Gains in Oil Drilling Stocks

Following the increase in Oil prices, stocks of companies in the Oil Drilling business are doing good in falling markets. Our research application had helped us in investing into some of the leaders in this sector. Our holdings in Alphageo, ABAN, CAIRN  & Deep Industries have all gained more than 15% from our entry levels, and this has come through in a falling market, which has taken a breather following the demonetization of higher value currencies.

Having these stocks in portfolio and their gains are helping us out perform the benchmarks on a regular basis. As we write this, the broad markets are down 0.64%, while our portfolio is down 0.32%. For a portfolio that is having a 1.32 beta, this phenomenon is a rare occurrence, showing us the strength of the research behind our stock selection.

Post Diwali…..Market Rally

dhamaka_stocksOctober was perceived by the media to be a ghost month, while it turned out to be wrong with the SENSEX gaining about 1.50% after a peak of 4.30% gain. It proved that, not every year is a bad year in October, particularly for India in the next 5 years, it is a Golden period. Every correction is an opportunity to get into the Equity markets. And take advantage of the current World leader in Economic growth.

Our portfolio managed to close with a 2.30% gain for the month of October 2015, having an Alpha of above 50% against the benchmark. We had good performance from the House Hold goods, Travel and Leisure, Support Services along with Computer Hardware, FMCG & Financial Sector stocks. The losers were from the Pharma & Textile space, which had marginal impact on the performance.

Deep Industries, Cosmo Films, FDC & ITD Cementation gave us more than 20% profits in October. Cosmo Films was added into our portfolio in June 2015, in 5 months this stock has given us 150% profits.

Bravisa Templetree, portfolio has managed to outperform the benchmark even with the lower exposure due to a good amount of exits following the market correction. We are 20% in cash at present and still have managed to do well due to the strength of the businesses we own. The dynamic nature of our system to move out of weaker stocks and add up to stronger ones as they show strength was the reason for the outperformance.

Biscuit packaging went into a total design makeover along with new varieties of films used in their packaging. Cosmo Films is the leader in this segment and has had a major benefit. Along with film manufacturers, packaging companies like Paper Products, SRF too had good gains.

After the Chinese market crash and followed by the Volkswagen scandal, where markets went into a tailspin, markets are getting ready for the next big run which is likely to happen after the next wave of correction just about the Diwali and post Diwali, Indian stock markets are poised for the next strong rally.

The reality sector which is one of the weak sectors at the moment is dragging other support sectors along with it like metals, home construction along with banking. Banking stocks have taken a bigger hit and there are no signs of slowdown in their weakness. So, the next rally is likely to be in the industrial sector.

2nd quarter results so far has been bleak for the large cap stocks. Most of the public sector banks have shown more weakness on their earnings. Automobile stocks which were the leaders in the 2014 rally have begun to show tiredness in their earnings. In our portfolio, exposure to Auto stocks have got considerably reduced baring few stocks like Eicher Motors, which continues to have good growth numbers. Sales numbers of Royal Enfield has shown 73% increase in the second quarter, while the stock is showing correction which may result in its exit from the portfolio.

Coffee Day listing did what it has to, down more than 20% as per expectation. Indigo IPO which went through with over subscription too is likely to open weak and the issue was pricey.

Bihar elections and FED interest rate hike will put some pressure on the market for some days after which the markets are likely to go into rally mood. Our portfolio is all set with the right stocks to participate in the rally.

A very Happy Diwali to all our patrons, clients and well wishers.

6 out of 11 top earners in our portfolio

11 earningBoosters

The second quarter results are likely to be subdued and will impact the markets in the coming weeks as results get announced. The list published in ET on 9th October 2015 shows some companies that have the potential to outperform the current quarter on the growth front. Among the 11 companies that are listed above, our portfolio have 6 of them.

As we can see in the list of expected top performers, the highest concentration is from the Pharma sector followed by the NBFC sector. In our portfolio too, we have increased exposure towards Pharma and NBFC segments a couple of months back & this happened as a dynamic process.

In 2014 our portfolio had more exposure into Auto Ancillary companies, as months passed the stock price movement of these stocks began to slow down, showing signs of tiredness. About 2 weeks before the Volkswagen issue came to light, almost all of our Auto segment exposure began to take exit. When Volkswagen issue got reported and the market collapsed, where most of the ancillary companies having presence in Germany took a big hit, out portfolio sustained lower damage. Just about that time the₹15000 Crores,  Amtek Auto default got reported, which shook the debt Mutual Fund market where JP Morgan fund had big exposure and they had to split the fund and bring controls on redemption. There are many PSU Banks which are likely to take a hit from this default.

Following our exits, the overall exposure in stocks got reduced to 75% of the capital, thus protecting the portfolio from the negative bias the markets had prior to RBI policy announcement reducing interest rates.

RBI decision came as a surprise, which Raguram Rajan has made us accustomed to since September 2013. Markets began to rally; mostly short covering, took the market to higher ups, while the strength seems to be waning now as the expectations from result season is tepid. Following results announcement, if there is going to be any weakness; our portfolio has got fairly protected due to our lower exposure and having investments into companies that are likely to give out good results. While the market began to gain strength, a couple of new stocks like BEML, Deep Industries, India Bulls housing have got added to our portfolio.

As the result season unfolds, there would be more clarity about which companies have greater strength in performance and those companies will automatically get added to our portfolio, from where, we will be prepared for our next big journey in the market rally. Being invested into the best businesses gives great confidence about the performance. In the last 3 years since we have been tracking the portfolio performance, we have achieved 68.50% gains, whereas in the same period the SENSEX has grown 38%. We have managed to achieve twice the return provided by the benchmark.