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.

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.

Ashok Leyland leads in August Auto sales.

Auto sales were weak for most of the frontline companies in August this year. Hero lost near 14%, TVS had a 1% growth, Maruti managed due to Ciaz and S-Cross, which otherwise would have been negative. M&M goes weak, Tata Motors 0.50% down on overall sales.

LeylandLorry

Ashok Leyland & Eicher were super stars. Ashok Leyland managed a 39% growth, supported by pre-buying ahead of ABS (Anti breaking System) becoming a mandatory norm from October 1st 2015. The growth was slightly ahead of expectations. Eicher continued with its above 50% growth. Royal Enfield sales grew 59% and commercial vehicle sales grew 22%.The company has opened sales office in the North America, which is another positive for its growth as exports are on a steady increase.

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Ashok Leyland turned around in the last quarter and it is likely to continue its growth phase for some more time to come. Stock has already run up, but still has a lot of room to be captures. Ashok Leyland came into our portfolio at ₹74, in August 2015. Post strong growth numbers we are adding to the existing exposure after the current correction phase is over.

At its high of ₹99.65, our investment in this stock has reached 30+ percent profits in a month. The broad based correction in the market post Chinese currency crisis has brought the stock down, which is an opportunity to accumulate for those who missed it at 75 levels.

16 Quarters of above 25% Sales and Profit growth by Eicher Motors

classic350_right-side_blue_600x463_motorcycleEicher Motors declared its December 2014 results yesterday. It had a growth of 56% on sales 66% on profits. This company has been giving above 25% sales and profit growth for the past 16 quarters. This is a tremendous feat, and the same is reflected in its stock price. This stock was at 1300  a share when the company began with its strong growth phase. 4 years have passed now and the stock price is at 16000 a share. Growth of 1250% in 4 years, apart from the the dividend the stock has provided in the same period which amounts to another 127.00 per share.

This company manufactures trucks and mini trucks along with Royal Enfield bullets. Today, bullets have become a fancy possession among the youth of India. The company is investing 500 Crores in a new facility to produce more Royal Enfield bullets and today there is a wait period for a new purchase and it has a premium too. On the roads, if we travel a kilo meter, out of 10 mini trucks and trucks that ply on the city 8 would be of Eicher motors make. With more new facilities coming up, it looks like the growth story is going to continue further.

In the year 2014, this stocks has delivered 200% profits. On 1st January 2014, the stocks was quoted at Rs. 4992.00, on 31st December 2014 it was Rs. 15103.00. We have a 3% exposure to this stock in our portfolio, it will continue to be in our portfolio till the companies growth slows down.

TVS Motor clocks 36% growth in Nov

jupiter_1586436fTVS Motors had a sales growth of 93% in the last quarter. November growth is 36%,Two-wheeler sales jumped 36 percent to 2.1 lakh units while scooter sales increased by 62 percent to 62,223 units and motorcycle sales rose by 41 percent to 86,424 units during the same period. “Three wheeler sales of the company registered an increase of 44 percent, growing from 6,304 units in November 2013 to 9,067 units in November 2014, said the company in its filing.

This stock was an investment opportunity in July this year. It came to buy when the stock was at 150 levels. As of this writing the stocks has made 50% return on investment and it looks like continuing the growth path.

Another notable point here in TVS Motors is the Three wheeler sales, there has been talks going on in the markets that Autos will lose their market share against the competition from taxis, Autos are charging Rs. 12 per km now. Taxis that are operating at Rs. 14 per km has began to get as low as Rs. 10 per km. There is a high possibility that people will pick a taxi instead of an Auto, which has many drawbacks. With bumper to bumper traffic across all the major cities in our country, people will be forced to use more taxis for their commuting requirements, this means more business for Auto manufacturers.

This would mean lower sales for Three wheelers, but, TVS has managed to corner some of their competitors market share to increase their sales volumes. This show a great business strategy in place for the company.When a company has a good sales and earnings growth, it is eventually going add value to the stock. And has all the likeliness to run up and give good returns to its investors.

How long this growth is going to continue? That we may not know, but, as long as the growth is strong, if we are invested, we can reap rich rewards. A car that is going at a 60 km speed in 4th gear cannot come to an abrupt stop, it has to at least get down to the speed at 2nd gear and gradually slowdown. And this slowdown is going to be visible, which can be utilized as an opportunity to take exit and book profit.

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One other stock that has been consistently having high growth is Eicher Motors, in the November month Eicher Motors, the Royal Enfield maker, sold 27,542 motorcycles in November, registering a growth of 52 percent compared to 18,131 units in November 2013. This stock came into high growth when the stock price was Rs. 1180, way back in 2010. From then on, it was a no look back for the stock.

In January 2014, the stock was quoting at Rs.5000 and today it is inching closer to Rs. 15000. A gain of 200% in 11 months, and the performance is going to continue. People normally shy away from stocks that are priced so high, complementing them with a low priced stock, but, price reflects the value the stock has in it. No smart investor will buy a stock at this price if there is no value.

Automobile stocks began to show strength in their earnings early this year and have rewarded their investors richly so far. But investing in any Auto stocks will not give us such high returns, specific stocks like Eicher, TVS have great potential in them. We need to identify such growth stocks for investment, which brings down the risk of stock investing almost to zero.