Performance is not consistent. it is CAGR which will keep changing depending upon the mood of the market. I look at the profit growth of the company to measure my portfolio value rather than stock prices.
Buffet says you should not look at price first (Marketcap) as it distorts your mind but unfortunately, if you do screen that is the first thing that comes to you. The best option is if u heard about good business you pick up annual reports then try to value the company and then go to the screen to check.

Sizing: It has evolved I had 10 %, 5 %, and then 1 % bucket. But I generally stop at 15 %. I believe you should do at least 3 to 4 % because if the stock price climbs with my framework you will get stuck with a 1 % allocation. For the first five years don’t go over 3 % as you can make mistakes, learn, and become concentrated. My largest muli-baggers were all small allocations.

Mudit these are things floated by TV and Mutual funds as they have to come every day and speak. Just plainly ignore large caps and small caps etc etc. See the opportunity size and think about how the business will capture it. I was mostly in small caps or microcaps with the assumption that they have first-generation promoters who are driving business. Microcap does not mean they will grow faster and large cap does not mean they cannot fall 75 %. Look what happened in the US

Thank you Amit for sharing your frameworks and kudos for consistent performance. I would like to think that my style is very similar to yours

One quick question – since it seems you’re looking for value to begin with (entry point), how do you size your position from the beginning?

Thanks in advance.

How did I Hold for long periods : I truly believe I am part owner of these businesses and people who make the most money are always business owners ( They are concentrated and have very long holding periods). It is the most difficult habit especially when stock prices are not reflecting the business change. For e.g. it was easy holding Bajaj Finance from 2014 to 2018 while Saksoft nothing happened to stock price for over 4 to 5 years and i bought the business with 5 times Free cash flow . I was buying 40 % ROCE business at 1 time Book.

I buy businesses that have some competitive advantage and have ROE over 20 % and then buy them cheap like when no one is buying them and then hold them. One model I use is to think of business as a growing FD (Owner earnings i-e- Free cash flow yield 1/ FCF ). off course you need to know if business cashflows will increase in the Future.

Most people are buying stocks i am buying partnerships with businesses and hence analysis of business and owner ( your partner ) is most important and then buying them cheaply gives you safety that you will not lose your money.

As I invested in Microcaps and small caps 2018 to 2019 was a bigger fall and more difficult for me than Covid fall. COVID-19 I was an experienced investor and bought truckloads of good companies like Persistent, Wonderla Motilal, Saksoft etc.

Bajaj Finance was beginner’s luck but I bought it 15 times Earnings, it was a play on Indian consumer’s spending and it was like FMCG stock for me. It is also my biggest mistake I did not add as it became expensive due to my framework of not paying. Stock is up 33 times and gives me a dividend yield of 15 %.

Look for high ROCE businesses, see their EBITA margins are constant (which means they have some pricing power), and buy them less than 10 times FCF ( FD is 7 % i.e. 15 times FCF). You will not find many ideas but that’s the whole point. Learning about promoters is not easy but you will know over period of time.