Stalwart Advisors

Rebalancing

We had invested 5% of portfolio in APL Apollo which has become 13% today due to stock going ~4x from our entry price, a significant outperformance compared to other positions. While we continue to have faith in management’s execution capabilities and given we seem to be at the cusp of a beginning of a positive real estate cycle, ideally we would want to continue to ride this fully, however in order to manage risks we are chopping it down by 3% to 10% and redeploying that cash in IBRealty (effectively Embassy).


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Exact weightage will depend on each subscriber’s risk appetite & comfort. However, as a thumb rule, any position size under 3% is little insignificant to move returns at portfolio level whereas beyond 10% it gets riskier from a concentration standpoint. Accordingly, low could indicate 3-4% weightage, medium 5-7% and high 8-10%.
Structural are those portfolio businesses where earnings are relatively stable (less volatility) and further are expected to rise in a steady fashion. Cyclicals are businesses which experience periods of upcycle followed by downcycle and have large variation in their reported earnings based on industry demand and supply. The mix between the two depends on available opportunities and respective valuation of the two pockets.