Catch me if you can

Hey everyone,

 

What a month. Equity finally makes it as a good word after years of tough times in finding just enough to outperform. And how.

sample this: last month I wrote on 10 stocks that were looking good. 

In a normal market, a stock (aban) moving up from 740 to 766 (div adjusted) in one month  would imply a good performance. 

But in a team with others playing a 20/20, poor aban ended up as the least performing new idea. How ferocious the last one month has been can be sampled by this:

a) jk tyre moved from 270 to 370;

b) kitex 270 to 350;

c) Hester 225 to 407;

d) ifgl refractories 160 to  211;

e) ipca 695 to 81

f) oriental carbon 260 to 340;

g) symphony 1100 to 1400;

h) bajaj fin 2225 to 2576;

i) premco 90 to 110.

So we had an interesting balance. On one side core holdings consolidated in prices beating markets and many have now reached multibagger status, the new ideas brought in the much needed thrust to better performance. 

 

The portfolio also did well to resist some companies that though may have moved up in the last few months took a knock in august. I hardly own much of metals, infra, real estate, psu and certainly avoided debt traps like unitech, Jp associates to name a few.

 

the traditional divide between core and non core lost a bit of focus. Core did well. Non core did well. Money was available thanks to. Healthy dividend flow and partly by some infusion and some minimal churning. 

 

It’s surprises many to learn that I added to my investment corpus by infusion of fresh capital as also deployment of dividend money back into market. What to do? I found new stocks at interesting valuations and got encouraged by the insurance caused by recent profits. I had written earlier on this insurance in one of my posts.

Typically a market gets expensive when ideas either run out or are not generated from self but are heard as part of borrowed conviction. However I remained in this state of bliss where my reading up basic news Nd papers, I f&id more reasons to buy than to sell. Sample this:

 

A) rubber prices continued to fall. Till some days back tyre cos had not reacted to this. Ceat was at 485/500 last month, Apollo tyres had corrected to 161, mrf was Cooling and jk tyres without a flat tyre had flattened to an interesting level. 

 

 

B) consumption data seemed to suggest aache din. The effect had rub on HUL and perhaps Britannia but not so much on cos like amrutanjan, emami, partially on eveready and not so much on Indo national (nippo) batteries. The results of these co were just too good.

 

c) micro finance co sks micro had repeatedly announced deployment of loan book, better financials, improving demand and yet an ignorant stock price. 

 

D) the pharma counters had seen a run up on too obvious names. However the fundamental changes in lesser know. Mid cap pharma was being ignored by excessive bets on obvious mid cap names. Stocks like souvenir despite huge patent approvals wS being ignored in the pursuit of stocks like ajanta totally oblivious to the fact that pharma is not just an excel sheet pe play. 

E) paint stocks were getting ignored barring Asian paints and perhaps Berger despite capex, increase in demand and feedback from dealers on off take.

 

F)  barring fiis and some diis, investors were overlooking IT despite huge order inflows, favorable currencies, better global off take and a relatively cheap valuation compared to rest of markets for cos that were world status. 

 

G) overlooking strong brand stories by overlooking in rear view mirrors and forgetting the power of changing times as shown by cos like Relaxo, la opala, Krbl as recent examples and paving consideration of names like linc pen.

 

All I could do was to pick a few names. And expand the shopping basket. The move played out well.

 

as you would make out while reaching this part of the update, I have little to express. I still find some stocks worth adding and am doing my best to find a few names. While I would have typically been happy to detail these names, I remain cautious this time given that markets are hot. A mistake inflicted on my own self is my learning but I do not want to live with the feeling of inflicting it on anyone else with their hard earned money.

 

It seems sufficient right now to be. Most gains came in by belief and not by discovery. 

May I advise, I am not a person to advise any of you on whether you should buy xyz or sell. I am a believer and see several cardinal changes in india, some of which may be immediate and some of which could take its while. Bull markets typically last for a few years. Contrary to many other investors, 2013 was not a spectacular year for equity in general while 2012 was a rather poor year. If you got it right it does not mean the market got it right and the mass always makes a true bull market.

 

I am particularly sceptic right now of some people who believe they are talented just because they bought a few companies that they read about here or other blogs. Prof bakshi  recently tweeted his views on excel sheet investing. Even an investor like me who typically reads more than average finds myself humbled in the presence of true value or growth investors who are legends. To believe that one can beat legendary investors like samir arora, raamdeo agarwal, sanjoy Bhattacharya, prashant jain, rd damani, r jhunjhunwala, in some statistical terms in the last one or two years is a fractured thought of some people truly fooled by randomness and swimming in a naked pool. Legends are few and they last. Learn from them. We are fortunate that some of them share rich experiences on tv, in print media.

 

one needs to survive crashes with courage left to be a true investor. Spend time introspecting on basics and be less obsessive of the run so far. Blind spots exists and are near in many scrips. Avoid people who are nouveau rich and have no consistent track record. Even a blue blooded fund manager is measured by alpha. 

 

happy investing.

 

 

 

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10 thoughts on “Catch me if you can

  1. Amit says:

    Thanks for sharing these thoughts. Your stock picks were excellent and have been doing great in this bull run. At the core, I am just a cautious investor at the moment considering the valuations are expensive and need to be careful and prepared for the next inevitable correction/crash whenever it may happen

  2. Amit Arora says:

    I like that you stay true to your discipline of core and trading which most of us seem to mix up. – Amit Arora

    • Sreeselva Veene says:

      Hi Safir,

      How do you view Kitex going forward? Purely going by the numbers, it looks overvalued. What do you suggest would be a reasonably safer levels to enter or you wouldn’t mind getting in even at these levels given the potential and the stick-ability of the infant-ware segment and the company’s esteemed clientele.

      Would also be great to get your views on KTIL if time permits.

  3. Ashutosh Garud says:

    In agreement with most of ur picks. However, in case of JK Tyre. It has a huge debt on its Balance sheet (more than 2.2x D/E).where as other tyre companies operate at less than 1x. its Debt equity is further going to exceed given its new Rs1400 cr capex plans. So its discounted valuations are for a reason (and may remain discounted in near to medium term atleast). So was just wondering about its rationale.

    • safirpicks says:

      the stock is up 72 ptc for the month. Market knows better. : )

      • Ashutosh Garud says:

        Well, Suzlon went up 160% in one month (from mid may to mid June). Wouldn’t agree on markets always know better, as its down 46% since then @20.5 now (when other midcaps zoomed). I am sure JK tyre is a far better company than suzlon, was just referring to price movement in that case.
        Anyways, I was just wondering on the rationale, as why is that only JK tyre needs so much of debt to operate, where as others do fine without it.

  4. Bhalchandra says:

    Hi Safir,

    wonderful write up with follow up price movement.

  5. anand says:

    dear safir pls suggest few good stocks for portfolio im small investor 3000 per stock is enough investment

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