Wednesday, March 11, 2009

My Portfolio and Historical Perspective

As a blogger, I have been writing about all the basics about stocks. But I also would like to let the readers know where I have had interest in the past and the mistakes I have made and what I have learnt. Given below is the list of stocks I have bought in small quantities and I have followed them closely during the past year. Like everyone, I have also met with negative numbers but the only difference is I have not sold majority of them. Now I have learnt few things based on my stock selection and in forthcoming articles I will list out the stocks that I am going to invest in at the current prices.



List of Stocks
1. NTPC
2. L&T
3. ICICI
4. RELIANCE COMMUNICATIONS
5. RELIANCE INFRASTRUCTURE
6. JP ASSOCIATES
7. CADILA HEALTHCARE
8. AXIS BANK
9. BANK OF BARODA
10. SIEMENS
11. CROMPTON GREAVES
12. PUNJ LLOYD
13. THERMAX
14. RELIANCE POWER
15. RELIANCE CAPITAL
16. RNRL
17. RPL
18. BHARATHI SHIPYARD
19. GUJARAT STATE FERTILIZER CORPORATION
20. FINANCIAL TECHNOLOGIES
21. PANTALOON
22. IVRCL INFRASTRUCTURE
23. SESA GOA
24. WELSPUN GUJARAT
25. TATA STEEL
26. ICSA
27. GLENMARK
28. BGR ENERGY
29. PLETHOCO PHARMACEUTICALS
30. TANLA SOLUTIONS


In the list, I think I have selected few very good stocks like NTPC, Cadila Helathcare and Gujarat State Fertilizer Corporation, that did not depreciate that much. In fact I bought NTPC when the SENSEX was around 16000 and I still have positive numbers.
Apart from these, majority of them declined more than 25 percent eventhough most of the companies in this list posted decent Q3 results if not great results. You can understand from this what Market can do?

I am keeping majority of these stocks as I believe that these companies can ride out the present turmoil and will get back to the positive territory when the market improves. How do I say that? I just guess from the histroy. Following graph shows that Rs. 1 Lakh invested in 1992 before the crash lost more than 50 % of the value but in 2 years and 3 months time, Rs. 1 Lakh has been recovered. Of course, one should have invested in good companies.

Another example is 2000 tech meltdown and the following graph depicts how long it took for the market receovery to regain back the same value of investment. It took almost 4 years to recover the capital investment. The important thing we need to understand from these graphs and history is that if you have invested in good companies, then there is a good chance to get back your capital investment(If you are a long term investor) atleast if not returns.
What do I mean by good companies?
I define companies as good companies if they have the follwoing characteristics.
1. Competitive Advantage in the Market Place
2. Not adversely affected by closely related innovations
3. Area where entry of new firms is difficult or sufficiently in a large market that can allow multiple players with significant revenues
4. Not affected by policy decisions
5. Strongly related to the day to day life

If a company has atleast 3 characteristics out of these 5, then I would term it as good companies. I will give one example of how a good company can potentially become a bad company.

Example: Financial Technologies is a very good company and its EPS is one among the best and also in a safe business. But recently National Stock Exchange has introduced its own software and they are giving it for free to the brokers. This action might potentially reduce the earnings of Financial Technologies. But we do not know for sure what will happen. The important thing to understand is just the basic behind it.
Hence, if you have invested in good companies and failed to book profit at the higher levels, then you can wait with a hope to get back what you have lost. The list I gave given above has many good companies and some bad companies. So, I prepared a new list of stocks replacing the bad companies with the good companies that are availabe at cheaper valuations which I will list out in the next article.
Note: I am not recommending any of these stocks and request the readers to use their judgement. But please wait for the future articles with new list of stocks in which you can do more research and invest.
Mistakes I have made: I had significant exposure in HPCL and I sold that stock when the SENSEX was around 14000 and bought Tanla Solutions, Tata Steel, Welspun Gujarat and Bharathi Shipyard. Though the stocks I bought are good stocks, I bought it at a wrong time that depreciated heavely. HPCL was a good pick and I still do not know why I sold it (Bought HPCL around 220 rupees). Now HPCL share price is Rs. 255 and the value of the stocks I bought replacing that can't be told.

Kumaran Seenivasan.

14 comments:

BULLS March 12, 2009 at 12:59 AM  

Mr Kumaran, Thanks for letting us know about your portfolio. I wont go much deeply in your portfolio as of now. However, i agree with your views posted on FT. I would like to ask, don't you consider BHEL a good pick for your long-term portfolio?

At this valuations, i find BHEL quite reasonable. That does not mean it won't go down further, but downside risk is relatively lower vis-a-vis buying at higher levels of Rs.2000 or above.

Kumaran March 12, 2009 at 5:46 AM  

Hi Bulls,

Thanks for your comments. As I said in the article, I have prepared a new list for the long term investments as I am thinking to replace many compnaies in the present portfolio. The new List includes BHEL. I did not buy earlier as the valuation was higher. Now I think BHEL is available at a reasonable price and definitely a good stock for long term investors.

jamesvaikom March 12, 2009 at 9:56 AM  

@bulls
during this market fall power stocks have not fallen that much. My view is we must buy banks, l@t, punj lloyd etc after some more dip. I will wait for fii's to dump bhel. my view is if they dump sbi they may dump bhel also.

Faisal March 12, 2009 at 2:40 PM  

BHEL sure is a good stock and might b a good choice for a long term portfolio....

I would also suggest you to have a look at ONGC...In my opinion it would be one of the major value creators in the long run...Do share your opinions also on this stock...

Happy March 14, 2009 at 8:35 AM  

Kumaram
I like to leave a message about Financial technologies. I heard that NSE block listed FT due to some major issues with the product. I know couple of international brokers talking to other vendors to replace FT solution.

I feel we need to identify stocks in energy, gas, oil, irrigation and power sectors. They will do good in next boom.

Some of my picks - NTPC, IVRCL, PTC, L&T, BHEL, Suzlon ( if they come out of issues), IDFC ( management has good connections with Gov), Tata steel, TATA motors, BGR, Avera T&D, Cairn India, NMDC

Some small cap igaraish, first source, ashok leyland, idea, Mercator, moser bear, satanava ispat, tube inv and value ind, denso, Indian hotels, petro net and voltas.

Trading stocks with low risk - IVRCL, kalindee rail, suzlon, abban, GMR, JP asso, core projects, welspun, punj loy, ICSA.

Kumaran March 14, 2009 at 10:35 AM  

To Faisal's Comments:

Thanks for your comments. You are absolutely right with respect to ONGC Faisal. It is one of the defensive stocs long term investors can have in their portfolio. Irrespective of the negative reports that came recently about ONGC, I still think it is one of the stocks investors can rely upon.

To HAPPY's Comment:

I just would like to add Agriculture as one more sector along with what you have listed. Fertilizer, Seeds, Chemicals etc have good prospects. Many stocks you have mentioned are in the list I have given in the post as well. But regarding the small cap stocks, I suggest to have only selected few. May be you can have 3small caps in your portfolio.

VENKATARAMAN March 16, 2009 at 12:22 AM  

I have discovered your blog only today and thank you for sharing your stock market wisdom and experiences..... you can expect me to interact with you on your postings regularly from now on.....I am rather surprised you have not included RIL, HDFC and CAIRN in your picks for long term investing..... can you please give your reasoned comments for ignoring these sound blue chip cos...... v ramachandran

Kumaran March 16, 2009 at 6:44 AM  

Hi Ramu,Thanks for your comments.RIL, HDFC and CAIRN are ofcourse good stocks. I am giving my reasons below.

1) As I said in the post, I have considered book value while selecting the stocks. Most of my picks are trading either less than the book value or atleast close to it. RIL, HDFC and CAIRN and all trading well above the book value.

2) RIL has become too big with the merger of RPL and the upside potential will exactly imitate the true bluechip company. May be 15% cagr over the long term. In any case,I wanted to limit the list to 40 stocks. If I post another list, May be I can include this too.

3)HDFC is a real good bank. But I already included SBI, ICICI,AXIS BANK,PUNJAB NATIONAL BANK AND YES BANK in the list and all are available at far lesser valuations than HDFC Bank and the upside potential for these banks are excellent.

4)Regarding CARIN, still it is not producing any substantial returns.If you think it is a potential multibagger,it should be trading at 25 rupees or so.But it already commands higher valuations like a blue chip company and I would rather go with proven companies which are available at dirt cheap prices rather than companies like CAIRN.

DARK KNIGHT ABHAY March 17, 2009 at 1:26 AM  

great post.. keep it up

abhay

SheeL March 21, 2009 at 1:54 AM  

Value Unlocking...?

When the stock market was on top a year before, there were many companies trying to demerge and list their subsidiary companies like ICICI, HDFC, Sterlite, Kotak, Reliance, etc., and create value unlocking for the share holders... just as the example we saw when two ambani brothers were divided...

Most of the banks are planning to list their subsidiaries, how do u see this as wealth creation for a particular stock in coming 2 or 3 years... as market might be better then and so will the companies go for it...

Don't you think we should consider this value unlocking thing while selecting a stock when planning for 2 - 5 years horizon...?

SheeL March 21, 2009 at 1:54 AM  

Value Unlocking...?

When the stock market was on top a year before, there were many companies trying to demerge and list their subsidiary companies like ICICI, HDFC, Sterlite, Kotak, Reliance, etc., and create value unlocking for the share holders... just as the example we saw when two ambani brothers were divided...

Most of the banks are planning to list their subsidiaries, how do u see this as wealth creation for a particular stock in coming 2 or 3 years... as market might be better then and so will the companies go for it...

Don't you think we should consider this value unlocking thing while selecting a stock when planning for 2 - 5 years horizon...?

Kumaran March 21, 2009 at 2:42 PM  

Hi Sheel,

I will post one article regarding value unlocking.

rd_dilip,  July 26, 2009 at 8:09 PM  

Mr.Kumaran, your article on My portfolio is really interesting and informative for learners like me.

I need your advice about Bharti Airtel stock which i bought for Rs.800 and with the quarterly results it has fallen to Rs.415.However, i immediately bought equal no.of shares to average it out. Can i hold on to the shares or shall i change the portfolio. Need your advice.

thanks,
Dilip R

Kumaran July 29, 2009 at 6:14 AM  

Hi Dilip,

Airtel is a good stock and the price drop is not due to quarterly results but because of the stock split I suppose. For every stock you had previously, now you will have 2 stocks. For example, if you had 50 stocks earlier, now there will be 100 stocks in your account. Face value of Rs.10 has come down to Rs.5 after the split. So, hold on to it till you get good retunrs.

Kumaran.

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This is a blog about stock market investments, investment strategies, and related topics. Any statement made in this blog is merely an expression of concerned authors opinion, and in no case should it be interpreted as an investment advice to buy stocks, sell stocks, or for that matter advice for any other issues be it money related or not. By using this blog you agree to (i) not take any investment decision, or any other important decisions based on any information, opinion, suggestion or experience mentioned or presented in this blog (ii) verify any information mentioned here, independently from your own reliable sources (for e.g. a registered investment advisor) and thereby check for possible inaccuracies. This blog is to create investment wisdom among general population and the authors are not responsible for
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