Exit Plan

Now that I've decided to freeze further purchases in my portfolio for next 6-12 months, I should also be ready with an exit plan given markets run away too fast and I should take some profits to deploy in better opportunities that I'll find in this study period.

Essentially, over last few weeks, I've found that my portfolio contains some decent stocks, but I can find better stories. The following are the reasons:

1. My portfolio primarily contains quantitatively undervalued stocks, not necessarily qualitatively great stocks at right price. I'm shifting towards finding businesses with strong moat and buying them undervalued when all hell is loose...times that come rarely, like in Dec 2011, June 2012 (for a subset of businesses), Oct-2009 to Mar 2010 and alike.

2. I risk holding some value traps, like SRF, MAZDA, not because they're bad businesses, but market may never re-rate their valuations. Hence, I'll freeze any further addition to these positions, and rather exit them for some profit (I've a strong conviction that markets will move towards all time high in next one year, more chances of this happening than a crash back to sub 5000 levels)

3. I'm already finding better opportunities, though they're expensive now, like Amara Raja Batteries, Shriram Transport Finance, etc, and will need funds for these when markets revert back again later, after hitting a peak.

Ok, so here's the exit plan - in order in which I'll sell them

SRF - Based on the concerns of this being a value trap, I plan to

- sell 30% of my holding when SRF crosses Rs 240 or so. Looking at the trend, I may sell just before dividend, since it always falls post dividend payments (ex-date)

- offload another 20-30% when it reaches towards Rs 300

PNB

As mentioned, if it goes above 950 - 1000, I'll exit this stock. Good bank, but risk of asset quality is not justified at Rs 1000, at least until FY14.

INFY

Again, its a stalwart dumped by market, and I'll exit (at least 30%) this when it again starts trading above a P/E of 20.

Other than these, I might exit some stake in other stocks, in general if they run up too fast, but only if I have great confidence to be able to re-allocate them to better opportunities.

Ok, final word - no more purchases until study progresses a good deal, exceptions being

- PEL falls below Rs 450

- Amara Raja falls below Rs 200

- IGL falls below Rs 210

- MAZDA falls below Rs 82

Otherwise, I'm happy to stick to 90% invested status and focus on studies... :-)