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How should an investor approach Stock Advisor's increasing number of recommendations?

Use recommendations as a universe but to get selective, use the 'Best Buys Now' list and may dominate your portfolio with All-Weather Stocks, says Dhirendra Kumar

I am a long-term subscriber to VR Stock Advisor. VR Stock Advisor currently has 40 stock recommendations. Considering the possibility of so many choices may overwhelm an investor, do you plan to have a cap on the number of stock recommendations on VR Stock Advisor?
- Bhushan Dhamale

We have actually slowed down with our recommendation. If you remember, our initial promise was that we would be making some 20 to 25 recommendations in a year. And we did it in the first one and a half years. Thereafter, we faced the same problem of plenty. But primarily, we were guided by the absence of any attractive investable opportunity. Currently, there is a long list of stocks on our watch list and we are looking for a favourable price point for many of them. We think that many of those companies are great ones but are not attractive at an acceptable price to us. So, there won't be so many recommendations, but there will be new recommendations. At the same time, you might have noticed a few sell recommendations, which have reduced the number of stocks a bit over the period.

But to answer your question, we have something called the 'Best Buys' list. Many investors were asking us what they should emphasise in their portfolio right now. Our 'Best Buys' list was an effort in that direction. In my view, I don't think anybody should be buying those 40 stocks every month as it's cumbersome. Further, I agree that there's the problem of plenty. But different people build their portfolios by using these 40 stocks differently - some pick a large number of 'All-Weather' Stocks, while some people like some specific stocks, which dominate their portfolio, etc. Building a portfolio with 10-20 stocks is fine. Even having 40 stocks is not a bad idea but it entirely depends on your level of comfort.
I agree that concentration leads to higher volatility but, we are reasonably confident about the companies that we have recommended. We are also confident about our process through which we keep you updated when something becomes unfavourable. Many investors have actually complained about a few stocks which have been falling and not recovered, but we are still very optimistic about those companies. Our Sell recommendations are primarily not guided by the price only. In fact, once we have made the recommendation, if we think that the fundamentals are very much in place but the price has corrected substantially, we may have been wrong to recommend it at that initial level. And all this has definitely cautioned us. We are more careful that at the time of the recommendation itself, most of the companies should also be attractively priced.

I would say the amount of money you invest in individual companies is entirely your choice. You can mix and match with various kinds of small companies and All-Weather Stocks. This will give you an opportunity and a wider universe to build your portfolio or you can use these recommendations as a universe to build your portfolio. You can also start with the Best Buy list and may use the 'Best Buys' list as something to be emphasised in your portfolio.
So, I agree with you regarding the problem of plenty, but markets are dynamic, things change and what is attractive may not remain attractive. Further, new opportunities, options and attractive avenues may turn up. You must have witnessed that in March, we made quite a few recommendations and some of them have turned out to be blockbusters. Some of them have actually surprised us as we did not expect them to go up in such a hurry. But it's a broad mix and we also have our set of losers. So, I would say that use recommendations as a universe but to get selective, use the Best Buy list and may dominate your portfolio with All-Weather Stocks.

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