Monthly Archives: February 2013

Portfolio update

Hey guys,

Th markets have done well since my last portfolio post. We made some changes most of which were tweeted at the same time. To reiterate:

Den networks: profit booked at 220, stock exited
Hathway: 60 pct booked at 275, rest held with zero cost and in fact positive fund flow
Dish: position closed at 72
Sun tv: we closed out trading position at 475. However I re entered at 424, this time as core.
Tbz: booked 50 pct at 250 rs. Residual holding is free of cost, in fact net fund positive.

Tilaknagar: position exited at 82 rs

Bata: added at 735 as core

Tv 18: added at 32, 26. Position enhanced as also portfolio weightage.

While I continue to be bullish on digitization, I chose to concentrate on sun TV, tv18. Also the temptation of booking handsome gains in den and hathway was inspired by some rather tempting opportunity costs in other companies.

Thus, I added some mnc plays. Just as there was euphoria on the upside on delisting hopes, there was undue panic and price correction due to management focus on compliance with 75 pct shareholding. Some pessimism was also on royalty increase fears after Hindustan unilever chose this path. However simple as it may sound, royalties usually increase with increased sales and as mnc’s enjoy high margins, it means more profits and using historic price to earnings, more value for the stocks.

I have been bearish on capital goods, infra and psu banks. This bearishness worked for us. I have now revoked bearishness on names like bhel, Crompton, hindalco, sterlite, ivrcl, gmr, gvk, psu banks etc. as the prices have corrected well.

I now look forward to a meaningful budget.
Happy investing and good luck.

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My take on markets

Hey hope all of you are doing well. There seems to a sudden spook factor in markets. I’m surprised that:

a) ppl are talking of a market crash that seems to have happened or is underway. First of all, when a market corrects by a few hundred points, over a month, its not a crash. Our model portfolio itself for example delivered great returns and a correction of a few percentage points is good. All of a sudden, I’m looking again at stock valuations and portfolio adjusts rather than being in a state when all I could see is one stock after the other on a tear. The very fact at my tweets reduced on stock picks was not to to some ack of enthusiasm but the fact that I could not find compelling buys. That is changing now.

b) the doomsayers have not even one reason for the markets to fall, just as they had not Ben one reason for its rise from nifty levels of 4700. It’s almost like markets “had” to go up from 4700 as if to prove the majority wrong and “had” to correct from 6200 to again prove the majority wrong. If you recall, my last post, was on experts and their views. If you also recall, most experts were sure of a per budget rally. Again to be proved wrong. Once again most have no clue. Is it not ironical tat a reading of good investment books will always teach you that in the long run and over a sustained period, even funds do not beat the markets. They have their ups and downs and usually tag the market.

C) I’m happy with govt actions on the last few months particularly on diesel and petrol. One hopes that while subsidy will be cut going forward, govt and pvt sector spending on infra somewhat revives. We need good infrastructure to attract economic growth an investment. I have been bearish on infra, capital goods and psu’s since the last 2 years, barring cummins and Larsen. This has rewarded well with the likes of bhel, beml, gmr, gvk, Crompton, ivrcl etc underperforming by far. Same applies to public sector banks where pvt sector pays recommended by me like Indus ind, hdfc bk, Jk bank, city union etc have done far better. I am bullish also on icici bank and karur vysya bank.

D) just as there was undue euphoria on delisting hopes for mncs and most saw their stocks soar, there is undue pessimism on their called off plans for delisting. True, that there could become concerns on enhanced royalties, but one cannot forget that royalties are a function of increased sales, mnc’s enjoy high margins and usually have the best strategies to grow in economies that are developing as against a saturated growth in their advanced economies.

e) it has reconfirmed my belief that markets can humble all of us. I appreciate and respect some of the great friends I’ve made in markets and am conversant with some of their excellent stock picking skills. However an investor can and should never forget that even the good guys have bad days and endup with losers. I recall how some value picks including but not limited to engineers India, apw president, sanghvi movers, Gujarat reclaim (now GRP), oriental carbon, cebbco (which I believe was endorsed by a dozen stock pickers), Crompton greaves, bhel, gspl, bank of baroda, to name a few have suffered. In my own universe of stocks, arshiya gave some pain, although I have fully held my position. I advised many of you not to average it as I don’t bet more on losing positions. I haver remain invested in arshiya and ave taken the fall a prolonged phase of future returns.

f) the magic has been diversification and opportune investing. We did some good trades in opportune investing. That created so additional cash for us that was invested in core ideas. As of now, we have no trading positions open. Diversification ensured that we got saved in our portfolio with arshiya. In fact it made a less than 2 pct impact despite a steep fall. We were luckier to have gained in almost all other positions.

g) investing is a lot of reading on one hand but an equal amount of chilling on the other. Over enthusiasm to buy or anxiety to sell just because of some news is not necessarily a winning thought. I’ve reduced my exposure to watching TV channels although I remain on the look out for interviews of some smart investors. More for macro assessments and least for stock ideas.

Portfolio changes:

I reduced positions in den, hathway and exited tv today, whie increasing positions in tv18 and sun TV. That’s on the digitization front, a story I believe in for long. I also booked good and timely profits in tbz and hold residual position at zero cost with additional profits converted to cash.

I have added some mnc stocks to the portfolio. These include styrolution abs given their huge bullishness on polymers, Fairfield atlas given its pounding just because of a delisting call off, Astra Zeneca, almost for same reasons. I’m looking for more. Fairfield is up some 15 pct since buying, styrolution marginally while Astra is almost marginally below my buying.

I may have missed some stocks, just the effect of a long flight back from the US.

I continue to remain bullish on strides, Wockhardt, Asian paints, Godrej industries, financial tech and Mcx, the pvt banks, nbfc like mah finance, bajaj finance, muthoot finance.

Happy investing.

Behavior of crowds including experts

Hi,

Could not resist doing this post just to educate fellow investors on the fascinating thing called markets.

1. The self proclaimed and highly converted experts saw a nifty headed to 3500. Oil prices, GDP fall, liquidity concerns, lethargic govt., fiscal deficit, global problems, recession etc were words attached to explain every reason for the markets to fall. Strangely the biggest proponents of the fall were stock brokers, forgetting that in doing so, they were killing the very system from which they originated and tied their bonuses and jobs too. In the next 12 months, came a rally of 25 percent, far beyond the intellect of the experts. While not much changed, except for some govt moves, much of which like fdi have not even yielded a single investment, the same lot turned into cheerleaders and all of a sudden the editorial departments and research analyst were alive converting their old sell reports into buys.

2. India bulls was downgraded by a foreign research house, the stock tanked to 190. While this resulted in a counter claim against the search house, the stock which was on expert sell lists, ended the year with a spectacular return.

3. Icici, which was on several downgrade lists with axis bank, saw a spectacular rise. The same issues of axis being downgraded post its enam deal were forgotten faster than a flop movie.

4. The darling stocks in the power sector, which were touted to be the rising stars, with each and evert influential person venturing into power with fancy terms such as merchant power profits were the worst performers.

5. The most promising and strongly recommended stocks in telecom, Bharti, RComm ended up being the worst performers and a lesser recommended stock idea marched its way.

6. The forgotten business in Hindustan unilever emerged from darkness taking the experts by storm. It outperformed the sector to finish with one of the best returns for the year. Suddenly at 520to 550, the stock found its way into several recommendations. Almost seemingly as if it was waiting to play a prank, the stock retracted to 450.

7. Some of the most recommended stocks were in fact the biggest boo hoo stories. The reasons attributed to these recos varied from so called cash on balance sheets being disproportionate to mkt value to their sheer endorsement by the biggies. Little surprise then, the mkt again had a different story to play. From a Kiri dyes recommended by shanker sharma at 600 bucks as the next Tata motors to an aptech, delta corp, Ncc, a2z all of Rakesh jhunjhunwala picks, the stocks humbled the greats.

8. Polaris, geodesic, hexaware, suzlon, gmr, arshiya, cebbco, skumars- one story after the other tumbled. While some of these were seen as beneficiaries of currency and outsourcing, in gmr, even the likes of value pickers saw an emerging airport construction niche.

9. The iconic cromptons, bhel, bel along with some of their capital goods cousins made their way to new lows although continued to be justified by many as value and even growth stocks.

10. Dlf moved from a sell to a buy after it moved from a Robert vadra alleged tie to debt issues. Sadly the recos changed after the stock rallied from 160 to 220. Interestingly the same research agency that reported a sell on Indiabull finance was also involved with dlf.

11. December 2012 saw funds selling infosys. Expert consensus on the continued downtrend and disappointment in results grew strength. As soon as most exited, reduced or even shorted the stock, the same had its best rally in years, only to get upgraded again. Wipro said me too. Not in context of the company and its efforts but in the eyes of analysts who having mass downgraded the stock at 330 saw it rally to 415.

12. Too expensive was the term used for ttk prestige, Asian paints, Marico, itc, to name a few. Only to see them outperform again.

13. Bosch announced a truncated week on cost cutting. The reaction on the stock on terms of an obvious fall was short lived.

14. On mobile, tulip continued to confuse. Too cheap on fall gave way to book losses on massive fall.

15. Digitization was the most debated story. Unbelieved, doubted and even dismissed. The stocks under this universe had the best run.

16. Sun tv plagued by experts for so called governance issues involving the marans just hit a new lifetime high. While value stocks including the favorite stock of two legendary investors, central bank, hit ever lows. I don’t blame the two investors, another case of expert consensus.

17. Some of the best performers were the underdogs- the Mayur uniquoters, the Atul autos, the gruh finances, relaxo, lesser known banks like city union, the most battered Karnataka bk as against the so hot dcb and dhanlaxmi, the lesser tracked amar raja against the jewel exide industries. In software, the banished mind tree that saw the exodus of top management shamed the experts to log super returns along with tech m and satyam which had been condemned for either their past or European exposure.

It’s important to read the difference between value in the nature of a signal and the noise. Happy investing.

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