Its been a while

We have liquidated all our Mutual Funds holding except for Gold ETF. I am seeing lot of opportunities from a 3-5 years perspective so I am getting very aggressive on direct equity now. I still continue with my dilemma of "Still Investing" when I see need of substantial funds next year :)

I continue my weekend classes for financial planning course. Intend to give exam in about two months. I am learning interesting concepts especially on Retirement & Goal based planning. There are many excel formulas I already knew though making good use of them now.

I have decided not to make any specific stock or mutual fund recommendation considering my current engagement at work place. I am updating my portfolio in the "Disclosure" tab. Banking & Finance  continues to dominate with 55%, Technology at 15% & metals at about 9%.

This Diwali, I wished but could not buy any Gadget. I was very close to buying an IPad 2 however, keep hearing rumors about IPad 3 launch. I know, this way, I may end up waiting for IPad 5 and may never actually buy but just human nature, after all :)

Love for buying the books continued though. I went all over the place and bought some 44 books from India Plaza. Most of the books are in Financial Planning, Money or Investment area.


Regards, Rohit

Mutual Fund Portfolio

Took a quick stock of Mutual Funds in my portfolio. No major surprises. I am redeeming 40%  of my holding in Reliance Growth since I can see opportunities in Direct Equity and can't invest more funds. On the other hand, Reliance Growth is not doing so well and also its the highest value fund in my portfolio.



Value Research Query

Regards, Rohit

Portfolio Review

A quick look at my equity portfolio shows that out of core holdings, Yes Bank, MM Forgings & Infosys have done well. In absolute terms the gain is 120%, 94% & 64% respectively. Reliance is 4th @ 50%. The investments are of course made at different points in time so there is no direct comparison. I recently entered back in MindTree and thinking to take a position in NTPC.

In Mutual Funds, HDFC Equity, Birla Sun Life Midcap & Fidelity Equity are the top 3 performers. In absolute terms the gain is 105%, 92% & 80%

Just like 13 scripts in Direct Equity, over a period of time, I have invested in 19 different Schemes of MF. I plan to reduce these to best 10. Will divert the amount so liquidated to chosen direct equity scripts.

Regards, Rohit

Investments Update

Few weeks before I decided to cut down on my monthly SIP in MF and direct that to Direct Equity instead. I still continue 1 SIP in HDFC Equity though. I picked up Aditya Birla Chemicals, JBF Industries, MRO Tek, Manugrah Industries, Micro Tech, Mind Tree, Precison Pipes & Reliance Communications. Big Shopping, huh !

Review of my portfolio performance shows that Direct Investments are earning a far higher rate of return than the one in MF. Now, this is not a new discovery though the Direct Investment ideally requires a quality time to research & understand what you are getting into.

In the time to come, I would focus on reducing the number of scripts I have in my Direct Equity Portfolio - currently at 13. Somehow, I am psychologically attracted to scripts which have low MRP :) I am consciously looking at scripts in the sub 100 Region so its mentally easier to build position. That's how most of the scripts mentioned above have found a place in my portfolio.

Review of our family's Asset Class, net of all liability shows that I continue to have an overall asset imbalance, primarily due to inflated real estate in Mumbai. Here is how it looks:
78% Real Estate
8% Equity
14% Cash or Equivalent
There is nothing much I can do in the short term. I hope to avoid additional real estate investment, keep diverting my savings to Equity & Debt and get a proper balance, eventually. But why is it not possible to correct this imbalance? Well, the real estate pie (net of loan value) comprises of the only property we have so we can't liquidate. It has grown significantly in last 4 years though its more like a paper profit as one always needs at least one house to live.

Why am I sitting on cash? Hum.... As I mentioned, I do not have time required to make a quality investment. I am pondering over some of the real estate investment options if I should increase the imbalance and go ahead. On the other hand, there is always 'I want to be on my own' thoughts though I am miles away. Let me post separately on this.

Regards, Rohit

Portfolio Updates

I finally gave up on few minor bets I had taken on Adlabs, Kotak Bank etc., for a momentum trading. These were supposed to be for 20/30% profit in few months time and I was to get out. Given the 2008 performance, this did not work for these scripts. After close to a years investment, I sold out at a massive loss of over 80% but never mind since the amounts are not very significant.

I also gave up on Reliance Power. Idea is that if money sitting on something which is not earning enough, let's move somewhere else and create some earning. So I have moved the residual amounts, from Adlab, Kotak & Reliance Power to Reliance Capital which has shown a better momentum.

I will continue with my momentum trading approach but will not exceed 5/10% of my portfolio. My current bets are Reliance Capital, HDIL, IDFC, Oracle Financials & Punj Lloyds. I will keep buying them on significant corrections and sell them the moment I reach 20% profit. For sure, this approach cannot work forever. So far, I have made decent profits in Reliance Capital, Mundra Port, HDIL, Oracle Financials, this way. But again, the amounts are insignificant :(

From the family portfolio, I also finally redeemed HDFC Long Term MIP at about 5% loss. Moved the proceeds to ICICI Bank FD for 390 Days @ 10.25%. Net net, over two years, this investment would earn less than the bank saving account and obviously, much lesser than the inflation. Bad luck :(

We also invested in another ICICI Bank FD, few days before, @ 11%. These are senior citizen rates. I now plan to invest in Tata FD for 3 years. @ 12% cumulative yield works out to 13.5% and looks too good. Of course, these are unsecured but for sure, I am happy to take that 'risk', with Tatas. Being very busy with work, so not sure if this FD is still open. Let me check.

I increased my SIP Investments. I am now invested in below, all growth options. When time permits, I would search on high rated funds giving good dividends. Recently, Outlook Profit issue lists out many Cos., at current valuation, are giving excellent dividend yields. I would prefer to invest thru a MF route, though.

1. Birla Sun Life Midcap
2. DSP BR Tiger
3. Franklin India Prima Plus
4. ICICI Pru Infrastructure
5. Reliance Banking
6. Reliance Growth
7. SBI Magnum Contra

At the aggregate portfolio level, The Direct equity investment is down by 42% & MF investment is down at 28%. Of course, it's not a direct comparison since the individual investment time frame differ.

Reviewing my overall asset allocation, I am under invested in equity. It's basically my PF investments which tilt the balance in favor of debt. With the current investment, I would be re-aligned to right proportion in next few years.


Regards, Rohit

Returns from MF - Income Funds

Here is an article published in Moneycontrol. This has Dhirendra Kumar's views on likely returns from Income Funds.


Regards, Rohit

Mutual Fund Vital Statistics - Alpha & R-Squared

I was reviewing my MF Portfolio and deciding if I should hold on or sell Sundaram Select Midcap. In the process, I came across this useful article on Valueresearch Online. The article is available here explains the meaning of statistics like Alpha & R-Squared.

Basics - Exchange Traded Funds

Business Standard has an article about Exchange Traded Fund. The article gives a brief history of ETFs and how it works. It's available here.

Portfolio Shuffling

So lot's happening with my portfolio. Let me try to give a quick update. I took a first major decision regarding my core direct equity portfolio and decided to sell Petronet LNG.

The biggest concern is the changing demand and supply scenario in India. Domestic Gas discoveries are rising. It seems very strongly that we will we a Gas surplus economy in next few years. Imported Gas will not be competitive thus. Also, Petronet has not been able to further tie up Long term LNG supplies. Kochi terminal is delayed by 2 years.

Current buoyancy in the stock is due to spot cargo volumes & appreciating rupee. These are short term / not so reliable factors. Also, regulatory intervention is very high as you can see from recent order to change the way Petronet sells LNG esp. to benefit Dhabhol.

Incidentally, except for Kotak brokerage house, everyone else is bullish on Petronet and recommending a buy. You can get the research reports from deadpresident's blog. For sure, I know, 15/20% upside is possible in Petronet due to short term factors. Over a period of next 2-3 years it can perhaps double from current levels. Though my feel is that this will not be a ten bagger and this cannot be a long term play. If it cannot be long term, I am not interested. So I have started selling my holdings.

Here is my Core Direct Equity Portfolio.

1. Reliance Industry
2. Infosys
3. NTPC
4. Yes Bank
5. Bharti Airtel
6. MindTree Consulting

Bharti Airtel is a recent addition. I have MindTree from its IPO time though I am not buying lot many shares. Priority is to buy as much shares as possible of Yes Bank and NTPC. Once in a while, I keep buying Reliance and Infosys. Heavy focus is on Yes Bank from the perspective that, to my mind, it has greatest potential to rise in the market.

I have also invested some of my IPO profits into IFCI. I usually don't like short term investing. This looks like a special situation case. At current levels of 80, I have made 20% profits. I expect the stock to go around 100-110 in next 4-6 months. I did not do a great amount of research. Just looked at few research reports and they suggest that intrinsic value is around 90 rupees considering the stake that IFCI has in so many companies.

I also don't like IPO trading. Though I invest in very few chosen IPOs where pricing looks attractive & one can make 20% or so in a short time. Again the same strategy. If I were to apply for an IPO, I would try and apply from all my family accounts so that allotment chances are maximum and my time looking into the IPO is justified by the returns. Most of the IPOs I get allotment, I sell quickly booking whatever profit. Some of them are good stocks but I have limited capital that can go into long term investing and that allocation has already been done in favor of chosen core equity portfolio stocks. Also, since I usually don't sell my core portfolio stocks at all, it's good to do some booking of profits, somewhere.

I made few changes in my core MF portfolio as well. Last few months, I have sold Franklin Opportunities, Franklin Prima and now started selling Franklin India Flexicap. Incidentally all these belong to Franklin Group. Not intentional ! Proceeds from selling Franklin Flexicap will go towards buying more of Magnum Contra. It's proportion is low compared to other schemes. It's doing well. So I am buying more.

I am building my MF Portfolio. Here is the list:

1. DSP ML Tiger & ICICI Pru Infrastructure - Thematic funds
2. DSP ML Opportunities - Opportunities funds
3. HDFC Tax Saver & Magnum Taxgain - ELSS Funds
4. Fidelity Equity & HDFC Equity - Large Caps
5. HDFC Prudence - Balance funds
6. Reliance Growth - Mid Cap funds
7. Magnum Contra - Contra funds

I also have Sundaram Select Mid Cap. Fund is not doing very well and I am happy with Reliance Growth. So I will start selling Sundaram Select Mid Cap very soon & shift money to Nifty Junior BeES.

I also started buying Benchmark Bank BeES and Nifty Junior BeES. I am eyeing Nifty BeES now. It's low expense (0.30%) is mouth watering. I am really really looking at a long term so these expenses do matter. Over next few years, I hope to make index funds to constitute like 40/50% of MF Portfolio. I may add ICICI Pru SPICE index fund at a later date.

I usually don't sell investments for less than a year to avoid paying short term capital gain tax and also to avoid getting into the hassle of tax returns preparation.

One common element of both Direct Equity and MF strategy is to build substantial positions, over next few years, in few identified stocks/schemes. I know this increases risk but I think overall the portfolio is quite diversified. More about this sometime later.

These are big decisions. So let's hope for the best !

Exchange Traded Funds

Dhiraj Kumar, CEO Value Research, has recently written about Exchange Traded Funds (ETFs). The article is available here. Exchange Traded Funds largely mirror the performance of underlying index. They are very cost effective as maximum they charge is around 1% compared to 2-2.5% by normal MF schemes.

I have recently started investing in Benchmark Bank BeES and Benchmark Nifty Junior BeES.

Regards,
Rohit

Good MFs - Diversified Equity Funds

I did some analysis recently. My selections are circled in the PPT. It's available here. These are some of the good MFs that can be expected to continue doing well. These are on the basis of capitalization and theme. It's a combination of high rated funds as well as new rated funds with a good potential. If you are OK with investment horizon of 5 years or more, these are v good choices. In fact, if you invest and these perform well, you should consider not selling them for a v v long period as the probability of loss gets substantially reduced to almost zero over a long period i.e. more than 10 years. I had limited time and flexibility to do this so you may find better choices based on different yardsticks and on an expanded universe. Actually one should try MF selection tools (fund selector, fund compare) available on http://www.valueresearchonline.com/

Disclaimer: I hold most of these funds.

Why shouldn't one invest in a New (Mutual) Fund Offer

Check the answer on Valueresearchonline.
http://ask.valueresearchonline.com/index.php?p=cv&qid=3685

Source: www.valueresearchonline.com

Articles on Mutual Fund Schemes

Found these on net...Good one. Courtesy Personalfn.com / Yahoo.com, Rediff.com

http://www.rediff.com/getahead/2005/jun/29fund.htm
http://in.mutualfunds.yahoo.com/070117/93/6b847.html

List of my favorite Mutual Funds

Large Cap
HDFC Equity
Merrill Lynch Opportunities

Mid Cap
Reliance Growth
Sundaram Select Midcap
Franklin Opportunities

Tax Saver
HDFC Tax Saver
SBI Magnum

Balanced
HDFC Prudence

Theme based
Pru ICICI Infrastructure
DSP ML tiger fund

Contrarion
Magnum Contra

I have opted for Growth option in all the above schemes. Most of these are rated 5* by value research. There are some more schemes that I have invested (e.g. Franklin India Flexicap fund) but watching their performance as they are relatively new. I hope I will be able to hold them for a timeframe of 3-5 years.