Under the 80:20 Rule, 80% of the wealth is created by only 20% of the stocks in the portfolio
Atul Suri, the expert on technical analysis, is a protégé of Rakesh Jhunjhunwala, the Badshah of Dalal Street.
Rakesh Jhunjhunwala is a concentrated investor, with only a handful of stocks such as Titan, Crisil, Lupin, etc making the bulk of his net worth of $2+ Billion.
So, it is not surprising that Atul Suri is inspired by Rakesh Jhunjhunwala and has imbibed some of his stellar qualities.
“Under the 80-20 principle, 80% of the wealth is created by only 20% of the stocks,” Atul Suri explained.
He pointed out that all the successful investors on the Planet, such as Warren Buffett and George Soros, follow this principle.
In fact, Warren Buffett gave a textbook example of this technique when he decided to invest a mammoth sum of $35.3 billion in Apple Inc.
The investment is now worth a colossal $122 billion, reiterating Warren Buffett’s mastery in stock picking.
Three stocks contribute to 80% of my portfolio value
Atul Suri revealed that only 3 stocks make the bulk of his portfolio.
These stocks are Divi’s Lab, Reliance Industries and InfoEdge alias Naukri.
Divis Labs, proxy for the API sector
Divi’s Lab is very familiar to us. It was first recommended to us by Saurabh Mukherjea with brilliant logic.
“Divi’s has higher return on capital, higher operating margins among Indian companies, which are selling their own medicines in the western world. I would say a CCP-type franchise with strong moat, strong compounding engine and, we reckon, it will potentially stand the test of time“, he had stated.
Saurabh’s analysis is corroborated by Ekta Batra, the noted expert on the Pharmaceutical sector.
“The API (active pharmaceutical ingredient) supply disruption in China will also be an opportunity for Divi’s. Currently, China is the lead supplier of APIs globally and in India. China supplies 20 percent API’s globally and 70-80 percent of India’s requirements,” she has stated.
Ekta Batra has also opined that these disruptions provide “multiyear opportunity” for Divis and the company will be able to leverage its long term partnerships to remain a supplier of choice and acquire new clients.
It is obvious that Divis Labs has to form part of every sensible investor’s portfolio.
Reliance, proxy for India
Reliance Industries, the mother of all behemoths (market capitalisation of 14.25 lakh crore), also has to form part of every sensible investor’s portfolio.
Atul Suri described Reliance as a “proxy” for the Indian stock market owing to its strangle-hold over several diversified sectors and industries.
“One can mention about Reliance’s being a very good proxy ….. Reliance are the kind of plays that will give leadership to the market and they will give us a lead sense into the direction of the market,” he stated.
Info Edge, proxy for the internet
Naukri alias Info Edge was first recommended to us by Aakash Prakash and Aanand Chouhan at the famous Sohn India conference of 2017.
The logic was simple yet brilliant.
The duo explained that Info Edge is a proxy for the entire internet in India due to its website properties such as naukri.com (employment), 99acres.com (real estate), jeevansathi.com (matrimony), zomato.com (food), policybazaar.com (insurance) etc.
Akash Prakash had confidently assured that InfoEdge would effortlessly give to 3x to 4x gains, which has come true.
The best part is that Zomato, the crown jewel in InfoEdge’s portfolio of websites, will shortly announce its IPO which will further send InfoEdge’s stock into the upward trajectory.
— Business Insider India🇮🇳 (@BiIndia) September 11, 2020
InfoEdge is also recommended to us by Saurabh Mukherjea (see Saurabh Mukherjea Recommends Three High-Quality “Cash Machine” Stocks).
“InfoEdge is dominant franchise that has a Himalayan barrier around the cash generation machine … The ability to generate cash from Naukri is the fulcrum of our business case around InfoEdge,” he stated.
Which stocks does Atul Suri hold and which sectors is he bullish on? Find out here! pic.twitter.com/RKiu4j5deI
— ET NOW (@ETNOWlive) September 22, 2020
Atul Suri's top 3 stock allocations – Divi's, Reliance, Info Edge @ETNOWlive
— Jayesh Khilnani (@jayeshkhilnani) September 22, 2020
Forget ‘Hope‘ stocks, invest in ‘certainty‘
Atul Suri advised that if we also decide to become ‘concentrated’ investors, we must invest only in stocks where there is certainty of earnings and not in so-called ‘hope’ trades.
“I would rather play certainty, I would rather play companies which are delivering even in difficult times and where there is clarity when they restart. You could be lucky, you could be great and pick some crazy multibaggers at distressed valuations which are available right now but you are also likely to be very, very wrong,” he said.
“I would rather bet where companies are able to deliver in difficult times. I am not a crazy risk taker, I am not 1:100 kind of player. I need consistent compounding stocks, I need stocks that do well even in difficult times whether draw downs are low and that keeps my style,” he added.