Sensex Beating Stock Select Portfolio Performance in under Three months

From our Stock Watch of over 300 Scrips these 16 are our Stock Select releases or re-releases on May 4,2009 for as Portfolio Ideas…These are based on Fundamentals and the idea of putting them on this Blog is to assert that even if you were anti-equity and ignored the March 2009 Lows and Sensex of 8000,you could yet have entered beginning May 2009 at Sensex levels of 11500 and made some good returns

No

Company

Opening Value

May 4,2009

in Rs

Current Price

July 21,2009

in Rs

Gain / Loss

in Rs

Gain / Loss

in %

1

Aftek Ltd

9.22

15.35

6.13

66.49

2

Ahmedabad Steelcraft Ltd

15.35

14.17

-1.18

-7.69

3

Allahabad Bank

52.50

84.95

32.45

61.81

4

Bharat Heavy Electricals ..

1651.75

2220.35

568.60

34.42

5

Dena Bank

37.10

52.50

15.40

41.51

6

Grasim Industries Ltd

1778.40

2772.00

993.60

55.87

7

GVK Power & Infrastructur..

38.50

43.15

4.65

12.08

8

IFCI Ltd

25.15

50.50

25.35

100.80

9

Infrastructure Developmen..

76.45

140.60

64.15

83.91

10

Jaiprakash Associates Ltd

138.80

222.25

83.45

60.12

11

Lanco Infratech Ltd

334.05

381.15

47.10

14.10

12

Larsen & Toubro Ltd

879.55

1456.70

577.15

65.62

13

NIIT Ltd

32.00

60.65

28.65

89.53

14

Reliance Industries Ltd

1802.70

2029.60

226.90

12.59

15

S.Kumars Nationwide Ltd

25.15

39.30

14.15

56.26

16

Shree Rama Multi-Tech Ltd

3.79

5.14

1.35

35.62

 Some Observations and Comments

  • In less than three months,the performance of most have been very good…Nine of the Sixteen have surged over 50%…The seven  that have not ,have also seen a surge from March 2009 lows and their northwards movements have decelerated from May
  • GVK and Lanco were recommended on May 21,2009 and NIIT on May 19,2009…all the others were May 4,2009…Opening Prices are as on the date of Reco  
  •  It do not include Sesa Goa,which has been our front runner for a long time now.It currently trades at Rs 230+ ,up near 300 % from March 2009 Low of Rs 60…Last year we had again recommended it at cum bonus and split price levels of over Rs 3000,translating to ex split and ex bonus price level range of  Rs 150 to Rs 165…we reiterated the recommendation several times at every significant decline 
  • It also does not include Firstsource Solutions recommended at Rs 9 and then at Rs 14 in Feb 2009…It now is Rs 22,after seeing a high of Rs 30 recently
  • It does not include Punj Loyd too as this was pursued vigorously in March 2009 at levels close to Rs 100…It’s doubled since them
  • IFCI has doubled and IDFC and NIIT have been near doublers
  • Even the Four Core Scrips,Grasim,BHEL,Larsen & Toubro and Reliance Industries,which have a high Percentage of Portfolio Weightage have performed very well….Of these BHEL,Larsen and Reliance have been re-recommended several times in the past two years…All have been doublers from early March 2009 
  • Only one scrip,Ahmedabad Steelcraft has yet to perform…It had gone upto Rs 20 though a while ago  and has seen a high of Rs 27 last year 

Don’t ask me why I have recommended these or could you yet enter them at these current levels if they have not reached target prices ! My Clients would kill me if I blog free what they pay me for !..But you could try and read between the lines and research these yourselves ! I did cover some of them in my Workshops

And a word of caution…..You must Invest as per your Profile….Many of the above scrips may not suit your Profile…for instance a Conservative Investor in Equities would concentrate only on the Core Scrips and would never Invest in Aftek or Shree Rama Multi-Tech !,no matter how insignificant the exposure would be !…On the other hand, an Aggressive Investor would seize even an event based opportunity even if it was contingent in nature , and therefore more riskier ! 

However I can say this…..any Portfolio created or expanded on May 4, 2009, with Scrip Selection and Weightage based on Investor profile,  from the above  would have registered a strong performance in under three months…in all probability,over 50% as Nine of the above scrips have surged 50% + inside three months….In the same period the Sensex has notched 30% , moving from 11600 levels to current levels of 15100

So a stock selection based portfolio,rather than an Index Fund or Sensex weighted Portfolio  would have nearly doubled your returns over those of the Sensex…..The Magic is to demonstrate consisitency in beating the Sensex over longer Periods….Many,like John Bogle of Vanguard believe in Index Investing only,while Warren Buffett’s Berkshire Hathaway has shown that over 44 years their Portfolio returns are simply mindboggling over those of the S & P 500….Even the CAGR is more than double…S& P is less than 9%,while Berkshire Hathaway is over 20% !…In absolute terms there is absolutely no comparison ! S & P is a shade over 4000 % while BH is over 300000 %  over 44 years from 1965 !

So best of Luck in searching for those Stocks that will  catapult you into stardom ! Rakesh Jhunjhunwala had the conviction in Crisil and Praj and Titan !…Matrix and Mercator have made Millions for many of My Clients a few years ago…a few even retired in their 30s and 40s,but have since returned to work as their Wives simply cannot tolerate them being at home all day !…Oh ! we do suck Lemon too…in the late 1990s it was the Damania Group that let us down…..In 2006/7 Silverline was one such Lemon..lucky we got out in time…a decision I took after an unconvincing meeting with the Promoter after we had believed in the restructuring story…I’ll leave a few others Lemons for some other Day ! read more

Ab Kya Kare ! ? Should You Buy,Hold or Sell ?

Washington Mutual (WaMu) ,one of USA’s biggest Banks was forcibly taken over by the regulator,FDIC yesterday and sold off for US $ 1.9 Billion to J P Morgan even while the Chairman and CEO of the Bank was on a flight in Mid Air…The quick move was to prevent a collapse as Depositors had already began a run on WaMu and withdrawn over US $ 16 billion in the last ten days

As we move towards Panic,Capitulation and Despondency in Equities with the Scenario in USA turning scarier than ever a lot of friends,family, clients,associates and even my Pay and Park Attendant are asking me “Ab Kya Hoga ?…Ab Kya Kare ?”

This is what I strongly advise…..

We are surely moving towards Distress Prices on the Bombay Stock Exchange and the National Stock Exchange…With the continuing disturbing scenario unfolding scarily in USA,there is clearly more Pain ahead in India as Dalal Street gets Wall”ed in

Critical Valuation Basis remains on Assessing the  Sustainable Growth in Earnings…Here is the Problem….Clearly we are seeing a rapid deceleration in the Earnings Growth

The Sensex’ earnings grew by nearly 17% in the first Quarter ending June 30,2008 in the current FY 09 supported by a 33% yoy growth in Earnings in Capital Goods Companies and a near 30% growth in earnings in Telecom Companies and a strong 44% growth in Earnings in ONGC. However, the Sensex (excluding the oil companies) saw an earnings growth of only 12.5% yoy during the quarter…..the lowest in the last fifteen quarters…compare this with the peak 40% growth in the December 31,2006 third quarter of FY 07  

EBIDTA Margins contracted by 1.8 % and are expected to contract yet further.Metals and Pharma were the saving graces and saw some margin expansion

The Earnings Momentum  going forward will continue to be impacted by hardening Interest rates and double digit Inflation and an economy slowdown,notwithstanding the Minister of Finance yet assuring of 8% GDP Growth this year assuming strong domestic consumption and Investments

From a closing Peak of Sensex of 20873 in January 2008,the correction has been a mighty near 40%…With Wall Street resembling Ghost Town,the Sensex Slide should continue to distress Levels of a P/E Multiple of 9 and 10 ( Last seen in 2001)…With the remaining quarters in FY 2009 expected to reflect continuing slowdown in the  earnings growth  I expect the FY 2009 Sensex EPS to be around 950 levels…This gives a macro Sensex Valuation of 9500 thereabouts on a derating P/E Multiple of 10…that’s another 25% to 30% drop from current Sensex levels of 13000 to 13500…yesterday it declined sharply by 445 points to close at 13102 read more