The Nifty and Sensex are at an all-time high. Many investors wished they participated in the ongoing rally but who could predict it 4-5 months ago? Now many are questioning the longevity of this market rally. Instead of waiting for the right time—which never comes in the investing arena—you should take the proactive approach and build a portfolio.
Investing in today’s market is just like signing up for an unlimited buffet. The menu is so long that it’s likely to confuse you. However, like restaurants label and classify food under various themes, Ventura Securities is also highlighting themes that may play out in 2020.
Companies with a large cash pile and healthy cashflows which are potentially near a low in their business cycles.
Approximate Allocation: 10%
Companies undergoing a transformation post either a period of rapid CAPEX or rampant competitive pain. However, the moats of their business model and growth outlook are still sanguine. Usually involves value unlocking as well.
Approximate Allocation: 15%
Companies that are intrinsically cost & innovation leaders in their field/ sector and well poised to gain from playout of global events (US-China trade faceoff, tighter environmental norms for certain industries) and provide the comfort of best-in-class balance sheets.
Approximate Allocation: 10%
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Typically, deep cyclical plays linked to macroeconomic factors (fiscal, credit, investments, etc.) or established player in an out-of-favour sector at the cusp of path-breaking reform (electricity) or a diversified player at the start of a J-curve for a new business.
Approximate Allocation: 20%
Companies with a history of discounted valuation or higher leverage (owing to inorganic activity) that have exhibited resilience to survive the downcycle with minimal strain. Potential to deliver supernormal returns as the business environment normalizes.
Approximate Allocation: 15%
These represent plays on multi-year growth cycles in the offing, for eg. packaged foods, financial services, e-business, etc.
Approximate Allocation: 15%
New age investments, strategically placed holding companies or Liquid Bees (Liquid Exchange Traded Schemes).
Approximate Allocation: 15%
To know which stocks we like within each of these themes, watch Round-up of trends in 2019 and how to position your portfolio in 2020 which could help you decide where to invest in 2020.
Allocation of funds across themes discussed above will not only provide you with adequate diversification across sectors and companies but will also help you diversify across investment styles and philosophies.
For instance, while betting on restructuration; you essentially have to adopt the bottom-up stock-picking—approach, which chiefly considers company-specific factors only. On the other hand, when you are investing in proxies on the Indian economy, you are taking the top-down call—wherein macroeconomic factors are considered before undertaking company-specific analysis. Likewise, investing in dividend and buybacks will make you follow the tenets of value investing.
Dark Horses and Trend Playscould be your contra bets and momentum plays, respectively. Holding cash will allow you to take advantage of sudden market corrections. Investing in commodity companies may help accelerate returns if the cycles play out as anticipated.
Nonetheless, you shouldn’t deploy available funds at one go. Instead, consider following the squirrel approach to building your portfolio over the next 2-3 months. Consider investing in the aforesaid 6 themes at the right valuations.
Disclaimer:
We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:
We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.
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