Introduction
With Yadnya’s Value Model portfolio, we are offering a portfolio built using Long Term Value Investing Strategy. Value investing is a term made popular by Mr Benjamin Graham who is also known as the father of value investing and in recent times by Mr Warren Buffett, CEO of Berkshire Hathaway. In his 2008 Berkshire Hathaway Chairman’s Letter, Warren Buffett said - “Long ago, Ben Graham taught me that price is what you pay; value is what you get. Whether we are talking about socks or stocks, I like buying quality merchandise when it is marked down.”
Simply put, it means buying undervalued stocks of companies with strong business models and holding these stocks over a long period. This philosophy has worked wonders for many patient and diligent investors. These are some of the main components of a value portfolio
Stock Selection Approach
For portfolio construction, this Model Portfolio uses primarily fundamental parameters with a hint of technical parameters. These parameters include Price Earnings ratio, Price to Book ratio, Dividend Yield, Debt to Equity, Profit After Tax % growth, Earnings per Share, Beta and trendline analysis of some of these parameters.
Some of the screening criteria used for the portfolios are that the Debt-to-Equity ratio should be low, no pledged shares, Price to Earnings ratio should also be lower than its past highs and the interest coverage ratio should be high as compared to peers in the same sector. For the Banking sector, Gross Non-Performing Assets and Net Interest Margins were important factors that have been utilized for screening stocks.
Investment objectiveThe aim is to generate long-term returns by investing in stable companies that are currently undervalued –
a value-driven large-cap and mid-cap portfolio.StrategyBuy and Hold investments with a time horizon of 5 years in stocks with strong fundamental characteristics and sound management.
Methodology
Tactical Sectoral Allocation
Please note this model portfolio is suitable for investors with moderate risk tolerance and risk appetite. Typically, to begin investing, we recommend starting with the mutual fund route, wherein you rely on the professional expertise of fund managers for making stock choices for you. After the initial learning curve, we suggest following it up with the Mutual Fund is driven portfolio approach with some percentage of direct stock exposure.
Guidelines10 - 20 stocks portfolio
Stock portfolio - Minimum exposure of 3% and a maximum of 10% to avoid concentration risk
Is this model portfolio for you?
This value portfolio is meant for moderate risk profile investors i.e., investors who are willing to accept periods of moderate market volatility in exchange for the possibility of receiving returns that outpace inflation by a good margin. It is important to have a long-time horizon for moderate-risk profile investors, investing in direct stocks because if there is a severe downturn in the market, an investor will need plenty of time to make up for the decline in value.
The expected average rate of return from a value portfolio is 11-13% over time. In its best year, it might gain 15-20% and in its worst year, it could decline by 20-30%.
These are typical investor profiles who can refer to this portfolio –
1. A low-risk taker 20 – 30 Years old investor with limited liabilities and above average savings rate
2. A medium risk taker 35 – 50 years old investor with dependents and high savings rate and a fair allocation already done to mutual funds for meeting their retirement goals.
3. A high-risk taker above 50 years old investor with no liabilities and a good retirement corpus in place
Typically, to begin investing, we recommend starting with the mutual fund route, wherein you rely on the professional expertise of fund managers for making stock choices for you. After the initial learning curve, we suggest following it up with the combined approach of Mutual Funds and some percentage of direct stock exposure.
Time HorizonMin. 5 years
RebalancingQuarterly
IndexBSE200 Total Return Index
Important DatesInception Date – March 25th, 2020
Launch Date – March 25th, 2020
Market Cap Category – Large & Mid-Caps
Last Quarterly Rebalancing – August 24th, 2024
Next Quarterly Rebalancing – November 30th, 2024
Portfolio Performance & Back Testing Results
Stocks have been selected based on the criteria that the stocks have fallen more than the benchmark.
Portfolio Performance as on 1st November, 2024:
Disclaimer: The information on this site is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell stocks. All these portfolios are created based on our expert’s experience in the market. These Model portfolios are prepared by SEBI Registered RIA.
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