2024- Reflections & Learnings

If there is one thing that can improve your investment outcomes significantly overtime is to Reflect & Learn from your own investments (both that worked and did not worked); this acts as a strong Positive Feedback Loop, something that I have discussed in detail in an earlier blog of- How to Learn & Grow in Investing

As a part of this reflection & learning process; post end of every year, there are three things that I do-

1. Stable Portfolio Analysis

A stable portfolio analysis is one wherein you look at how your portfolio would have done assuming you would have not made any changes ie. you would have continued with the exact same portfolio as that of last year’s end.

This analysis is quite interesting and could be eye-opening for many given that it tells you whether all the work & decisions that you made during the year added any positive alpha or not and if so by how much.

A lot of times investors would be surprised to know that doing nothing would have actually been better for them.

For me 2024’s actual returns were almost 3x than that of the stable portfolio, which provides a sense of comfort & conviction on the decision making process.

Another thing I like to do is to look at how the stable portfolio has performed. Because if the stable portfolio & its individual stocks have also done reasonably well without any major losses at individual stock level; it is an indicator of a good stock selection process.

2. Progress on Goals

On the back of reflections & learnings of every year, I like to set out few things that I need to improve going ahead.

At the beginning of 2024, there were two key things that I had set to be improved in 2024-

• Better Screening

• Better execution on Non-Linear bucket

Screening is the most unstructured part of investing. Over last few years I had observed that I had missed out on a lot of good opportunities which I would have otherwise invested in, but could not as I never discovered them early on in the first place.

So screening was one area that I needed to improve the most on. I realized that I was approaching a very unstructured process like screening in a very unstructured way; whereas the right way was to approach an unstructured process through a very structured process.

The biggest improvement in terms of screening has come from having a dedicated time for screening. Now every week there are certain hours that are fixed for doing only screening and that has improved overall screening and investment outcomes substantially for me.

The 2nd goal for the year was to have more non-linear ideas in the portfolio. Ideally I would like to have 2/3rd of my portfolio in Resilient businesses and rest in Non-linear.

(readers who want more context on this Resilience vs Non-Linear buckets can watch our investing framework webinar here-

In the past I had max 2-3 active ideas on the Non-linear side and thus the portfolio was not able to really capitalize on the Non-linear bucket; however in 2024 on the back of a conscious effort and improved screening process I was able to get to that idle count of 6-7 active Non-linear ideas, which has led to some of the biggest winners of 2024 like V2 Retail, Garware Hi-Tech and Kernex.

3. Learnings & Goals for 2025

One of the key learnings for 2024 has been that I have been holding onto my laggards way too long. Despite knowing that fundamentally things are not going to improve materially in near term, I still kept giving some ideas in our Resilient bucket way to much room for them to turnaround under the pretext of strong margin of safety.

And though margin of safety avoided any losses in these investments, but I just did not account for the opportunity cost of holding onto these laggards in my decision making, which especially in the current market has been quite significant.

This includes stocks like Indiamart and RACL Geartech.

Some course correction in this regard is something that I have already done towards the end of 2024 and one of the goal for the coming year would be to avoid such mistakes and be more sharp in terms of how much room I am willing to give to such investments.

2nd key learning or say realisation has been that I have not been able to capitalize on some of the sectoral themes.

Sectoral themes do end up creating some of the biggest non-linear moves, but I have always been a highly bottoms-up investor wherein me holding a stock in any specific theme would have purely been a coincidence wherein I would have invested in that company with some other thesis which then ended up becoming part of a certain theme later on.

Like in 2019, I had bought into a lot of contract manufacturers working with innovators like Suven, PI Industries and Syngene. This was purely on the back of the strength of their business model, but then 2020 happened and eventually CDMO became a fancy theme and I was able to benefit from it.

One of the primary reason for not being able to play sectoral themes has been that it is very difficult to anticipate the macro trend early on and once the trend is slightly clear or evident the stocks would have already ran up quite a bit; at which point I always felt that the risk:reward would not be favourable from here on.

However such thinking has been flawed; what I have observed is that even after the 1st leg of upmove, a lot of sectoral themes have a lot of steam still left as they continue to surprise the market on the upside and thus there is strong returns to be made even from a relatively later stage.

Such sectoral plays could be well played within our Non-linear bucket and the goal for the coming year is to first figure out how I can play some of these sectoral trends beyond their 1st upmove and then eventually how to bet on them early on.

These reflections & learnings are something that we typically discuss in our quarterly members concall. This time I have put out the broad aspects of my 2024 reflections & learnings for all the readers of our Knowledge Base.

For members, we would present a more detailed analysis & discussion in our members concall post Q3FY25 results.

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Surge Capital is a trade/brand name used by Ankush Agrawal (Individual SEBI Registered Research Analyst INH000008941) to provide equity research services in the Indian Equity Markets.

“Registration granted by SEBI, and certification from NISM in no way guarantee performance of the Research Analyst or provide any assurance of returns to investors”

“Investments in securities market are subject to market risks. Read all the related documents carefully before investing.”

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