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Capitalmind Focused

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The Capitalmind Focused portfolio is designed to generate wealth for investors over the long term by investing in market leaders across sectors. This portfolio is suitable to investors looking to invest for the long term (5+ years) in strong stocks with high quality management and high growth potential.

The Capitalmind Focused Portfolio invests in 15 to 18 stocks across sectors and is reviewed regularly for updates and rebalances.

 

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Portfolio Highlights

  • Focus on market leaders with growth visibility in the next 3-5 years.
  • Strong risk management in place with pre-defined entry/exit strategies.
  • Focus on Free cash flow generating companies without excess leverage.
  • Competent Management with good corporate governance.
  • Companies that consistently generate higher Return on Capital than the Cost of Capital.
  • Reluctant towards companies with high cyclicality in business.

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 witnessed it in 2018 & 2020. To handle such challenging times, we have weights for individual stocks.

  • Initial allocation (3%): When we like a company that fits our investment criteria, we will take an initial position of 3% of the portfolio.
  • Standard allocation (6%): Our conviction in the company increases when:
    • The company delivers on a quarterly basis.
    • The investment thesis plays out on expected lines
    • Once these criteria are met, we will increase our allocation to 6%.
  • Highest allocation (9%): The longer we have actively stayed with the company, the higher our conviction will be. Over a period of time, these companies will,
    • Become an anchor in our portfolio
    • They are the main contributors to our alpha
    • They have built enduring moats around it
    • Exhibit strong long term growth prospects.
    • In such scenarios, we further increase our allocation to 9% to make it part of our core portfolio.

This framework gives us the 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.

Technicals for Long Term Investing

  • No matter how strong the business fundamentals are, if the stock is not bought & sold at right prices, the returns will be under pressure.
  • Price/volume-based technicals as an additional factor in our portfolios. This helps us in portfolio sizing (weights), entry or exit prices & help avoid large drawdowns.

Focus on Growth & Opportunity cost

  • We have tightened our growth filters. The company should deliver above industry growth. There should be a potential growth trigger in the next 3-5 years. We need to avoid value traps, but also clearly focus on growing companies.
  • Opportunity cost refers to the cost of not opting for an alternative investment. It is a function of time. Holding on to an underperforming stock for months or years can lead to much higher opportunity cost. Being wrong is ok, staying wrong is not.

Frequently Asked Questions

Should I invest in lumpsum or invest systematically (SIP)?

Investing in any long-term portfolio should be done in tranches i.e through SIP. It is a good idea to build your position in this portfolio over 3 to 6 months rather than going in all at once.

How much of my portfolio should I allocate to CM Focused?

You can start with a target percentage of equity allocation in mind and arrive at that target over the course of a few months. The target can vary between 10% to 50% of equity allocation. The important thing is to give it a year before you decide whether it works for you.

What is the minimum amount that can be invested in this strategy?

The minimum lot size for CM Focused is ~2.5 Lac (including cash component). However, at any given time, the minimum amount varies depending on the underlying stock prices.

Can I use this portfolio for monthly income generation?

No. CM Focused can underperform the market for periods of time. At any time, only consider investing an amount that you will definitely not need over the next 2-3 years.

What is the Churn rate of the portfolio?

It is a low-churn portfolio. We intend to hold on to the companies that are showing good growth or visible near-term triggers. Typically we will rebalance the portfolio 4-5 times per year as per the market conditions.

Does Capitalmind execute the portfolio buys and sells?

No. Premium is a research platform offering model portfolios and action updates. The execution of the changes is done by members through their own trading accounts.

We regularly share updates on the website to keep you updated with portfolio developments.

A few key updates from the website are listed here:

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