Wednesday, December 24, 2014

Is America responsible for crude oil fall?

U.S domestic oil production50 percent crash in crude oil in matter of just 6 months has shaken entire world and had left economies such as Russia, Venezuela and other oil dependent countries in shambles. Analysts are puzzled whether the fall is due to the slowdown in world economic growth or is it because we are producing more oil than we can consume. As per the following Bloomberg info-graphic, it seems that later is the more likely case as the world largest consumer of oil is producing more oil today than it produced in last 30 years coupled with falling oil consumption.

Sunday, December 21, 2014

Peter Lynch Interview on How to Pick Stocks

Peter Lynch
In this exclusive video published by Fidelity investments in 2012, Peter Lynch, the author of hugely popular and bestseller book, "One up on wall street", has shared his philosophy and process of picking stocks and building portfolio that can outperform markets by a wide margin. 

As part of his role at Fidelity Investments, he managed the Magellan Fund between 1977 and 1990 averaging a 29% return, making it the best 20-year return of any mutual fund over the period. About an hour long video is full of valuable lessons from one of world's most successful stock picker.

Monday, December 15, 2014

The Teen Wolf of Wall Street

Mohammed Islam, a 17 year old high school student, has made $72 million playing stock markets. The kid from Queens has achieved all this by trading stocks on his lunch breaks, New York magazine reports in its 15th Dec issue.

Islam considers Paul Tudor Jones as his guru and is targeting a billion dollar by the end of next year. He hopes to start a hedge fund after he turns 18. 

Portfolio Update - Dec 2014

As expected market fell sharply in 2nd week of Dec 2014 and is down around 5% from the peak. Lot of quality stocks are down more than 10% since then. As we were expecting correction and had significant cash in our portfolio we are utilizing this opportunity for adding some quality names in our model portfolio.

You can check the updated portfolio here: Amit Agarwal Stock Portfolio

Wednesday, November 26, 2014

Top 5 Reasons to Avoid ITC Stock

After Tuesday's (26th Nov) fall of more than 5% on huge volumes, the stock of ITC rose marginally on Wednesday (27th Nov) amid brokerage upgrades and their justification that the decision to ban loose cigarettes cannot be practically implemented and thus will have negligible to marginal impact on ITC earnings. However, it appears to be something fishy about the brokerage upgrades which immediately came after the stock took a big plunge. Most of the big mutual funds and FIIs have ITC among their top holdings and fall in price certainly affects their performance specially when there is a an year end round the corner when their YoY performance is measured. 

It is very clear that govt. is trying everything to curb the consumption of tobacco in the country and would go to any extent to curtail it. Here are the 5 reasons you should avoid ITC for the time being.

Sunday, November 16, 2014

Top 20 books on Stock Market Investing

At InvestorZclub many popular eBooks and PDFs related, to finance, investment and personal development, has been shared which readers can either read online or download for free. Some of these books such as "The intelligent Investor", "The Richest Man in Babylon", "Rich Dad Poor Dad" etc were the best sellers of their time.  

Below is the list of 20 most popular eBooks (by views) and pdfs reviewed and shared on the blog.

Monday, November 10, 2014

Where is the bottom for crude oil?

If the given image is of any indication brent crude oil might bottom out at 75-80 range as many of the major crude oil producing countries will fall into chaos and will try everything to support crude prices. 

If oil prices bottom out in this range many of the Indian and international producers such as Cairn India, ONGC, BP, Conco Phillips will provide good stock price appreciation from current levels in medium to long term.

Globally, the weaker oil price means more money in the hands of consumers. World oil exports averaged about 40m barrels a day last year; a $30 drop in the oil price, which is roughly the fall in the Brent benchmark since June, would transfer more than $400bn from oil exporters to consumers if oil prices stay at current levels for a year. This is very good news for FMCG, Autos, Airlines and many other industries that depend on oil and it's by products .

One country to watch out very closely is Venezuela as it needs roughly $160 a barrel to balance it's budget. At half of that price it might be forced to default on it's debt repayment. This event could trigger short term panic in equity markets for the fear of cascading effect on other vulnerable countries.

Thursday, October 23, 2014

Top 5 articles on InvestorZclub in 2014

1) Amit Agarwal Model Portfolio - A real time hypothetical portfolio which has outperformed some of the best mutual funds in India. It is one of the most shared and viewed article since the start of this blog and in 2014.

2) Buy Bharti Airtel at every decline - One of the highest conviction idea that was published under Investment Ideas category at 290 bucks in Feb 2014. 

3) Do's and Don't of Investing in IPOs - 6 timeless wisdom before you take a look at any IPO issue and how greater fool theory ruin the chase for IPOs.

4) Indian Stock Market Outlook 2014 - Published on 1st Jan 2014, the article witnessed lot of views and appreciation from InvestorZclub readers and subscribers. 

5) 3 Mistakes that taught me the golden rules of Investing - Published on 23rd Jan it is second most read article on this blog in 2014.

Sunday, October 19, 2014

Reliance Industries: Do not buy on dips

Reliance Industries Logo
If you have listened to the crap analysts on business news channel who were recommending Reliance Industries to be bought at every dip, you have many reasons to worry now. Here are some of them:

1. Very low Gas price hike than anticipated: Analysts were almost sure that gas prices will be hiked to $8.4 per MMBTU and Reliance Industries will make a killing even though it could not fulfill its commitment of producing agreed amount of gas every year. Now the govt has finally hiked the price but far lower that what was discounted in the stock price to just $5.6 per MMBTU. 

2. No benefit of gas price hike to RIL: However small a price hike of more than 30% is positive though less positive than what was anticipated. But what's severely worrying for Reliance Industries is that govt. has denied the benefit of even this price rise to the company. It will have to continue to sell gas at the rate of $4.2 per MMBTU untill the shortfall is delivered.

Tuesday, October 7, 2014

Consequence of chasing stock prices: The live example

When stock prices move people become impatient both on upside as well as  downside. After 16th may people went crazy and bought whatever they can feeling they should not get left out. The consistent rising prices created perfect trap which sucked in most people. Today some of those junk names are down 50 - 60% from their June 2014 high.

In a post titled "Stocks to avoid under BJP govt." two stocks were specifically highlighted in bold that must have been avoided. But euphoria was so high that those stocks went up significantly over next 1 month. People were excited and still bought those stocks at higher levels without understanding the consequences. Today one of that stock is down 35% from it's level on 16th may and 50% from it's June 2014 high, while the other stocks is flat since 16th may but down 40% from June high.

You can check that post here

Moral: Never chase a running or falling stock price. List 5 solid reasons why you are buying or selling a particular stock. By this practice alone you will be ahead of many stock market pundits on street and achieve superior results. It must be remembered that succeeding in investing or trading doesen't require MBA degree in  finance. People with reasonable knowledge but with very high self discipline and control over emotions are likely to achieve much better result than people with MBA & Phds with fickle psychology and emotions. 

Sunday, October 5, 2014

TCS - An IT Company or an Employment Agency?

TCS Employee base
Well I have not been a big fan of IT companies in India whether it's about working for them or investing in their stocks for long term. The recent run up in stock prices of TCS, HCL Tech, Tech Mahindra and other IT staffing companies has only increased my worries as they are being perceived as technology companies and getting valuations accordingly.

TCS is now valued at around $90 billion in market value and is trading at a PE of 21 times FY-16 EPS. If one believes that TCS is an innovative technology company like Apple, Oracle or Google then the valuations are justified but what PE would you apply to an employment agency who has just grown at the rate of growth in number of employees in the company. With employee billing arbitrage gradually getting narrowed due to very high wage inflation in India and less than 2% wage inflation in western world the margins will gradually decrease over next 10 years on this business model. 

Friday, September 26, 2014

Steel Authority of India Ltd (SAIL) Stock Analysis

When I look at Steel Authority of India Limited (SAIL) stock with 2 to 3 years investment horizon, it appears to be very attractive at current price (CMP as on 25th Sep 2015: Rs.68). Just consider the following points.

1. SAIL steel capacity is expected to reach around 21.5 million tonnes by March 2017 from capacity of around 13.3 million tonnes as on March 2012. As on March 2014, it had crude steel production capacity of approx. 16 million tonnes.

2. Considering the modest replacement cost of 65000 per tonne, the replacement cost for entire company comes to around Rs. 1.4 lakh crores (1,40,000 crores) against the current market value of around Rs. 29,000 crores.

3. Considering the net debt level of Rs. 45000 crores by March 2017, if one purchase the stock today at roughly 70 bucks, he will be paying an enterprise value of 74000 crores (almost half of SAIL's March 2017 replacement cost).

Thursday, September 25, 2014

Portfolio Update - Sep 2014

The supreme court judgement on coal blocks along with weak global cues lead to massive selling in select stocks thereby presenting an opportunity to invest in those names incrementally at attractive valuations. 

Our model portfolio which has been sitting on lot of cash since past couple of months are now filled with lot of stocks along with some cash to utilize in case there is further fall in the market.

Wednesday, September 24, 2014

Companies and Coal blocks affected by Supreme Court order for cancellation

Coal Blocks Cancelled by Supreme Court
In the landmark judgement of Supreme Court to cancel 214 of the 218 coal blocks alloted since 1992, there are some big names who are going to be affected severly. Baring NTPC, SAIL & RPower the verdict is negative for all the public - private companies. 

Among the lot the most affected were Jindal Steel and Power, Jaiprakash power Limited, Hindalco, CESC, Usha Martin as their operational coal blocks have been cancelled. Beside that many non-operational coal blocks were also cancelled which had already seen significant amount of investments by the holding companies such as Mahan Coal block of Hindalco Industries.

Following is the list of major operational and non-operational coal blocks that were cancelled and the company which will be subsequently affected.

Wednesday, September 10, 2014

India Outperforms Major World Stock Markets

India is clearly standing out on the global map as far as the performance of major stock markets in the world are concerned. Key benchmark index SENSEX has outperformed all the major world indices by wide margin and is up more than 36% in 12 months. The second best performing market was Italy which went up 22% in the same period. 

The world's biggest market U.S went up 12% in last one year while the worst performing market among the pack was Russia for obvious reasons. Russian MICEX is up just 1% since September 2013.

Tuesday, September 2, 2014

Amit Agarwal Portfolio Update

Booking profits in stocks bought in September. Added only one stock as on 2nd Sep for the relative performance issue. In general there is hardly any bargain available for sizable position building. Please check the updated portfolio for details: Amit Agarwal Stock Portfolio

Thursday, August 28, 2014

SENSEX Valuation expensive on FY-16 EPS

Indian Stock Market has delivered exceptional return since the start of the calendar 2014 and rightly so based on expected lines. We got historical political mandate in May 2014 and the global liquidity situation has been very benign since then. But without proper consolidation and time correction (if not price correction) market is increasingly getting vulnerable for sudden sharp knocks.

Valuation is no longer attractive and good quality companies are trading at historically high valuation. Like I have always said, Market is a pendulum which keeps swinging back and forth between the state of overvaluation & undervaluation and never stay at fair valuation (center) for long. Right now markets are stretching towards the overvaluation. The more it stretches in that direction, sharper will be the retrenchment.

Wednesday, August 13, 2014

Want to succeed in investing? - Stop believing in God

Why only investing, if you want to succeed in anything you should stop relying on God for outcomes. Whether God exist or not, that's a controversial question but personally I started doing much better in all respect when I stopped praying for outcomes. 

My mother spends 4 hrs in prayer and since childhood I was also a strong believer in God and thought whatever is happening to me is because what god or fate has decided for me until one morning in 2000 when I went up at 4 A.M in the morning, just before my IIT entrance exam, for  a hawan (as suggested by my mother) to crack the exam. No wonder I couldn't secure even last rank in the prelim itself. Inside I knew I was not prepared and asked for support of god to help me pass the exam. I was blamed that without preparation even God doesen't help. I thought if I am fully prepared then why should I  ask the support of God. It's like asking  for wheel chair when your legs are absolutely fine.

When I started Investing in Stocks, my Mother started suggesting me the stones to wear, the days I should trade and above all the days I should not trade at all. I was even recommended stocks to buy based on my favorable stars. Though I occasionally followed her tip in the beginning out of self doubt but I was increasingly getting convinced that stocks in long terms move on fundamentals and in short term based on sentiments. 

Friday, July 25, 2014

New stocks in model Portfolio - July 2014

After sitting on 100% cash, utilizing the sharp knock in the prices of couple of stocks to add to the portfolio as on 25th July 2014. 

Please check the latest model portfolio for the update.

Wednesday, July 23, 2014

Model Portfolio Update - July 2014

Started this Equity portfolio on 21st March 2013 with Rs. 1,00,000 of capital. As on 23rd July sold of all the residual holdings in the portfolio for profit and sitting on 100% cash of Rs. 1,63,520which will be deployed on any weakness in the market.

Please check here for update on recent activities in the portfolio. If you want to get updates on the activities happening in the model portfolio please subscribe to our facebook and email updates.

Friday, June 20, 2014

Financial Freedom: 8 costly mistakes you must avoid

A recent guide emailed to me by Robert Kiyosaki re-validated some of my beliefs that I had when I hated to be an employee and wanted to be on my own. Following are the 8 most common beliefs (or rather mis-beliefs) that people have, as far as financial freedom is concerned, and which is what doing the exact opposite - holding them back.

  1. Higher Education   = Success
  2. Getting a job solves all financial problems
  3. Work Hard to get richer
  4. Live below your means
  5. Save Money and become rich.
  6. Your house is an asset.
  7. Get out of debt
  8. Invest Diversely in the long term
For details on each of the above dilemmas and how you can overcome them, download the ebook from the following link: 

Wednesday, June 18, 2014

5 Stocks that are under buy radar of Bank of America Merrill Lynch

Bank of America Merrill Lynch
Since the election outcome, Bank of America Merrill Lynch has recommended buy rating on following stocks with 1 year investment horizon.

Voltas Ltd.

The brokerage house in its report dated 18th June 2014 has recommended a buy rating on the company with target price of Rs.282 in 1 year time frame. They expect sharply higher earnings per share (EPS). Branded AC unit turning profitable is biggest positive for the stock. Mechanical, Electrical & Public Health (MEP) turnaround and better mix will boost margins. Valuations are cheaper than peers and its historical peak.

Saturday, June 7, 2014

Do's and Don'ts of Investing in IPOs

Worldwide, IPO markets are often viewed as a lottery, wherein successful allottees are able to sell their holdings at a huge premium on listing. While this went well till 2008, this arbitrage has faded over time at least in India.

Post 1992 the promoters are free to price their offering as per the market demand, which resulted in promoters realizing the maximum value of the issuance. Unlike secondary market, primary market is a promoter to investor transaction where like any other business the seller tries to realize maximum value by adopting all sorts of strategy. Reliance Power was hugely subscribed and then was a huge failure because the company had nothing on ground but the promoters through their Investment bankers tried very hard to sell the future value at an exorbitantly high price. The stock is still languishing below it's IPO price. 

However it's not that always bad to go for an IPO provided you approach them as investments rather than lotteries. One should always consider following points before going in for an IPO:

Friday, May 30, 2014

Top Ten Universities of America - Specialization and Tuition Fees

The best among the best. Here is the list of top 10 universities of America with their specialization, Location, Undergraduate enrollment numbers (approx.) and approximate tuition fees.

Sunday, May 25, 2014

This stock could generate 10% return in a week

In this super boiling market where people are busy scouting for stock that can pop up 10% or even 20% in a day, and why not this has been the trend since past one week, it is very lethal to buy stocks for ultra short term but expecting superb gains. On repeated requests from my readers, clients and friends, though I stay away from the concept of buying stock for a week or so, I think people can put their bet on Punjab Sind Bank at Rs.63 for last week of this month (26th to 30th). 

Few quick reasons for why this stock...

1. Public sector banks are flavor of the month and even elephants (SBI, BOB)  are dancing with 10%, 20% moves in a single day. SBI, having market value of over 2 lakh crores is up 90% from it's low of Rs.1450. PSB is just 67% from it's low till date. Union bank, OBC, BOB, PNB, Indian Bank are up anywhere between 120 - 200% from it's 52 week low.

Friday, May 16, 2014

Stocks to Avoid in BJP govt. regime

With BJP having full majority at the center, there are many themes in the stock markets to play for an upside such as PSU Banks, Road Infra, Power and capital goods etc. which are expected to do well over time. But not all stocks are good for investment under NDA regime and careful selection is important as if you are in those names you might be in for a serious disappointment. Two such names that comes at the top of my head are DLF and Jindal Steel and power. 

Naveen Jindal the promoter of JSPL is already being charged under coal scam and he has lost his MP seat from congress in 2014 Lok Sabh Election. Valuation wise the stock trades at hefty valuation on EV to EBIDTA basis compared to Tata Steel and JSW steel. With debt rising every year and the power of the promoter to compromise system gone, JSPL as a company has tough times ahead. So avoid this stock completely.

Tuesday, May 13, 2014

Model Portfolio Update - May 2014

Lot of fresh addition to the portfolio after 1.5 months of status quo. Investments made in stocks with reasonable value, good upside potential due to stable govt. at the center and adequate diversification.

Check out the latest portfolio here: Amit Agarwal Stock Portoflio

Friday, May 9, 2014

Wonderla Holidays IPO allotment to Retail Investors unfair

Individual small retail investors have been hugely disappointed with the IPO of Wonderla Holidays as far as the allotment of shares are concerned. Many individual investors who applied for one or two lots hoping to get shares as per SEBI's minimum allotment rule, have not received any shares. As expected the stock listed at 165 on the listing day as on 9th May 2014 but many of the small retail investors who had the applied in the IPO couldn't gain as they have not been allotted any shares.

There was huge demand for shares in the HNI category which were rumored to have borrowed 4000 crores to apply in the IPO at very high interest rates.

There is a possibility of company management and these HNI investors forming a nexus and gain at the expense of retail investors. There was huge grey market activity in the marketplace as well. As per SEBI rule each retail investors must get minimum allotment to encourage wider participation (See articles below).

Wednesday, May 7, 2014

Top 20 Bank loan defaulter companies in India

Few corporate defaulters have brought most of the public sector banks to their knees eroding their net-worth and compelling them to dilute equity to comply with Basel norms. PSBs have been huge wealth destroyers since past couple of years partly due to economic slowdown and partly because of willful defaulters. 

Following is the list of top 20 loan defaulters in India:

Saturday, May 3, 2014

Top 10 highest dividend yielding stocks in CNX 100

With stable govt at the center and likely peak out of interest rates in India, quality stocks with high dividend yield could provide sufficient downside protection and reasonable upside potential. Following is the list of top 10 stocks in CNX 100 (top 100 companies listed on NSE) with highest dividend yield.

Div Yield
Oil India Ltd 482.5 6.2
NTPC Ltd 114.45 5.0
Union Bank of India 153.15 5.0
Coal India Ltd 295.3 4.7
NMDC Ltd 152.2 4.6
Canara Bank 285.4 4.4
MphasiS Ltd 414 4.1
Bank of India 233.05 4.0
Power Finance Corporation Ltd 187.3 3.8
Reliance Capital Ltd 349.2 3.7
*LTP as on 2nd May 2014

Tuesday, April 8, 2014

Ranabaxy Insider Trading - Where is SEBI?

Markets Rejoiced the mega merger announcement of Ranbaxy and Sun pharmaceuticals on 7th April 2014 but the real action was happening in the prior week and somebody made fortune by having an insider line in this deal. 

The stock shot up more than 25% in the prior week on very high volumes but very low delivery indicating speculative built up of position prior to the merger announcement. 

Delivery on the National Stock Exchange was around 12 per cent of traded volume on 2nd, 3rd and 4th April when the stock witnessed nine per cent, 5.1 per cent and 8.2 per cent respectively. The closing on 4th April was less than Rs 3 from the share price in the deal. 

Friday, March 21, 2014

Model Portfolio: One Year Performance Review

The model portfolio which was created with an initial capital of Rs.1,00,000 /- on 21st March 2013 completed one year of existence on 21st March 2014. I feel very happy to say that in-spite of very challenging  macro and micro economic situation in India, our model portfolio has outperformed benchmark Nifty by huge margin.

Model Portfolio snapshot as on 21st March 2014:

As can be seen from the Nifty chart below, during the period from 21st March 2013 to 21st March 2014, Nifty has delivered an absolute return of 14.74% while our model portfolio has generated 29.1% return based on the closing price of stocks held in the portfolio as on 21st March 2014.

Wednesday, March 12, 2014

Sell DLF 220 Call Option

DLF has moved up sharply from the 140 odd levels since the beginning of March 2014 to 180 as on 12th March 2104 mainly due to short covering. Due the sharp up-move in the stock on 11th March on very low delivery volumes and short covering, the IV's in the strike prices of the counters has gone up substantially. One can utilize such high IVs to sell far out of the money call which are adequately safe.

Valuation wise DLF is trading at around 16 times EV to EBIDTA of current financial year which is quite expensive in the context of slowdown in realty sector in India. Also the majority of debt reduction exercise is over which means all the good news in terms of debt reduction is discounted in the price. Technically the stock seems to be highly overbought at current levels and is also up more than 25% since the Feb 2014 closing. Hence there seems to be limited upside (if at all) from current levels. Hence one can sell 220 strike call @ 0.95 or higher which is highly safe as movement towards 220 will imply almost 50% move from the Feb close.

Total Return from the trade:

Friday, February 28, 2014

Buy Bharti Airtel at every decline

Bharti Airtel
With spectrum auction out and the M&A rules defined, the telecom sector is finally getting out of the regulatory interference which is a big positive for all the telecom players in India. Though the debt level of the sector will further rise, consolidation and tariff rationalization will make the leverage position of the sector comfortable in next 1-2 years. Both the big telecom players Bharti and Idea Cellular appears attractive for investment at current levels but Bharti Airtel in particular is very attractively poised at current price of around Rs. 290. Here is why?

1. Back of the envelope calculation suggest limited downside and reasonable upside. Lets consider following valuation points assuming around Rs.92000 crores of revenue, Rs.30000 crores of EBIDTA and net debt of Rs.60000 crores for FY-15.

Sunday, February 9, 2014

Corporate Governance Rating for listed companies in India

SEBI is considering a "Corporate Governance Rating" for every listed company in India which, in my view, could be a game changing event for minority shareholders. Security Exchange board of India is in the process of finalizing its new Corporate Governance Code and revamp insider trading norms. Beside having new rules that are largely targeted to protect minority shareholders, Governance Rating for each company will be very handy specially when a small investor is investing in mid and small cap companies.

Like IPO grading, a grading system for companies on governance front is a much needed reform that will strengthen the overall capital market of the country. For minority shareholders, governance is much more important than valuations and the former being subjective it becomes very difficult to asses the score in that front. 

If "Corporate Governance Rating" become reality it will help all of us in flushing out almost all crap and scam ridden companies. All we need to do is check the score and completely avoid companies which are below certain level. 

In my whole investing career more than 90% of my loosing bets were due to governance issues in the companies. Strong insider trading rules and tough penal actions for the guilty along with Corporate Governance Rating will surly help build confidence in the Indian Stock Markets and encourage wider participation by small retail investors. 

Thursday, February 6, 2014

Engineers India FPO Analysis: Avoid

Engineers India Limited is coming up with its FPO to offer 33,693,660 equity shares of face value 5 each from 6th February, 2014. The issue details are as follow:

Offer Size: 33,693,660 Equity Shares of face value of 5 each
Price Band : 145 - 150 (Discount of 6 for Eligible Employees and Retail Individual Investors)
Issue Opens on Feb 6, 2014
Issue Closes on Feb 10, 2014
Lot Size : 100 Equity Shares and in multiples of 100 Equity Shares thereafter (Min Investment Rs.14500 to Rs.15000)

Should one apply to this FPO?

The straight answer is "NO" as the company is witnessing falling revenues and profitability. Also the price at which the issue is being offered is very close to the current market price which is Rs.150. As far as valuations are concerned the stock @150 is trading at 11 times FY-14 earnings. 

Tuesday, January 28, 2014

9 Witty Quotes on Money

"If you have a gun you can rob a bank, but if you have a bank you can rob everyone" - Bill Maher

"The safest way to double your money is to fold it over and put it in your pocket." - Kin Hubbard

"A bank is a place that will lend you money if you can prove that you don't need it." - Bob Hope

"Cocaine is God's way of saying you're making too much money." - Robin Williams

"Finance is the art of passing money from hand to hand until it finally disappears." - Robert W. Sarnoff

Thursday, January 23, 2014

3 Mistakes that taught me the golden rules of Investing

In 10 years of my stock investing experience I have done many mistakes which caused me substantial financial losses but in return I learned some invaluable lessons that are now the fundamental pillars of my investing approach. Here are the top 3 mistakes and the lessons I learned from them. 

Mistake # 1:  Over Concentration - During my initial days of stock picking I used to go overboard on one or two stocks and put all my money into them expecting an imminent explosion in stock prices and my invested capital. I invested significant proportion of my capital into names like Prithvi Information, Lloyd Electric, Paramount Communications during 2006-07. Guess what most of them went burst and are today down 90 to 99% from my purchase price. Though I managed to get out of them without loosing all of my capital but I still had to take more 40% knock on those names. I also had winners in the form of UCO bank, Zensar Tech etc but the gains in them were not sufficient to cover the losses. From then onward however confident I am, a stock never occupies more than 10% of my portfolio.

Lesson and Golden Rule # 1: Diversification equals Risk. Adequate diversification must to manage the risk of a portfolio. Never put all your eggs in one basket until and unless there is 100% chance of things happening in the way you want them to happen.

Monday, January 13, 2014

Learn how India's best known Value Investors pick stocks

Value Investing - Intrinsic Value
Value Investing is not a rocket science but an art that requires simple thinking, patience and asset owners attitude. If one can acquire these three skills he/she should not have difficulty in picking high performance stocks. 

There are many text books available which can be read to understand how value investing is performed but to get things in nutshell and help you understand the practical aspect of this style of investing, following is a set of videos where in India's best known value investors discusses live on value investing framework and their individual strategies of picking winning stocks. 

Thursday, January 9, 2014

Sell Indian Oil (IOC) 180 put at 1.10

With all the buzz and fuzz about Indian Oil Corporation divestment to meet the fiscal deficit target, IOC stock has been under continuous pressure for quite long. But with all the news flow it appears that govt. wants to sell the stake but at higher price. At current market price of around Rs.197, the stock is a bargain buy and available at a fraction of it's replacement cost. The stock is also trading near 3 year low. Hence there is high possibility that govt. might not go ahead with IOC divestment until price recovers.

Considering all these factors one can sell 1 lot (1000) IOC 180 put at current market premium of Rs 1.10 or higher to generate a return of 4.17% in 15 days. Even if the divestment happens now it is highly unlikely that the price will be set below 180.

Total Return from the trade:

Sunday, January 5, 2014

Outperforming vs Under-performing stocks of 2013

2013 was undoubtedly a very polarized market where the companies which delivered on earnings and governance outperformed benchmark Indicies significantly while the companies which failed to deliver on earnings and repair their fractured balance sheets, under-performed indices by huge margin.

For instance Britannia Industries appreciated by more than 84% in calendar year 2013 while at the same time JP Associates fell 44% during the same period. JP Associates is saddled with debt and had to do distress sale of it's cement plant in gujarat while Britannia Industries kept generating high Return on Capital and also witnessed 430 bps margin expansion in second quarter of FY-14.

Business Standard has compiled a very good list of key stocks which outperformed / under-performed along with highlights of reasons behind their performance. The doc is available for download in PDF below:

Wednesday, January 1, 2014

Indian Stock Market Outlook - 2014

In general 2014 appears quite optimistic as far as performance of Indian equities are concerned. 2013 witnessed some major shocks in terms of currency, inflation and deficits which resulted in whipsaw movements in stocks and indices. Gross Corporate earnings in India has also not been encouraging so far. But in-spite of all bad macro and micro news flow in 2013, most of markets globally including Indian markets made new highs. Mutual funds sold more than Rs.75,000 crores worth of stocks in the year gone by while FIIs continued to pump in money and bought more than Rs.1 lakh crores worth of stocks.

During second half of 2013, QE tapering risk kept emerging markets on edge as none of us were able to estimate the impact it would have on capital markets. Finally after lot of suspense the QE tapering did happened and fed reduced the bond buying program by $10 billion. The market reacted positively as the quantum of tapering was low and it also signalled improvement in U.S economy.

So what to expect from Indian equites in 2014?

In a straight answer to this question, 2014 is expected to be optimistic and scale new high. But there will be no straight line movement and we will witness occasional correction on account profit bookings and unknown fears.

15 Stock Investment Tips from Rakesh Jhunjhunwala

1. Always go against tide. Buy when others are selling and sell when others are buying.  2. If you believe in the growth prospects o...