Monthly Archives: March 2013

The financial year ends

Hey guys,

As the financial year draws to its end on 31st march, its time to reflect on what it brought for me in several aspects.

1. The approach of classifying the portfolio between core and trading was a smart one. It allowed me to be bullish at the start of last year and cut all trading positions when the markets rose towards the end of last calendar year.

2. In January this year, I departed from the mid cap mania. As twitted, the sense was large caps were a better bet than mid caps. It seemed so logical when such huge fii inflows on one hand and a continuous retail withdrawal from mid and small caps. This move rewarded us not by giving profits but by insuring that the downside was not so harsh.

3. I ignored more noise than I had done previous years. Sometimes even at the extent of sounding brash or arrogant and sometimes even rude. The point was I just can’t digest hearing half baked or overlooked views. One can never forget, everyone advised but not everyone matters.

4. I learnt once again, markets reward discipline. There is nothing as an expert who can take you through a smooth ride. The year that went saw some supposedly good stocks referred to in several forum falling. Some names include Aarti drugs, bank of baroda, innoventive industries, GRP, cravatex, engineers India, noida toll, bhel, gspl, gic housing, lic housing, smruthi organics etc doing rather bad. I myself went wrong in arshiya by a whooping extent in value terms as also partly towards the year end in Mcx and Astra Zeneca. I remain invested in all three. However I take solace from an overall portfolio return.

5. Diversification was a key insurance. It kept my losses from arshiya, Mcx and Astra low. I have not booked any loss so far so in a sense they are paper losses. Having said that I remembered the axiom, greed and fear. The exposure to the three under performers in aggregate at the end of the year was a net impact of 4 pct.

6. I avoided averaging, so much that I discouraged many of you to add arshiya too. This move and resist paid dividends.

7. I added winners when some losers emerged. The markets are smart in punishing companies and the aberration usually is right. It is only at times when markets go overboard which is when opportune investment sets in. It did today in havells, a scrip that ultimately rewarded20 pct in a single day. The same happened when the markets had so much negative last year and the. So much euphoria later on. At one time in December 2012, mid caps rose relentlessly as if markets had to finish some targets.

8. Usually it does not matter if you time or ill time the markets if you remain committed to good companies and add in moderate doses. Typically wealth creation is not a trading phenomenon and usually requires a long ride in a steady vehicle.

9. I made many friends in the year, including those in the financial markets. Some of them such as ayush, devesh, saurabh, sohail, kiran, prashanth showed good inclination to be like minded. I am sure I missed a few names. Just a tiring day.

10. I also encountered some people who think its impossible to get it wrong and who make endless comments. I must clarify, I am not a trader, don’t know charts, frankly don’t even care for them and don’t possess a mantra to time the market. I don’t have a way to get it right always and may not know about some companies. If you follow me, you should gauge the totality effect.

11. Read always. It will keep you in the stride of things.

12. Warren Buffett has said buy stocks that you can afford to own if the markets are closed. I don’t find such comfort in anything that is complex, based on circumstances beyond a company’s control and based on all the gas that floats.

13. As I end the financial year I remain bullish on stocks. One must understand being bullish on stocks and being bullish on markets is not the same. Markets have their own way and will go up and down. I wish I knew where markets were headed as they are controlled by far more factors than those that control stocks.

14. Even in the current markets, several mid caps and small caps may remain cheap. It is silly in my view to believe that the retail investor will end up coming to buy these companies when he has done everything to avoid markets. Atleast I can expect large caps to do better. Promoters in small and mid caps are not in possession of enough cash to buy their own stocks and those that rise on manipulation in any case should be off radar.

15. I remain bullish on pvt banks, consumption themes which I think will do better than markets although am not be exponential gainers on a year to year basis, select pharma and on a basket of mnc cos. I remain bullish on 2 capital good companies as I have repeatedly twitted and which have outperformed by far.

16. I am working on re orientation of some stocks in my portfolio. Hope to do justice.

Happy investing and I look towards a good financial year.

PS: stocks are a passion. Not because of the money one can make but because they teach me so much. Also history reveals usually periods of underperformance by markets for 5 years or thereabouts are followed by years of outperformance. I’m praying too.

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What’s up or headed there

Hi,

Another non event in a budget has passed. I wonder if the govt allows bets to be legally placed on the union budget, with STT and other surcharges, ala a lottery, what would be its collections. The point is, no one ever knows if a budget would be good or bad in advance and yet stupid messages and posts come pre and post budgets. I got invited to a con call 2 days before the budget where someone was trying to poll on best budget bets. Needless to say, I didn’t participate and can assure you no one got anything right. Similarly post budget I read several analsys giving thumbs up or down to stocks, actually playing into the Mylan assumption of the world ending or deciding on stocks on that one fateful budget day. ITC which was had max thumbs down rallied immediately after the budget while there was hardly any major movement on any other co worth a mention. The only exceptions were MCX and FT.

I don’t even consider MCX to be so impacted had it not been for the intent of one of its investors to cash out. The news of their inability to sell and change in intent to sell followed by a stake sale by one of the institutions, brought down the stock. As twitted, I reduced my holding partially as I don’t like uncertainties which are beyond control of companies.

Instead as I wrote about here and also twitted, I added some mnc cos to the portfolio. The reading has payed well with a decent bounce up in some names while my personal feeling is others will soon follow.

At th same time, I exited Fairfield atlas. I like to play for meaningful opportunities and a correction of he stock to 100 bucks ad offered such a play. At 160, the bet is only on small moves. There s a doctrine in investing that I read in a brilliant book called Zurich Axioms by Max Gunther, you must learn to leave one money on th table. Honestly not one person in the world knows when is the perfect time to exit any stock but its good to book some profits particularly when the idea was not taken as a core holding.

Asian Paints, a stock that I recommended at 2700 odd had met wit many comments. The obvious ones were that it is overvalued, is a non obvious stock and is going through a commodity pricing disadvantage. All hamburg. The stock is now almost 100 pct up. Which brings me to anothe belief, I don’t believe in wisdom of crowds when history talks a different story.

Cos with a history of wealth creation and in sectors with moats usually can’t be timed. No matter when u buy them as long as you do add in their worst times too revert to their excellence.

I have not initiated any trading positions still. Frankly I’m not sure where the mkts are headed. It may not even matter. If you like some companies and hey get cheap, do th honors and buy. If the mkts fall, you would have picked the best. That’s all you can do. You could not hav predicted markets beyond and it’s the discipline of investing that eventually will hold you through. Right now, I hav reduced my portfolio somewhat, as I wanted to take a small break with some cash to re look at fresh ideas.

Some of ou may think that makes m bearish or apprehensive. What abt the 96 pct invested? The human mind is so in awe of short term actions that it overlooks th larger picture. If one studies stock market rallies, to need only about 20 days of run in one year to make good returns in the market. There will be days when markets rally very smartly. No one knows when the 20 odd or more days will come. So the best you can do is to wait for them. In between there will be down days and days of no meaningful moves. I welcome both, one for the opportunity to buy cheaper and the other for the time comfort to buy and research.

Happy investing as always. Your feedback is always appreciated.

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