Arora shared his portfolio details and formula for picking a stock for the special annual Mint series — Guru Portfolio.
He is and has always remained an equity-heavy investor, with 70% of his current portfolio into stocks and 10% each going to debt, gold and real estate. “I have been an equity manager all my life. I don’t like real estate, and I don’t like private equity because I’m a public markets guy," Arora said.
He plans to take equity allocation to 90-95% when markets settle down.
His overall portfolio has delivered zero percent (in US dollar terms) returns on an annual basis. His India-focused fund is large-cap heavy (75-80% allocation), with most companies larger than $1 billion in market capitalization. His preferred sectors are currently financials, consumption, pharma and tech.
Arora’s investment style involves the filtering of stocks basis eight parameters — theme, industry, disruption, company history/management/strategy, corporate governance, accounting, medium-term triggers (mostly expected earnings), and valuation.
If a stock fails on a single parameter, he does not touch it. “I don’t believe in tradeoffs anymore. If a stock is great on all the parameters but expensive, I won’t buy it," he said. “At any given time, roughly half of all listed stocks will outperform, and half will underperform. There are times of intense market concentration when smaller numbers outperform but over long periods, half the market outperforms. The key is to find the stocks in this top half," he said.
Arora’s India dedicated fund is an offshore one (a foreign institutional investor or FII fund). It, hence, shorts some stocks to hedge its position at times but remains net long. “It protects our downside during bad times, and this helps with compounding, but we are not net short because that means losing out on the rising market. The market has gone up multiple times over the past two decades," he said.
Arora’s global fund invests predominantly in the US market (around 80% of assets) but also has some select European blue-chip companies such as Nestle and Louis Vuitton. It is benchmarked to the MSCI World Index, and his preferred themes are tech, consumer, financials and industrial.
Helios’ global fund is currently quite heavily in cash (40% of assets in the global fund). Arora said he turned negative on the US markets in January, after which he sold many stocks. However, Arora expects the turmoil in the global and Indian equity markets will resolve itself in 3-6 months and is looking to deploy the cash in the fund in the near future. “A key indicator would be when US stocks stop falling on bad news."
The expert admitted that he is not a big fan of private equity. The few private equity investments I made didn’t do well anyway, he said. One lockdown-induced lifestyle change that will become permanent for Arora is making sure that he walks more than 10,000 steps every day. He admits to being a big chole bhature fan. “I think Haldiram’s should make me a brand ambassador and give me anchor allotment when they go public," he joked. “To me, as the founder of an investment management company, wealth is delivering returns to my investors rather than accumulating personal wealth. I have the letters ‘NAV’ as an artifact on my desk to remind me of this," said Arora, who doesn’t intend on retiring.
