My stock portfolio – the third set of 5

While most investors may be going through the MF route to buy equity as an asset class, there is a lot of interest in the stock portfolios of seemingly successful investors. This is amply demonstrated by the numerous requests I get for stock tips and readers wanting to know about my portfolio. In the last 2 post I had written about my top 10 holdings. Here I will write about the next 5.

The first in the list is ITC and some observations are below.

  • My motivation for buying the stock was to get a well run mass consumer company in my portfolio. I also have HUL but ITC has performed better over the years.
  • My first purchase was in 2006 August and the last in January 2015. I had also sold off some of my shares in the interim when it hit the figure of 400.
  • The stock has seen a lot of corporate action in terms of bonus and I too got benefited by a 1:1 bonus in 2010 and a 1:2 bonus in 2016.
  • It has normally been a good dividend paying company with 500 % to 850 % rates in the last 4 years.
  • In terms of potential, this is clearly one of the best examples of an Indian company which is benefited from the local consumption story. I think it is quite possible for the stock to double over the next 2-3 years, even with the challenges in the cigarettes business.
  • My investment in the stock is now at an average price of 98 Rs.
  • I do not have any real plans to sell the stock, now or in the near future.

The second in the list is Mindtree and some observations are below.

  • My motivation for buying the stock was mainly to invest in a relatively new IT services company run by a management that had great pedigree.
  • My first purchase was in July 2007 and the final one in September 2008.
  • The stock had declared a 1:1 bonus in 2014 and  in 2016.
  • It has normally paid good dividends in the range of  100 % and more.
  • In terms of potential, the company is facing serious challenges now and this is being reflected in the declining price. However, I think it will recover in this year and it is quite possible for it to reach 1000 levels in a couple of years.
  • My investment in the stock is now at an average price of 134 Rs.
  • I have no plans of selling this stock now or in the near future.

The third in the list is Hindustan Zinc and some observations are below.

  • My motivation for buying the stock was to have a commodity based company in my portfolio and this was one of the better run companies.
  • My first purchase was in 2007 June and the last in March 2009.
  • The stock has not seen corporate action in terms of bonus or splits after my purchases.
  • It has normally been a good dividend paying company and in the last 2 years the dividends have been 300 % and 400 %
  • In terms of potential, this is clearly one of the best examples of an Indian company which has dominated locally and well on course for it’s global journey now. I think it is quite possible for the stock to double over the next 4-5 years.
  • My investment in the stock is now at an average price of 542 Rs and it is about 5 % of my portfolio value at CMP.
  • I do not have any real plans to sell the stock, now or in the near future.

The fourth in the list is TCS and some observations are below.

  • My motivation for buying the stock was it’s prominent place in the IT sector as a major global player.
  • All my purchases of this stock was between January 2008 and June 2009.
  • The stock had seen a bonus of 1:1 in June 2009.
  • It has normally been a great dividend paying company and mostly paid 45 Rs dividend per share in 2016.
  • In terms of potential, this is clearly one of the best examples of an Indian company which has gone global successfully. I think it is quite possible for the stock to double over the next 3-4 years, despite the obvious challenges.
  • My investment in the stock is now at an average price of 399 Rs and it is about 4 % of my portfolio value at CMP.
  • I do not have any real plans to sell the stock, now or in the near future.

The final one in the top 5 list is L & T and some observations are below.

  • I bought some convertible debentures way back in 1992 and this effectively got converted into shares at a value of 60 Rs.
  • The stock has seen bonuses in 2006, 2008 and 2013 where  my numbers went up and I also sold off some at a decent profit.
  • It has normally been a great dividend paying company at around 800 % and more.
  • In terms of potential, this is clearly one of the best examples of an Indian company having made it both locally and globally. I think it is quite possible for the stock to double over the next 2-3 years.
  • My investment in the stock is now at an average price of 20 Rs and it is about 4 % of my portfolio value at CMP.
  • Based on this purchase I also got shares of Ultratech Cement free 🙂
  • I do not have any real plans to sell the stock, now or in the near future.

As you will see from here, investing in good companies and holding them for a long period of time has really worked for me here. There are some other holdings I have that may be of interest to my readers. I will share it in a future post.

My stock portfolio – the next 5

While most investors may be going through the MF route to buy equity as an asset class, there is a lot of interest in the stock portfolios of seemingly successful investors. This is amply demonstrated by the numerous requests I get for stock tips and readers wanting to know about my portfolio. In the last post I had written about my top 5 holdings. Here I will write about the next 5.

The first in the list is Kansai Nerolac and some observations are below.

  • My motivation for buying the stock was to get a Paint company in my portfolio. As I wanted to get a growth oriented company I chose this over Asian Paints.
  • My first purchase was in 2008 January and the last in January 2009.
  • The stock has seen a lot of corporate action in terms of bonus and I too got benefited by a 1:1 bonus in June 2010.
  • It has normally been a good dividend paying company at 100 % and in the past 2 years this has gone up too.
  • In terms of potential, this is clearly one of the best examples of an Indian company which is benefited from the local consumption story. I think it is quite possible for the stock to double over the next 2-3 years.
  • My investment in the stock is now at an average price of 29 Rs and it is about 5 % of my portfolio value at CMP.
  • I do not have any real plans to sell the stock, now or in the near future.

The second in the list is TVS Motor and some observations are below.

  • My motivation for buying the stock was mainly to participate in the two wheeler segment and I chose it over Hero Motocorp.
  • My first purchase was in October 2006 and the final one in December 2006.
  • The stock had declared a 1:1 bonus in 2010.
  • It has normally paid good dividends in the range of 75 % to 100 % and in the last 2 years this has increased to 200 % plus.
  • In terms of potential, the company is poised to grow aggressively due to the aspirations of our population. It is quite possible for the stock price to double in the next 2 years or so.
  • My investment in the stock is now at an average price of 49 Rs and it is about 5 % of my portfolio value at CMP.
  • I have no plans of selling this stock now or in the near future.

The third in the list is Dr Reddy’s Lab and some observations are below.

  • My motivation for buying the stock was it’s prominent place in the Pharma sector and the focus it had on research as an Indian company.
  • My first purchase was in 2007 June and the last in March 2009.
  • The stock has not seen corporate action in terms of bonus or splits after my purchases.
  • It has normally been a good dividend paying company and in the last 2 years the dividends have been 300 % and 400 %
  • In terms of potential, this is clearly one of the best examples of an Indian company which has dominated locally and well on course for it’s global journey now. I think it is quite possible for the stock to double over the next 4-5 years.
  • My investment in the stock is now at an average price of 542 Rs and it is about 5 % of my portfolio value at CMP.
  • I do not have any real plans to sell the stock, now or in the near future.

The fourth in the list is TCS and some observations are below.

  • My motivation for buying the stock was it’s prominent place in the IT sector as a major global player.
  • All my purchases of this stock was between January 2008 and June 2009.
  • The stock had seen a bonus of 1:1 in June 2009.
  • It has normally been a great dividend paying company and mostly paid 45 Rs dividend per share in 2016.
  • In terms of potential, this is clearly one of the best examples of an Indian company which has gone global successfully. I think it is quite possible for the stock to double over the next 3-4 years, despite the obvious challenges.
  • My investment in the stock is now at an average price of 399 Rs and it is about 4 % of my portfolio value at CMP.
  • I do not have any real plans to sell the stock, now or in the near future.

The final one in the top 5 list is L & T and some observations are below.

  • I bought some convertible debentures way back in 1992 and this effectively got converted into shares at a value of 60 Rs.
  • The stock has seen bonuses in 2006, 2008 and 2013 where  my numbers went up and I also sold off some at a decent profit.
  • It has normally been a great dividend paying company at around 800 % and more.
  • In terms of potential, this is clearly one of the best examples of an Indian company having made it both locally and globally. I think it is quite possible for the stock to double over the next 2-3 years.
  • My investment in the stock is now at an average price of 20 Rs and it is about 4 % of my portfolio value at CMP.
  • Based on this purchase I also got shares of Ultratech Cement free 🙂
  • I do not have any real plans to sell the stock, now or in the near future.

As you will see from here, investing in good companies and holding them for a long period of time has really worked for me here. There are some other holdings I have that may be of interest to my readers. I will share it in a future post.

My stock portfolio -5 top holdings

While most investors may be going through the MF route to buy equity as an asset class, there is a lot of interest in the stock portfolios of seemingly successful investors. This is amply demonstrated by the numerous requests I get for stock tips and readers wanting to know about my portfolio. I had written on this earlier but with the passage of time a few things have changed. So here is a list of my top 5 holdings.

The first in the list is Tata Motors and some observations are below.

  • My motivation for buying the stock was it’s prominent place in the Auto sector along with Maruti as Indian auto companies.
  • My first purchase was in 2007 February and the last in January 2009.
  • The stock has seen a lot of corporate action in terms of bonus earlier but I only witnessed a split in 2011.
  • It has normally been a good dividend paying company at 100 % but in the past 2 years this has come down considerably.
  • In terms of potential, this is clearly one of the best examples of an Indian company which has gone global successfully. I think it is quite possible for the stock to double over the next 2-3 years.
  • My investment in the stock is now at an average price of 109 Rs and it is about 8 % of my portfolio value at CMP.
  • I do not have any real plans to sell the stock, now or in the near future.

The second in the list is Palred Technologies and some observations are below.

  • My motivation for buying the stock was really the options I got as the CEO of Four Soft between 2007 and 2012.
  • These were mostly through allotments over these years.
  • The stock has seen a lot of corporate action in terms of capital reduction and split. Four Soft was also sold off to Kewill and the current business of Palred Technologies is completely different.
  • It has normally never paid dividends but on the selling of the company the shareholders got a special dividend, which for me amounted to more than 10 lacs.
  • In terms of potential, the company is one of the few listed Indian companies in the E-commerce portal area. However, it deals in relatively cheap electronic accessories and is in a low margin business.
  • My investment in the stock is now at an average price of 30 Rs and it is about 7 % of my portfolio value at CMP.
  • I do not see this as a long term success and may sell it whenever I need money.

The third in the list is Maruti Suzuki and some observations are below.

  • My motivation for buying the stock was it’s prominent place in the Auto sector along with Tata Motors as Indian auto companies.
  • My first purchase was in 2007 June and the last in October 2009.
  • The stock has not seen corporate action in terms of bonus or splits.
  • It has normally been a good dividend paying company and in the last 2 years the dividends have been 500 % and 700 %
  • In terms of potential, this is clearly one of the best examples of an Indian company which has dominated locally and started it’s global journey now. I think it is quite possible for the stock to double over the next 4-5 years.
  • My investment in the stock is now at an average price of 678 Rs and it is about 7 % of my portfolio value at CMP.
  • I do not have any real plans to sell the stock, now or in the near future.

The fourth in the list is Infosys and some observations are below.

  • My motivation for buying the stock was it’s prominent place in the IT sector as a major global player.
  • All my purchases of this stock was between June and November 2007.
  • The stock has seen a lot of corporate action in terms of two 1:1 bonuses in the years 2014 and 2015.
  • It has normally been a good dividend paying company and mostly pays dividends at 500 % and beyond.
  • In terms of potential, this is clearly one of the best examples of an Indian company which has gone global successfully. I think it is quite possible for the stock to double over the next 3-4 years, despite the obvious challenges.
  • My investment in the stock is now at an average price of 454 Rs and it is about 7 % of my portfolio value at CMP.
  • I do not have any real plans to sell the stock, now or in the near future.

The final one in the top 5 list is M & M and some observations are below.

  • My motivation for buying the stock was it’s prominent place in the commercial vehicles sector, which is an important one for our economy.
  • My first purchase was in 2007 March and the last in January 2009.
  • The stock has seen a split in 2010 when the face value was reduced to 5 from 10.
  • It has normally been a good dividend paying company at around 200 % and more.
  • In terms of potential, this is clearly one of the best examples of an Indian company catering to a growing local demand. I think it is quite possible for the stock to double over the next 4-5 years.
  • My investment in the stock is now at an average price of 285 Rs and it is about 7 % of my portfolio value at CMP.
  • I do not have any real plans to sell the stock, now or in the near future.

As you will see from here, investing in good companies and holding them for a long period of time has really worked for me here. There are some other holdings I have that may be of interest to my readers. I will share it in a future post.

My stock choices for investment this Diwali

More than the new year or the financial year, traders in the stock market consider Diwali to be the beginning of their investment year. If you look at the performance over the last Samvat to this one we will see that the Sensex and Nifty have given about 10 % returns whereas the mid cap and the small cap index have given returns in excess of 20 %.

How will things work out for the next one year? From all indications the following outcomes are quite probable, with the normal caveat of all market projections being a hazardous game at the best of times:-

  • Nifty will probably be choppy through the year and end up with about a 7-8% gains from the current levels. 9500 will be a great level to achieve, I do not see Nifty crossing 10000 in 2017.
  • Mid caps are doing quite well now and will face a correction. Unlike in 2016, the next year will be the one where large caps will probably do better than mid caps.
  • Small cap index will continue to do well and will be the best performer.

Which stocks will be worth buying this Diwali with a hope of gaining at least 30 % and above in the next 12-18 months? I have been following a few of the good analysts and traders to understand what they are recommending and why. Based on that here are some of the stocks which are likely to do rather well. Make sure you do your own learning before you invest in any of these.

  • Kingfa Science
  • Rajratan Global wires
  • Cineline India
  • Jayant Agro
  • EPC Industries
  • Praj Industries
  • BEL
  • Vindhya Telelinks
  • CARE
  • Sadbhav Engg
  • ILFS Transportation
  • UCAL Fuel
  • KEC International
  • INOX Leisure
  • Indo National
  • Umang Dairy

While I have a few of these stocks I am planning to add some of these to the extent of 3-4 lacs between now and end of year, based on the right pricing levels. The idea will be to see if the investment can give an XIRR of about 18-24 % and double in the next 3-4 years. I plan to use the amount for a family vacation outside India for all 4 of us.

How do I know that such returns will be there? Well, I do not really but having looked at these stocks closely, it does seem to me that these companies will definitely have great chances of growth in the next few years.

MF managers are not yet into some of them, so go ahead and grab your chance while these are still reasonably priced. Wishing all my readers a very happy and prosperous Diwali.

My stock portfolio – highest return stocks

As readers know by now, I have 3 portfolios namely Debt, Mutual funds and stocks. My Debt equity allocation is roughly 1:1 and between stocks and MF it is about 3:2 in terms of the current portfolio. It is interesting to note that my investments in stocks and MF have been nearly the same over the years. This means that my annualised returns from my stock portfolio is considerably more than that of my MF portfolio.

This brings me to the reason as to why you must have both an MF and a stock portfolio. Stocks can grow from the underlying business doing well. However, they can also grow through bonus issues, splits, mergers, acquisitions and Value unlocking to existing shareholders. In fact, stocks where I have the highest returns are mostly through these routes. More on that latter but first let me outline how I measure the success of any stock in my portfolio. I understand that XIRR calculations will be the easiest way to do this but I just take the multiple by which the current price is to the average purchase price. This is as I have realised that over a long time period this is a pretty accurate measure.

With that said here are the highest multiples in my stock portfolio:-

  • HCL Tech, Adani Ports, CG Consumer, Reliance, Aditya Birla Fashion, L & T, Ultratech Cement where returns are from 200 times to 15000 times. This is clearly caused by the fact that I paid virtually nothing in acquiring these stocks. For example I got 66 HCL Tech shares as I has HCL InfoSystems shares. With Bonus and Split these have now frown to be 264 shares. I got Ultratech Cement as I was holding L & T shares.
  • Multiples of 75 through 125 are achieved in the following shares. The gains are due to selecting the right company at the right price as well as related corporate action such as bonuses and splits etc. 
    • Berger Paints
    • Kansai Nerolac
    • Titan
    • Cadila
    • Piramal Enterprises
    • BPCL
  • Multiples of 50 through 75 are achieved in the following shares.
    • Vinati Organics
    • Maruti 
    • PVR
    • Apollo Hospitals
    • Himatsingka Seide
    • TVS Motors
    • Apollo Tyres
    • TCS
    • Bata
  • Multiples of 25 through 50 are achieved in the following shares.
    • Arvind
    • DRL
    • Tata Motors
    • M & M
    • Petronet LNG
    • Greaves Cotton
    • HPCL
    • HUL
    • MRPL
    • Hindustan Zinc
    • Mindtree
    • Tata Chemicals
    • PC Jeweller
    • Bharat Forge
    • Sun Pharma

I am a little reluctant to provide actual figures but you will be able to understand the scale of the gains. Just as an example, my buying price in Berger Paints is 19.63 and the stock is trading at 262 now. Of course, I have had several spectacular failures too such as Unitech, Kingfisher Airlines, Teledata, Karuturi Global etc. On the balance things have worked out rather well and enabled me to achieve a state of Financial independence by the time my son had just started his Graduation course.

My recommendation is you start with a stock portfolio right now if you have not done so already. You have to do it on your own learning from Facebook groups or Blogs will not be enough. Start small if you are conservative at heart but do get started.

I knew very little about stocks when I did and it has really worked well for me.

LT Infotech – should you invest?

Of late the IPO market seems to be sizzling with action. Mahanagar Gas did rather well and Quess Corp exceeded even the wildest expectations of the optimists. So much so, that very few people who applied were blessed with any allotment. The listing gains that the stocks had seem to justify the enthusiasm of the applicants. In the light of the current situation, how will the LT Infotech issue work out? Is it worth an investment?

The first thing to look at any IPO is the company and it’s relative position in the industry. The second issue to look at is the prospects of the industry in the short and long term. The third issue to look at is the price point of the offering and whether it makes sense. Let us look at each one of these one by one.

To begin with one must understand that LT Infotech is not really a tier 1 IT services company in the Indian context. There are several companies which have done better, despite the fact that LTI has been around for a long time, with the support of a group as strong financially as any other. At the same time, it is a decently profitable company which has grown revenues by 18 % annually over the years. Their growth has been steady, though not spectacular. So, if the question was whether you should buy it in comparison to other IT majors, the answer is probably no. However, the IPO is a different matter and here we need to examine at what price we are getting it allotted.

As far as the IT industry in India goes, there is no doubt that it is passing through challenging times and the landscape is likely to remain difficult in the near future. The growth in USD terms has really been negligible in this year and the Q1 results due now do not promise much. The BREXIT issue along with the H1B bill that will be discussed in the US will impact two of the largest markets that the sector has. The model followed by most Indian companies was to push for more manpower both onsite and offshore in order to grow the revenues and profits. Technology, business and regulatory changes is putting sustained pressure on this model and the players will need to adapt fast.

So does the pricing make sense? Yes at 12-13 times of current earning, the IPO seems rather attractively priced. In the current liquidity driven market situation there is a possibility of the issue being hugely oversubscribed and open with good listing gains. The one factor that can queer the pitch is the quarterly results of other IT majors. In case these are disappointing, there will be a dampening effect on the listing price of LTI.

In the balance how is the future of LTI? I think it will be subject to the same challenges as all tier 1 and 2 companies. However, the support of the group as well as the strong finances that it has will very likely propel it to better growth as compared to others. I will therefore recommend people to invest in it, especially if you are having a portfolio that is light on IT. For people who are starting to build a portfolio, this will be a decent company to invest in. Do not go for listing gains alone, this will be worth holding and adding to for the long term.

How should you invest? If you have 2 lacs available then put in the entire amount. It will maximize your chances of getting some shares and your money is only going to be blocked for 10 days or so. In any case, it is unlikely that retail investors will get more than 1 lot.

Go for it – maybe 15 years later you will thank yourself (and me) that you did so !!

 

A layman’s guide to 200 DMA and how to use it

When you write a blog that has readers from all over, it is sometimes a challenge to decide how you need to pitch a topic. On one hand you can assume that your readers know most of the things you are referring to and just get on with the blog post. On the other you may have to explain the basic details elaborately, before getting on with the main topic. I have referred to 200 DMA as a basic indicator for deciding on when to buy in some of my posts. It was pointed out to me by a few readers that many may not really know what is 200 DMA, leave alone it’s significance.

Well, let me get down to the basics then – DMA full form is Daily Moving Average and 200 DMA is the Daily Moving Average over a 200 day period. You calculate it for Nifty by adding all the closing Nifty levels for the last 200 days and then dividing the sum by 200. So, obviously unless we are having a flat market for long the current level of Nifty will normally be different from the 200 DMA of Nifty. The other point to understand is this – we can have 200 DMA for any stock or for any other index as well. So 200 DMA of ITC is possible and so is 200 DMA of Sensex or CNX Mid cap index. Also, while 200 DMA is used very popularly you do have other indicators like 50 DMA, 30 DMA etc. These are also calculated as I have explained for 200 DMA.

Why is the 200 DMA the most popularly used indicator? Historically at some earlier point in time, stock markets used to be in business for 200 days a year. The 200 DMA would then represent the average value of the stock or particular index over the past year on a rolling basis. What is the significance of this? Well, one year is a fairly substantial period and the 200 DMA value will give you an indication compared to what the current market price (CMP) is. For example if the stock has been trading with a downward bias then in general CMP will be less than 200 DMA. It may not be a very good idea to buy such a stock when the 200 DMA is in a declining trend, even though the CMP by itself may look attractive. Similarly in a rising market the 200 DMA will show an increasing trend and it may make sense to consider buying any stock only after the 200 DMA trend gets to be a decreasing one, or at least flattens out considerably.

Let me try to explain this with the example of Nifty in the year 2015. On 3rd November 2014, Nifty was at 8324 and 200 DMA of Nifty was at 7191. Based on how the market has performed over the last one year, we can note the following:-

  • On 12th February 2015, Nifty was at 8711 and 200 DMA for Nifty was 8312.
  • On 22nd April 2015, Nifty was at 8429 and 200 DMA for Nifty was 8254
  • On 23rd April  2015, Nifty was at 8398 and 200 DMA for Nifty was 8564.
  • On 7th May 2015, Nifty was at 8057 and 200 DMA for Nifty was 8289
  • On 12th June 2015, Nifty was at 7982 and 200 DMA for Nifty was 8360.
  • On 25th August 2015, Nifty was at 7880 and 200 DMA for Nifty was 8456.
  • On 7th September 2015, Nifty was at 7558 and 200 DMA for Nifty was 8430.
  • On 29th October 2015, Nifty was at 8111 and 200 DMA for Nifty was 8378.

It is easy to see from this that the 200 DMA Nifty has started to decline for the last few days and this needs to be confirmed as a trend. Obviously, if the trend is confirmed then we are entering the buying zone for some of the Nifty stocks as well as for the MF schemes that have a high percentage of holding in the Nifty stocks. The maximum gap between the Nifty level and the 200 DMA was on 7th September but the Nifty found support at that level. I would say the 200 DMA has a high chance of declining further, based on whether BJP loses the Bihar elections. Crystal ball gazing is a tough task for our markets but I do think there is a possibility of the 200 DMA for Nifty reaching a level of 8100 or so by December end.

This will clearly mean that the Nifty will probably achieve levels higher than 200 DMA for the first time since 18th August, some time in January 2016. From now till then we will probably be in a strong buying zone. Of course, for individual stock or MF schemes you must also look at the 200 DMA levels for that stock or relevant index and see those trends for the past year. There are several web sites which will supply you with the relevant data you need to make buying decisions.

I hope with this I have been able to clear up the way in which you can make use of 200 DMA figures and trends. I will do another post on price triggers for stocks in the near future. But before that, I will write one about how I intend to use these indicators for my MF purchase, now that I have finally got out of SIP.