretty quickly (in 10 weeks to be precise). From now on, I will be posting whenever something is blog-worthy. Going for quality over quantity. I use my personal journal to jot down thoughts on a more regular basis.
With the dawn of a new year, many like to make resolutions in changing something or starting something new. However, I would like to use the new year to just reflect and learn from my mistakes. Specifically, I want to do this on my investment decisions. 2017 has been a pivotal year that I will remember in years to come because this is when I started putting my money into the markets. It has been a great learning experience so far. I am enjoying it (although I am surfing on the waves of a bull market when I am saying this). Let’s look at my decisions in 2017 one after the other and critic them.
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Dec 2016: bought VTI and VOO shares and started DCA with $100 every month. This was the first money I put into the stock market. As most novices do, I started with the index investing route. I got a decent 20% return until now. I think it is a wise and safe decision. However, I reduced my holding by 50% and moved it to other holdings now.
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May 2017: bought KPIT @ 121 INR. Oct 2017: exited KPIT @ 138 INR and put that money in Kellton Tech @ 100 INR KPIT was my first individual stock pick and did the most extensive research on it compared to my other stocks. I found it on a screener. I made sure the company was solid (no obvious red flags) and then ran a conservative DCF that showed me a fair value around 150 INR. I assumed the company would meet its reported growth numbers and bought into it. Buying at multiple price points helped lower my average cost. I think I have made a mistake selling KPIT too early. I saw Kellton Tech, another solid IT company that was undervalued to have more growth potential than KPIT. So I decided to sell KPIT for Kellton. Though I still believe Kellton is a better investment, I made a mistake in selling KPIT for Kellton instead of buying it using cash in my portfolio. I say this because I knew KPIT still had potential to go up (at least to 150 INR according to my DCF). However, I did not know when it will happen and I feared holding two IT companies at once (IT companies are out of favor in current Indian markets). KPIT is now trading around 210 INR. I spotted the value (or am I fooled by randomness?) but jumped off the bus too early. The lesson I learned is that when there is still potential in an investment, never sell it for another one PROVIDED there is cash lying around.
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June, July 2017: small holdings in Jaicorp, Menon Bearings and MOIL. I sold Jaicorp in a few weeks after I got suspicious on their subsidiaries’ book-keeping. It went up 120% since then but I do not regret it (as Buffett says, I am happy not holding something I do not understand). I still hold MOIL and it is my smallest holding. I sold Menon Bearings at 15-20% profit. I do not want to do small positions in a bunch of companies because I do not have the mental bandwidth to think about all of them. So I stick to 4-5 big positions (curious to see how this will serve me in the future).
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June, July 2017: bought Divis Labs @ 650 INR. I made a post about this pick a while ago and it played out exactly how I expected (could be random or good intuition. At this point, I do not know). I am doing about 70% in profit and still holding it. The confidence I get in myself when I look back to how I made this decision (no analyst or friend suggested buying this) is more important than the money I made out of it. It helps me trust in my decisions. I still believe in the company, its competitive advantage and the management. They have to get their profits and growth back up. Let’s see how this year plays out for them.
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July 2017: bought Mahanagar Gas @ 979 INR. This is a natural gas company in Mumbai that owns all of the filling stations and natural gas pipelines in the greater Mumbai area. So the company has a HUGE moat and I paid a higher multiple compared to the other ones. I bought it mainly on analyst and a cousin recommendation. However, with the Indian government planning to go all EV by 2030 and the solar energy initiatives, I am losing confidence in the longevity of the company. There is still a lot of time for the disruptions to occur and I am planning to exit when I think it is overvalued. I do not have great gut feelings about it.
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August 2017: bought Karnataka Bank @ 137 INR. India is still largely unbanked and this is a bank that focuses on rural areas (or at least tells it does) which is where most of the unbanked are. I wanted to be part of the huge tailwind for banking in India but still at minimal risk. So I picked Karnataka Bank which is trading below 1 times price to book ratio (which means I am getting their assets for lower than what it was worth). Another sense of confidence I have in this company is that a prominent investor invested in the company at similar prices as I did. I am planning to hold on to this one for a long time.
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Speculations in cryptocurrencies. I do not want to go deep into this topic but I learned a lot through the speculations and got to witness a bubble first-hand. I made 6x my money and then lost half of it in the recent crash. I am still holding on to the coins I believe in (FunFair, Civic and Bitcoin) and I may write a post about it.
Overall these are the big investment decisions I made this year. I am debating whether I should include the smaller buy and sell decisions. I think I should not because buying and selling them were part of the decision making process. I have observed that I evaluate whether to hold something even after buying it. So if I changing my mind and sell something within weeks of buying it, that should not count as an investment decision. I want to keep the number of investment decisions I make in a year to single digits (taking from Charlie Munger). Let’s see how this model works out for me.
