Bajaj Finance – a long term story

Bajaj Finance stock crossed ₹ 4000 on 26th Sept 2019. This stock has been the darling of stock markets for quite some time, what is so big about it crossing ₹4000 per share.

It was a remembrance to me as I bought this stock way back in 2015 for 4K. Now, the same stock after 1:1 bonus and 1 to 5 split has again crossed 4000. This means, the ₹4000 investment in Bajaj Finace in Jan 2015 is today worth ₹40,000. Yes it is ₹40,000,  growth 1000% in about 4 years.

At a time when NBFC’s are getting masacred by the markets following thier poor handling for their businesses, followed by a crunch in support from banks which crippled their businesses. Most of the NBFC’s failed because of their exposure to real estate through builders funding as well as their own greed to acquire real estate assets using short term funds.

Bajaj Finance’s business is more focused on consumer lending. Bajaj Finance did not see a slowdown in it’s business. Even when economic slowdown was much talked about and felt in the economy, this company has been growing at 40%. Their NPA’s are at 0.75%. In a period where there is no funding available for other NBFC’s, Bajaj has been getting overseas funding at a fairly cheap cost. Along with this it has been mobilising large corpus through the Corporate FD markets.

It is growing its fund base alogn with business growth. Where can the stock go from here. Currently Bajaj Fiannce is trading at 60 times its earnings. That means, for every rupee of earnings that the company is generating, market is paying ₹60. It is too pricey, that is the price quality and consistency commands. Bajaj Finance’s latest earnings is at 72 per share and is grown at 42% in the June 2019 quarter. In the last 12 quarters it has an average of 21.55% growth on its TTM earnings. There was a dip in earnings when the company gave bonus shares.

In general market condition when a company gives bonus shares, its capital gets bigger and from there on because it has to service a higher capital, growth slows down. In the case of Bajaj, it slowed down only for 4 quarters, inspite of having 1:1 bonus, which increased the capital to double of what it had earlier. Growth momentum continued at a robust pace. This in itself was a very big achievement because getting back to 30% growth rates just after 1 year from bonus means very robust business growth.

Coming to future prospects, if the company grows at 21% & has a PE of 60, the stoock price will be 7800. Even at a 25% lesser valuation which the stock mostly has after the annoucnement of every quarterly results, the stock price should be at 3750.

Is it good to buy now? Absolutely not. Bajaj Finance stock is very highly priced. With today’s earnings Bajaj finance is attractive only if the price comes down to 2550, which is not a possibility when markets go bullish.

One can have this stock in mind to take entry when there is a crash in the market and price gets to a level it trades at less that 50% of current valuation.

On dividend yeild, this stock is a poor performer, it gives out very less as dividend which is a good move for companies that grow at a faster pace. Berkshire Hathway, one of the world’s highest priced stock, never has given bonus or dividend. Thier philosophy is that, instead of you investing the dividend and growing it, which normally is less than what I grow the company. I will retain the earnings and help you have the best growth for your money.

For those who have already invested in Bajaj Finance, it is one of the goldmine stocks, which can be held for some more years, till it shows signs of weakness in its growth.

Midcap strength continues

Markets favored midcaps on 7th September, where the SENSEX was totally flat, Midcap Index made 0.30% and small cap made 0.51%. Our portfolio managed a gain of 0.60%. This strength was possible due to big gains from metals sector, Tata Metaliks lead with a 10% gain followed by Jindal stainless with 7%. We had 3 stocks with above 5% gains.

Bajaj Finance, which has occupied mainstream news today, is close to 2000, it came into our portfolio at 470 levels.  Post its bonus issue, ranking dropped and we had restrictions on adding this stock to the newer accounts. We have  made 300% gains in this stock so far. The company has offered 4.50% stake to institutions at 1650 price level and had  4.50 times over subscription.

We had losses in SREI Infra which lost more than 7% followed by Himadri losing close to 5%. SREI lost today due to  Bharath Road not having good outcome in its IPO.

Strongest stocks turn the weakest…..

Our portfolio had higher exposure in the financial sector followed by Sugar, Paper and Cements. All these businesses were doing very good growth on their sales and profits and that showed in their stock prices. Having these high growth stocks helped us achieve 8.50% gains in the month of October.

Following the demonetisation and Trump win in the US elections, the very same high growth sectors went into the receiving end. Pressure on liquidity brought various kinds of pain to the businesses in these Industries.

A couple of articles published in ET after the event showing the impact of currency on the sectors.

 

Nov 17 2016 : The Economic Times (Bangalore)

NBFCs Recover Some Ground, but Gains may be Short-Lived

Anandi C Mumbai

VALUATIONS HIGH Non-banking financial cos’ loan against portfolio book expected to be squeezed due to demonetisation; valuations still rich given prospects hazy

Non-banking finance companies on Wednesday got a break from the sell-off on the bourses post the government’s demonetisation move that has dragged their shares down by 13-20% in a week. Shares of the financiers such as Bajaj Finance, Cholamandalam Investment and Finance and LIC Housing Finance, among others rallied 3-10% on Wednesday but the gains could be short-lived amid worries about rising bad assets and rich stock valuations.

Non-banking finance companies (NBFCs) have been among the best performers on Dalal Street in 2016 as rising consumption and increased demand for housing led to voracious appetite for loans especially in Tier 2 and 3 towns. Since March 01, when the market rebound began after falling in January and February, Bajaj Finserv soared 81%, Bajaj Finance jumped 51%, Dewan Housing Finance rose 50% and Can Fin Homes gained 46%.

Now, with demonetisation expected to result in a decline in property prices, the loan against portfolio (LAP) book of NBFCs will be squeezed, resulting in higher bad loans.

“Finance companies which have bet big on LAP and mortgage loans in last couple of years and expanded their balance sheet rapidly will be among the most impacted because many of them will start seeing pressure on asset quality,“ said Ritesh Jain, chief investment officer, Tata Mutual Fund.

Dewan Housing, Repco Home Finance, Shriram City Union, CanFin Homes and Capital First have fallen 17% in a week. Companies lending to commercial vehicles could be among the biggest hit by the demonetisation move.

“commercial vehicles would be affected as they heavily rely on cash.This short-term cash mismatch could impact their business in the coming two quarters,“ said Siddharth Purohit, senior equity research analyst, Angel Broking.

Valuations of many of these companies have moderated after the recent sell-off but they are still rich given their hazy prospects, said fund managers.

“The valuations of many of them are quite steep at current levels and any bounce back would be temporary ,“ said Jain of Tata Mutual Fund.

Analysts said that it would take more time to determine the right valuations which had inflated over the past one year.

“Only if the prices correct quite significantly compared to the past five years’ rise can we say that meaningful corrections have come in,“ said Paras Bothra, president equities, Ashika Stock Broking.

 

Nov 17 2016 : The Economic Times (Bangalore)

A Real Estate in Pain is Bad News for Cement Cos

Rajesh N Naidu & Ashutosh R Shyam
ET Intelligence Group

CREDIT SUISSE has cut EPS projections for UltraTech, Ambuja & ACC by 16-27% for FY18 after govt’s demonetisation move

The government’s demonetisation drive has affected cement companies badly as they rely a lot on the real estate sector, which is bearing the brunt of this initiative. Analysts have cut the earnings per share (EPS) estimates of cement companies for the next two fiscals between 10 and 20%.

The annual volumes growth of the cement industry is pared to 5-6% in the next three years, compared with 8-9% earlier -in FY16, the total cement consumption was close to 278 MT. Given these factors, cement stocks are likely to fall further and more downgrades are expected.

In the past few years though, cement companies had caught the fancy of investors as it was believed that utilisation levels would go up to 90% by 2020 from 69% at present. It was estimated that cement companies would record superior operating margins as seen in the last upcycle during 2004-2009.

Besides, increase in infrastructure spending, no significant capacity expansion and the ability of these companies to maintain and increase prices in most regions, except east India, helped improve their valuations. Before the recent correction, cement firms were trading at a 15year high EVEBITDA.

But now with the government’s decision to do away with high-denominated currency notes, the demand for housing is likely to take a hit as builders stare at a cash crunch. And the government’s infrastructure projects aren’t enough to negate the possible slowdown in the sector.

This is because the governmentsupported projects -roads, irrigation and railways -consume only 6% of the total cement produced.What’s worse, this comes at a time when input costs are rising as pet coke and coal prices are rising.

Foreign brokerage Credit Suisse has cut its EPS projections for UltraTech, Ambuja and ACC by 1627% for FY18, which has led to a lowering of their target price in the range of 7-20% for these firms.

 

 

 

Jhunjunwals’s portfolio drops 15%. So was ours, many of the stocks in his portfolio also adorned ours and we are holding on for our tables to confirm their exits.

 

Nov 17 2016 : The Economic Times (Bangalore)

Jhunjhunwala Loses Rs 1,480 cr in Just 16 Days

Jwalit Vyas Mumbai:

MAXIMUM VALUE erosion of Rs 397 cr in Titan, where share price fell 15% in Nov

Rakesh Jhunjhunwala, the big bull of Dalal Street, has seen value erosion of over $200 million or `1,478 crore since November 1, 2016 on his portfolio.This does not include the value erosion on the investments in his recent top pick DLF, which is down over 30% in the last 15 days, as his exact holding in the company is not public.

Maximum wealth erosion in terms of value for Jhunjhunwala has been in Tata group owned jewellery company Titan, which saw share price fall 15% since the beginning of the month, leading to a total value erosion of `397 crore.From the peak in August this year, Jhunjhunwala’s holding value in the company is down by `840 crore.Holding value in the other Tata Group stocks such as Tata Motors and Rallis have also come down significantly.

In terms of percentage, the big gest loser in the big bull’s portfolio is the casino company Delta Corp, whose shares plummeted over 40% in the last 15 days.

Jhunjhunwala was bullish on the Indian real estate sector.Other than DLF, he holds 3.2% in Dewan Housing Finance, which lends money to the real estate de velopers and home buyers. The stock tanked 28% in the last 15 days, wiping out al most `100 crore for the big bull.

Other real estate stocks in his port folio include Delhi-based Mumbai-based D B Anant Raj and Mumbai-based D B Realty and Man Infraconstructions, stocks down 15% to 33% in the last 15 days. The only exceptions in his portfolio are MCX and CRISIL, which have remained flattish in a falling market. He owns 3.94% and 1.7% in the two companies, respectively .

 

 

 

We don’t own CAPF, while the stock is in our buy list and the entry price has been consistently moving down following the drop in the stock’s price.

 

Nov 17 2016 : The Economic Times (Bangalore)

ET NOW Q&A – Only 1.5% of LAPs Paid Back in Cash: Capital First

 

In an interview to ET NOW, Capital First chairman V Vaidyanathan, said that in the loan against property book, only 1.5% is collected in the form of cash and that the issue about loan against property (LAP) is overdone.Edited excerpts:

What’s the first hand experience of demonetisation at Capital First?

We should distinguish between a liquidity issue and a solvency issue.Right now, it is only liquidity issue.Basically, traders which are a substantial part of the people to whom we lend, small shopkeepers, traders, entrepreneurs, etc., they have the cash. They go and deposit the money in the bank. They are unable to withdraw it because of withdrawal limits and therefore, they are in a situation where they might have a temporary mismatch in terms of being able to pay. It is not ability to pay issue. In our case at Capital First, 100% of our customers can pay us in the form of PDCs, or electronic clearing instruments. Only the customers who return their cheque, which is the about 10%, when we go back and collect from them which is also close to about 5% That means about 5% pay by cash. Clearly, the moment cash comes back in people’s hands, the repayment cycle will start again. If this issue stretches on for three or four or eight months or something like that, that could become a solvency issue.

Your MSME segment operates mainly on the LAP book. What kind of an impact could we see there?

In our loan against property (LAP) book, 98.5% of our collection is coming through electronic instruments, that is only 1.5% is collected in the form of cash. In LAP, we should not forget it is not the property that is paying you, it is cash, it is the businesses that are earning money and paying you back.So as long as liquidity comes back, solvency remains same, customers will pay. This issue about loan against property is overdone.

But considering property is a critical factor do you not feel that there will be some cases where payments would bounce?

Usually about 90% customers clear their instalments in the first attempt.That leaves 10% of them. As I said, about 8.5% pay you back again in the form of cheques again that is 1.5%. I am saying it is not really a big deal.

This sudden change in our markets due to two most important events have left almost all the businesses in our country stare at huge loss of business. December Quarter results are going to be a washout, and it will take more than 4 months to get back to normalcy. With more than 10 lakh crores of cash moving into the banking system, which will increase the liquidity in the economy, interest rates are likely to fall by about a percent from here and that will be 6% interest on bank deposits.

Excess liquidity in the system, as there is no much demand for credit from the corporate will move into G Sec’s which will propel high government spending in the coming year and propel the economy to bigger growth.

As we are in the mid of the 3rd quarter, till results are out, much decision on the churn of portfolio will not be likely apart from a few stocks moving out and getting replaced by new one’s. The impact on portfolio performance is going to be prolonged.

 

 

 

 

 

 

 

 

Performance report for July 2016

Markets have been doing well and there are media reports that there can be some correction. Which is true? Fundamentally on a broader perspective there is not much change seen in the earnings of companies. Then, why did the market take off post budget? Foreign Portfolio Investors who moved out of our markets post China crisis have returned back. FPI’s have poured more than $1 Billion into our markets.

Perf.31.07.16

When such high amount of money comes in, it will move the whole markets and that is what has happened. Businesses that were fundamentally strong, though there were very few, began to

Following BREXIT, markets have taken off well due to FPI inflows. More than a billion dollars have been invested in our markets in the last one month, which has helped in markets giving a good growth.

Metals & Infrastructure sectors were leaders in returns as they are moving up from the bottom, while on the fundamental side, the companies in these sectors are yet to show strength.

BREXIT and saturation in the BFSI segment which was contributing to growth in the Technology sector has turned the sector into the weakest in the prevailing markets.

SENSEX gained above 4% in the month of July, in line with our performance which stood at 4.20% for the month of July.

Our Exposure:

Being exposed to the right sectors that have the potential to get the best growth in the prevailing markets gives us an edge in performance. Our systems have ensured that we are invested in the right sectors. Presently, we are overweight on Financials, Cement, infrastructure, Sugar& Paper. NBFC businesses have got into an advantage position against the traditional banks. NPA’s position of NBFC’s has been fairly low when compared to the PSU peers. They are also placed well in the rural markets where the next thrust on the business growth is expected to happen. Likely boost in the consumption pattern after the 7th pay commission is getting factored into the market.

Financial sector has above 12% exposure in our portfolio. Bajaj Finance & Bharath Financial has been consistent performers following their robust result announcements.

PRS.Sector.31.07.16

We have had increased exposure into the Basic Materials sector comprising Metals and Chemicals, the sector that was down in the last year. After a good base formation there are some green shoots visible in this sector. Exposure was reduced in the Technology sector following weak performance numbers from the businesses in this sector.

Merger of Oil Marketing Companies into a single company was good news which helped the leader of this sector HPCL have good gains.

Result season though not very good on the broad perspective, it has pretty well on specific stocks. Stocks like Bajaj Finance, Bharat Financial, etc., have given phenomenal gains following result announcement. Good monsoon and subsequent rural demand have been helping in companies that have good rural presence gain momentum in the markets.

GST becoming a reality soon is also helping service sector businesses to gain as they are the biggest beneficiaries of this move. Following no new stimulants that have uncertainty in them, which can drive the markets from here, we are having small corrections and this correction is required often the markets to move out of weaker holdings and add new stocks into a portfolio.

NBFC leadership & our position in it…..

running-horse-black-white-2

Banking sector went into a turmoil following NPA’s and bad asset management. Public Sector Banks went out of investor favor. The Private Banks which always commanded rich premium among investors too began to lose attraction because of more and more regulations tightening their hands on growth. While all this was happening and keeping the financial sector at the razors edge, NBFC’s went to become leaders in the financial sector with phenomenal growth in their valuations.

The reasons behind NBFC’a gaining strength were –

  1. They are healthy on NPA’s.
  2. March quarter profit growth was 32%, while private banks had 23%.
  3. Home loan portfolio increased by 12%, all of it grabbed from the private banks.
  4. Focused approach made them best placed to grab opportunities arising from the base of the pyramid.
  5. Bountiful monsoon that is expected this year is likely to boost rural income, where NBFC’s are well placed.
  6. Most of them are positioned in the lower income segment, where the budget provision of more deduction on interest payment for the first time home buyers for loans upto 35 lakhs, came to their advantage.

Investors moved away from richly valued private banks to NBFC’s which shows in their stock growth in the last 1 year. NBFC’s had registered between 20 – 60% growth in the last 12 months. Toppers among them are Chola Finance, GIC Housing, Repco Home, Shriram Transport, Canfin Homes, Bajaj Finance etc.,

In our portfolio, 22% percent of the total equity exposure is in the financial sector and we do not have any banks in our portfolio. We hold all the top names along with stocks like SKS Micro, Edelweiss, which have shown good growth in their top line and bottom line. Our entry into these stocks was fairly early, giving us the edge to capitalize on their growth. Most of our investments have given above 15% growth since we have invested.

As an automatic process, our research identified the stocks in this sector for our investments.

Rajan’s continuation and the markets

Raghuram-Rajan-3

Central bank direction on interest rates both national & international always used to be big expectations and directions of the markets would take course after the announcements. For the first time in the history of our financial markets, expectation was not on interest rates.  It was the governor himself who became the news, the expectation of Raguram Rajan’s continuation as the Governor for the second term became hot.

Press had a joy ride, at least which was what Rajan told in the press meet when asked about the rumors. It is strongly believed that he will continue as governor for the second term, still there are some weak hands which are speculating and are wanting to en-cash on the rumors.

After all why would he not continue, financial markets world over has regarded him as the very best central bank governors in the world today. Very few can match his experience, expertise and knowledge. As a country too none of us would want to lose a person of his caliber. The day he took over as governor in 2013, financial markets turned for good and has been continuing. A lot of bold decisions like the cleansing of the PSB’s would not have happened, if not for him.

It is because of this cleaning that NBFC’s became attractive and companies like BAJAJ Finance, SKS Micro, Chola Fin, etc have had very good price rally. Automobile, Pharma and many more sectors benefited. We do have some of the above businesses in our portfolio which have been making good gains.

He will continue for sure and India is going to see one of its very big growths happening in the next 3 years. And probably, after that, move ahead to become a developed economy. All of it will happen not only because of Rajan, it is the whole circuit of people who have lined up along with Narendra Modi, economic conditions, business just in the cusp of a great growth.

Be invested in the India story; make a killing as the time is ripe.

May 2016 performance

Screen Shot 2016-06-03 at 3.55.03 PM

Performance of our portfolio is trailing the benchmarks in the 1 month to 6 month period. The broader benchmarks like the SENSEX have done better because of the Large Cap stocks that have had good increase in price, following their results announcement. Most of them have shown increase in profits, while sales numbers are yet to catch up.

Public Sector Banks (PSB’s), that have become untouchables in the last one year, have after the sharp clean up done on their balance sheets, getting rid of NPA’s, now showing good upward price moves. This turnaround in the PSB’s is not because of positive growth in them, it is just that, they have cleaned themselves and going forward, the expectation is that the performance will be good. Bank stocks have moved up on anticipation of better results in the coming quarters.

Turnaround is just happening and it should take another quarter or two to show up on the top line of companies’ performance. We have been adding stocks to our portfolio, following the March 2016 results. Our portfolio was moved out of stock exposure when the markets turned weak, and presently with new additions in the Paper, Sugar and NBFC sectors, our exposure have moved up to just above 50% and soon it should be reaching full loading.

Stocks like Balrampur Chini, Bajaj Holdings, Chola Finance, Bajaj Finance, DCM Shriram that were added in the last fortnight have been doing very good and going forward, these businesses are expected to give stronger growth to our portfolio.

We invest only in those business that show both Sales and Profit growth, hence, our portfolio does not carry Large Cap stocks in the current market, while we will be adding stocks that show strength, unbiased on the category or sectors.

Stars of the Modi Sarkar

It’s been 2 years since Modi Sarkar is in power and the expectations that Modi was to deliver propelled the financial markets to big rally. What began with a lot of euphoria began to weed out as results of companies failed to keep pace. In the 2 year period there were some businesses which did tremendously well on the sales and profits as well as on their stock prices, while there were many laggards which took away investor wealth along with their confidence.

Mid caps were the stars of the rally and there were 17 stocks which zoomed more than 100%. Among them the top 4 were from diverse sectors which had more than 200%. All the 4 were part of our portfolio and we still hold to 3 of them Bajaj Finance, Ashok Leyland and 3M India.

Top4 Gainers.May16

Stocks that gained more than 100% were-

HPCL, Marico, India Bulls Housing, Piramal Enterprises, Torrent Pharma, Berger Paints, Emami etc., and among the 100% gainers too, we had 4 of the stocks in our portfolio.

It was not a rosy period for all the stocks in our market, we did have 20 stocks that fell in value in the last 2 years. Losses were between 5-90%, between them the top 4 losers were the following.

Top Losers may16

None of the above were in our portfolio, having the best performers and not having any of the weak ones in the portfolio is what helped us have phenomenal growth against the broader benchmarks.

In the last 2 years the returns from SENSEX, MIDCAP and Bravisa Temple Tree shows the superior returns we were able to achieve.

BTT with Index May16

“Midcaps have delivered significant returns over the last three-five years compared to large cap funds but you have to be wary that they are more volatile. So you clearly need to have a long-term horizon in terms of investing in some of these funds. So, I will say even 5-7 years might be a short time because you can have cycles in the market where mid-caps might under perform and since they have run up so much, you have to be a little cautious when entering this segment.” – Kaustubh Belapurkar, Director – Manager Research, Morning star India.

Pre-election rally began with the banking stocks in 2014, while surprisingly, apart from Yes Bank, all of the bank stocks 20-73%. In our portfolio, we were totally out of banking exposure since 2013, just before the challenges we faced in the Subba Rao period. After Raghuram Rajan stepped in, our economy went into a dramatic change, while there is still a long way to go before the banking stocks get strength, because there have been so much muck to be cleaned in them, without Raghuram Rajan, it wouldn’t have been possible for sure.

Factors like ease of doing business, Make in India, Roads and Railway infrastructure along with GST will instill very good growth for our economy, selecting the right stocks and being invested in them till they complete their growth phase will give any investor tremendous profit potential on their investments.

Not in a hurry to turnaround……

Slow TurnaroundThe Indian stock markets which had an euphoric rally in 2014, turned down in 2015 and is looking to have another negative year in 2016. Price increase in stocks are always backed by earnings growth, and when earnings show a slowdown, price moves either get flat or decline based on the interests each individual stock has built in it.

In 2014, earnings growth was very good and it supported the price increase following which expectations got higher and it fuelled the valuations to get a little bit stretched. Once the reality set in to show that the expectations were wrong, rather it was in fact the other way around, a slowdown in the growth rates, investors were in for a surprise. All of a sudden all the buy orders became sell orders and hence the larger fall we have had in the markets post Chinese market crisis.

Automobile companies which were leaders in 2014 began to slow down on their growth. Infrastructure restructuring which was expected to be big and to support the banking sector, has been taking more than the anticipated time to get on the roads. New sectors that began to show strength were NBFC’s and Pharma along with export based businesses. Each one went on to face its own challenges. As spending declined, which has been shown in the top line growth of the Indian businesses in their December financial results, with sales growth in the lower single digits and profits showing an increase which means, companies have resorted to controlling operations to increase profits, which is also a negative in a growth story. Controlling operations expenses cannot continue for a long period. Without sales growth, it will bring in more challenges. This facilitated the weakness in the NBFC sector. USFDA played the devil’s advocate to pharma companies, big names in the Pharma space began to fall like nine pins. Between 20-30% drop in prices of stocks like Dr. Reddy’s Cadila, Cipla etc.,

Exports sector went into a different challenge, external forces played against them, all of a sudden they become un-competitive to their markets following the devaluation of Chinese currency. Orders began to slow down and some of the prominent stocks have lost more than 50% from their peak price.

With big time damages done to the markets, Indices Nifty and SENSEX breached their near term supports and turned bearish. Within few months what was the world’s best economy became the opposite. Now, it will take a little longer than anyone could guess for the markets to turn around. Government through its next arsenal, “THE BUDGET” looks like not to give any big fillip, with just a couple of days for the budget, markets don’t show any kind of strength. Next triggers can come only from the Q4 results, which already shows weakness as banks like SBI have announced that, they are going to show more bad loans in their books.

The best way to approach the market at these troubled times is to wait on the side lines, ready with funds to take the next opportunity early on. In our portfolio for our clients, we have liquidated most of our holdings baring very few best performing stocks like Bajaj Finance, Pidilite etc., Being invested in short term debt will help our capital grow at nominal rates till the next opportunity arrives. In Equity investing, if we deploy this method of getting in when the markets are strong and out when it is weak, it is possible to outperform the benchmarks over a longer period. Hence, again it gets proved that, buy and hold will not be the best strategy in Equity investing. It can only give returns to the extent of that which is got from FD’s. Rarely one can find stocks that have given super normal returns on a continuous basis for decades.

Take a look at your portfolio and do a churn of holdings wherever required and be in cash to take the next opportunity.

SENSEX stocks of 2020.

classic350_right-side_blue_600x463_motorcycleIndia is the world’s best economy today. Following its robust journey that is going to come up in the next 5 years, there is going to be a dramatic shift in the whole economy and with it even the economic barometer of India, the SENSEX. The SENSEX will also undergo change by replacing some of its constituents. Those stocks that will take a space in the future index will be the stars of the markets in the next 5 years.

What if we can identify them and be invested in them?

The growth those companies will have is going to be tremendous and the potential for profits will be equivalent. The expected stocks that can move in to the SENSEX, the list is big with some new not yet listed companies too. Though for the new ones we may not have a direction, for those that are existing, and if identified and invested, can give great gains.

Some of the company’s whose are likely to move in are: NESCAFE

EICHER Motors (Royal Enfield Bullets)

Page Industries (Jockey and Speedo brand products)

TITAN (Watches and Jewelry)

NESTLE and the likes.

Companies that have premiumisation as their focus are likely to shine bright. So, look for premium products in the market and the companies that produce them and be invested in them, chances are you will end up having a goldmine.

jockey-logoAt present our portfolio contains the first 2 names and we have been holding them for quite a long period, in these years that we have owned these businesses, they have showed continuous growth in their sales as well as profits. If they continue the same for the next 5 years, we will still have them. While, there is no guarantee that it will be so.

In the last year, there were some companies that made it big on their growth and become the darlings of the market. Some of the best ones are

Ashok Leyland, Britannia., HPCL, Baja Finance, Ramco Cements, Maruti, TCS, Ultratech Cements, PVR & Kotak Mahindra.

And there are a next set of business that are showing signs of reaching for the best. They are Canfin Homes, TCI, Tata Motors, Orient Cement, Persistent, Heritage Food and BHEL.

These were the names that have come up in the ET500 listing.

Among the above names we are invested in about 7 businesses, while we have doubts on some like BHEL, TCI etc., while if they qualify our parameters in the future we will definitely look at adding them in our portfolio.

By being invested in the best performing companies, our portfolio is managing to grow the best. Last year we had an Alpha of 63% against the NSE 500 Index, This year in the first half, so far we are at 28% Alpha against the NSE 500.

We will continue to grow in the same manner adhering to the best practices and innovative thoughts.