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

Opportunities

I am back after a while. Seems like had gone into a writer's block :) Actually I also got very busy with few certifications that I took up at my workplace.

Stock Indexes are going strong from last few sessions. And couple of recent IPOs have done well too. I chose to stay out of them mainly because of small sizes. I also sense lot of price manipulations in some of the IPOs currently doing 'well'. On Directly Equity, I have seen couple of opportunities but let most of them go. I did buy 3i Infotech and HEG but not much. I would have liked to buy Yes Bank, JBF Industires, LIC Housing, Shriram Finance and few more on my radar.

On the other hand, I see some of my investment not making any movement. So logically, I should shift them to Stocks that are likely to grow faster.

However, I am holding back since I plan massive cash outflows starting end of this year or early next year. Investing in Equity for such a short time frame is certainly not advisable.

Paid my taxes for all Capital gains and included an E&OE margin of 10% on a safer side. It would have been a smart move to book losses on some of the trades I am holding in losses. I missed it but never-mind.

I bought below books recently

1. Make More Money - Secrets from the Worlds Greatest Finance Classics
2. The Fresh Brew - Chronicles of Business & Freedom.

Regards, Rohit

Portfolio Review

Is PE & 52 Week L or H is the only measure? Of course not. Few things that I would like to check:

• Nature of business
• Growth in Sales, Profit & EPS in last 5 years
• Level of Long Term Debt
• ROCE
• Visibility in the earnings
• Publicly available Brokerage Reports
• Valuation

I reviewed all 23 Stocks in my portfolio & applied the above parameters. While Aditya Chemicals, HEG, Manappuram, Micro Tech & Yes Bank show a strong sign of growth over a period of years, IFCI, MM Forging, MRO Tek, Pudumjee Industries, Shipping Corp. & Manugraph Industries show negative growth. I have considered where 2 of 3 parameters show negative growth so ignored Reliance, Power Grid or Precision Pipes showing negative EPS growth, for example.

Aditya Birla Chemicals, HEG, JBF Industries & Micro Tech have reasonable or low valuations and also have shown strong growth over a period of years, In case of LIC Housing Finance, I suspect that EPS reported is for a face value of 10. Recently, there has been a split to face value 2, reflected in the CMP.

In case of Manappuram, while the historical growth in Earnings has been good, the stock seems at high valuation right now. Seems like recently they have diluted lot of equity base. The business is simple & management looks strong. We would buy more. MM Forging is a clear case of turnaround as we can see from the performance in last few quarters. While it does not match the criteria, I would hold for now. IFCI is just for speculation that they would eventually get a Banking license & someone would take them over. But would it not be wise to switch these funds to some high growth stock? I am wondering.

MRO Tek originally attracted me as they had cash balance of around Rs.40 per share. I need to check the latest status now. Looks like potentially due for sell off from my portfolio. Pudumjee investment was based on Outlook Profit story on concept stocks. Management looks strong and their household products of tissue paper seems will grow strong. I will hold on. But its very expensive. Also, they have increased debt...making me uncomfortable.

Shipping Corp, Punjab & Singh & Power Grid are IPO investments. Have not been able to get out of these.

Here is how our industry profile looks like. Yes, the Banking & Financial Services have of course got a very highly skewed balance. Its Yes Bank, LIC Housing Finance, Manappuram & Shriram Transport though over 37% is due to Yes Bank. At this stage, I am comfortable with this imbalance and have been increasing my non banking sector investments over a period of time, to get this under control.
My sense is that I need to focus more in reading, rather than buying more stocks. I am hoping that this vacation, I will complete Benjamin Graham's Intelligent Investor. I am on my annual vacation right now and went thru a medical treatment on my ears. So its like a compulsory rest :)

Regards, Rohit

Portfolio Update

Last week, I redeemed holdings in MF schemes of DSP BR Opportunities, DSP BR Tiger & HDFC Prudence. I am shifting the proceeds to stocks like Reliance, Mind Tree, IFCI, Reliance Communication & MM Forgings.

I also purchased couple of Yes Bank stocks but only for a momentum trading perspective. Bought at about 272 & will liquidate in the 300-315 Range.

Need to liquidate Fortis Flexi Debt Fund and again shift to Direct Equity. This will take few days as the holding is in physical mode.

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

What's Up !!!

Have been very busy, of course, what else but work. Also, the state of stock market does not encourage one to look portfolio or blogs :)

He he. On a serious note. I completed my ITIL Certification recently. Also, took over responsibilities for a large program. So all this hardly leaves any time. Unfortunately, all this took a tall on my health and I am forced to take some rest. Just returned from hospital yesterday. Was down due to fever, weakness, low counts of things like Platelets, WBC etc. God knows what all this means but net net, I am having bed rest. This is for the first time in my life I had to be off this way. So 'must focus on my health now. Before it get's too late.

Couple of weeks before, I had sold off about 30% of my portfolio in key stocks like Yes Bank, IFCI and GMR. Was able to buy back Yes and IFCI at something like 30/40% discount in the recent carnage. Though of course, what I have not sold are substantial quantities and portfolio is in a pretty bad shape. Right from Direct Equity to MF SIPs, all look very sad :)

Not really a big problem at this stage as this was supposed to be a long term investment anyway. What has changed however is this. I took the possession of my house in Mumbai and had to cough up 7% towards service tax and vat as a contingent liability thru Fixed Deposit. I am not prepared for this and my finances have started showing up.

Also, was looking up some interesting rental stream commercial real estate kind of investments. But then could not go further. Just no money dude :)


Regards, Rohit

Tracking your finances

Found this interesting post on Prem's blog. It can help the way one manages the portfolio and overall finances. I intensively use Money Control portfolio at the moment but I have downloaded the GNU Cash to see if I can record my trades, assets and liabilities in a better manner. The software also looked good particularly for small businesses.

Regards,
Rohit

Financial Planning - my thoughts

Very often I have been asked. Which mutual fund scheme is good? Which shares I can invest in? How much insurance is enough for me? And so on... I recently made a presentation to few of my friends. So here is a copy for you. Sorry, the presentation is not very intuitive and it's best when someone walks thru.

Selling Decisions

Found a useful article on this....on Ravi Aranke's blog. Here it is.

Cheers

Portfolio Approach

I liked most of the thoughts on the portfolio approach in this article posted on Deadpresident blog.

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 !

Buy & Hold

So here is how my portfolio is doing right now. Not too bad !!! I know the markets are very volatile at the moment and know that a good correction is due anytime time though I am not looking at selling or rebalancing my portfolio at the moment. I am feeling comfortable with the direct equity exposure as these are select few scripts chosen over period of last 18/24 months. These have been bought with long term targets viz. at least 5 years or so.

For example, I intend to sell Yes Bank only in 2010 onwards when their branch expansion (150 from 40 Currently) will be achieved or sell NTPC only in 2012 or so when their capacity expansion plans (doubling from around 27K MW currently to around 50K MW) will be achieved. But then, I may not sell at all if they continue to do well and I gain further understanding of the businesses. Similarly, I have no set target for Reliance, Infosys & Mindtree. I may not sell any of my holding at all. Companies like Infosys & Reliance have been generating substantial wealth for shareholders year after year. Force majeure situations at personal front, will of course, make me review this stand.

So this is my very simple buy & hold strategy. Or let me say that I don't purposefully want to learn 'when to sell', for now !!!

Portfolio Tracking

I have found out a useful portfolio feature of Value Research portfolio facility available online. If you upload all your mutual fund investments, 'Portfolio checkup - Equity' section gives you an idea of your Portfolio style break up, style Vs. capitalization, top 15 equity holding and sector allocation.

I found the equity holding section particularly helpful. I was yesterday reviewing my Direct Equity portfolio and felt that my next buy should be Reliance Industries as compared to other stocks in my core portfolio, the weight was low. When I discovered the top 15 equity holding section in my value research online portfolio, I realised that thru my MF investment, I already possess an x number of RIL. This changes my need to buy additional RIL now.

With the help of value research portfolio, I can manage my core direct equity investments in a better way now. I think they project the approximate value by multiplying the # of the respective share that the MF scheme holds * my proportionate holding (very small !) in that particular scheme.

Regards,

Rohit