Tag Archives: equities

Long Term Portfolio Stocks in India – Sure Shot Large Cap Bets

27 Oct

‘Growth or appreciation’ is the primary goal of any stock investment regardless of your time horizon and risk profile. Dividends, buyback opportunities, merger-demerger benefits etc are secondary, although still significant in providing additional advantages to your equity portfolio.

Just going by that primary definition of ‘appreciation’ let me explain an easy way of picking safe and sure-shot long term portfolio stocks. I have two objectives here – first, to explain this simple methodology of picking steady growth portfolio stocks and second, to share a portfolio of 12 solid large cap stocks that one can blindly invest and forget for the next 10 or 20 years to build massive wealth. Well, I am not talking about lump sum investment here but one can keep buying these twelve stocks at every market correction opportunity OR at regular intervals (SIP) in order to build long term wealth. This is also an attempt answer some of the queries that I keep getting from the readers of this blog regarding steady portfolio stocks for long term.

The Methodology of Choosing Steady Growth Stocks

Now, over to the methodology – It’s actually a pretty simple technique and no rocket science. Please follow the following steps to arrive at your final list.

Step 1: First you have to make an initial list of about 50 stocks from multiple sectors/industries. This initial list can be easily made by taking all 30 Sensex stocks plus say 20 big names from the NSE Top 100 list. If you are confused here, start with the list of top 100 stocks in NSE itself.

Step 2: Now, since our aim is price ‘appreciation’ in the long term, we need to have a look at the long term chart of these companies. You can use Yahoo finance, Money Control or NSE / BSE charts to see the 10 year or 15 year chart of the companies shortlisted from Step 1. In this step, you have to pick all those companies which have a steadily upward going chart (which of course indicates price appreciation). E.g. the charts of HDFC Bank or Asian Paints look exceptionally good and not that of SBI or ONGC. Discard all those companies that don’t have a smooth upward looking price journey and you will be left with 15 or 20 good growth stories (price-wise or chart-wise)

Step 3: This list, of say 20 companies that have great looking charts, has to be further scrutinized for good growth parameters. Here, I simply look at the RoE (Return on Equity), RoCE (Return on Capital Employed) and Sales and Profit parameters of these stocks. I usually use the Screener site to check these parameters. For long term growth stocks, a steady RoE of say above 15 (preferably 20+), RoCE of above 20 (Preferably 25 or 30) and a positive sales and profit growth in double figures is more than enough. Don’t be surprised if you notice companies with an RoE of 50 or RoCE of 200 plus.

Step 4: Most of the stocks with from Step 2 and 3 may be having good growth parameters. Now, to drop a few more, please take a look at their Debt / Equity ratio, again using Screener. Here, for long term stocks, I would drop all those companies that have a Debt to Equity ratio of more than 25% (0.25). Ideally, one should pick zero debt companies here or the ones with Debt / Equity ratio as zero or nearly zero. Please note that in the case of Banking, Financial and NBFC stocks, one shouldn’t look at this ratio, as their primary business itself is borrowing and lending

The above four steps would leave you with a dozen or so stellar performers that you can invest in for solid long term gains.

Good and Not-So-Good long term charts

Here’re some examples of typical charts to go for, as discussed in Step 2. Please note that one has to look into the 10 or 15 year chart and NOT 2 or 5 year charts while hunting for potential long term portfolio stocks.

Exceptional growth stocks with great charts

Asian Paints

HDFC Bank

HUL

Pidilite

Decent companies with poor long term charts

Well, these are still portfolio stocks for historic reasons but they don’t necessarily fetch you the desired price appreciation. On the other hand, just by looking at their charts, one can figure out that they are good for medium term trading point of view whereby they offer many up and down cycles in the long term charts.

ONGC

SBI

My list of 12 Buy-and-Forget Long Term Portfolio Stocks

Based on the above screening, the following would be my list of long term portfolio stocks across industries. Ten of them are index stocks while two others are high growth non-index stocks with proven track record and continuous growth in the future as well.


1. Asian Paints Ltd
2. Bajaj Auto Ltd
3. Bajaj Finance Ltd
4. HCL Technologies Ltd
5. HDFC
6. HDFC Bank Ltd
7. Hindustan Unilever Ltd
8. Lupin Ltd
9. Maruti Suzuki Ltd
10. Pidilite Industries
11. Yes Bank Ltd
12. Zee Entertaintment Ltd

Now, all those who are looking for multibagger recommendations, from a few months point of view, may ask yourselves the following question. Would you put your hard-earned money in risky multibagger stocks OR in safe, established businesses that can return 10 or 15 times over a ten year period?

Happy Investing!

(Standard disclaimer: I am not a qualified investment advisor. Do your own research before investing or consult a certified financial advisor. I personally hold some of the above stocks in my long term portfolio)

10 Small Cap Stocks that offer Significant Growth Potential

18 Jan

About two years back, I had recommended some decent midcap stocks most of which appreciated big time even before the current bull run started. I have been, since, trying to dig out some value picks in the mid cap segment but unfortunately, most of them ran up big time – much beyond their fair valuations. Let me concentrate on some pure small cap stocks this time with their underlying businesses holding very good growth potential and stock appreciation for the future.

Important: You may note that many of the stocks listed below, while still offering value, have run up a bit as well. The markets are at near all-time-highs and hence some of these stocks can go down sharply at some point. Hence it would be ideal to buy them in the ranges mentioned or take a staggered approach. Further, never put a lot of money into small caps stocks – not more than 10%-15% of your overall equity portfolio

 

Small Cap Stock Picks

(Company Name, Price on 18/01/2015, Buy Price Range)


1. Chaman Lal Setia Exports (80, 50-60)

2. Gujarat Foils (70, 48-55)

3. Goodricke Group (152, CMP and at dips)

4. Goodyear India (624, 450-480)

5. Hinduja Global Solutions (629, CMP and at dips)

6. JVL Agro Industries (20, 15-18)

7. Jyoti Structures (39, CMP)

8. Noida Toll Bridge Company (35, 24-28)

9. Nucleus Software Exports (199, At dips below 160)

10. Stylam Industries (83, At dips below 60)

 

Criteria for Selection

Some of the criteria used to pick the small cap stock mentioned here are:

  • Industry (Excluded Oils, Chemicals, Steel, Textiles etc)
  • Promoters (How trustworthy are they?)
  • Age & Stability of the company
  • Growth Numbers (Top and Bottom line)
  • Dividend Yield (As applicable)
  • Debt on Book (Zero or Manageable debt)

As you know, the biggest challenge for most small cap companies is managing the debt as they usually avail high interest loans. A big chunk of their profit flows out as interest repayment and that’s probably the main parameter that would define the growth potential of many of them.

Disclosure: As of writing of this post, I am invested in JVL Agro Industries. I plan to invest in at least 3-4 of the above listed companies as and when their stock quotes reach the ranges mentioned.

Disclaimer: I am not a qualified finance adviser or portfolio manager. Please consult the experts before taking any investment decision in the equity market. You may have to do further research on these stocks on financial portals, websites of these companies as well as mandatory filings by them before taking any positions.

Good luck with your equity investments!

Updates

June 01, 2015:

1. Chaman Lal Setia Exports: Hold

2. Gujarat Foils: Hold

3. Goodricke Group: Avoid/Exit (Growth outlook not exciting, Exit on any rally)

4. Goodyear India: Buy in the initially recommended range only

5. Hinduja Global Solutions: Hold

6. JVL Agro Industries: Hold

7. Jyoti Structures: Avoid/Book loss (No debt restructuring seen, Interest coverage poor)

8. Noida Toll Bridge Company: Buy in the initially recommended range only

9. Nucleus Software Exports: Book Partial Profit

10. Stylam Industries: Buy in the initially recommended range only

August 13, 2015:

1. Chaman Lal Setia Exports: Book Partial Profit (Stock already doubled from the recommended date and tripled from the recommended price!)

2. Gujarat Foils: Hold

3. Goodricke Group: Exited (See previous update) (Growth outlook not exciting, Exit on any rally)

4. Goodyear India: Buy in the initially recommended range only, Hold if you already entered

5. Hinduja Global Solutions: Hold

6. JVL Agro Industries: Hold

7. Jyoti Structures: Exited (See previous update)

8. Noida Toll Bridge Company: Hold

9. Nucleus Software Exports: Booked Partial Profit (See previous update), Hold the rest

10. Stylam Industries: Buy in the initially recommended range only, Hold if you already entered (Stock more than doubled from the recommended date/price)

Note: Due to lack of time, I will not be providing any more update on this particular list. The readers are expected to take further research based action on their holdings.

My Stock Portfolio

7 Jun

Ever since I posted my article on Midcap recommendations, I have been getting emails from a few readers asking for stock recommendations, mutual fund ideas, SIP investments etc.

As it is practically impossible to answer all queries by email, I thought of making it simpler by publicly posting my stock portfolio in this post (which I will keep updating)

Note: Before attempting to invest in any of these stocks, I strongly urge you to read through the rest of this post – especially the Disclaimer section.

My Equity Portfolio

* Last updated on 2-November-2017

1. Long Term Basket (5+ Years)

* Last action: Added more ONGC

Stock Name Investment Horizon Status
Asian Paints Ltd Long Term PROFIT
Aurobindo Pharma Long Term PROFIT
HCL Technologies Ltd Long Term PROFIT
Hindustan Uniliever Ltd Long Term PROFIT
*Kotak Gold ETF Long Term FLAT
Lupin Ltd Long Term LOSS
NMDC Long Term PROFIT
ONGC Long Term LOSS


2. Medium Term Basket (6 Months to 5 Years)

(# Some of these stocks may be moved to Long Term basket later)
* Last action: None

Stock Name Investment Horizon Status
IDFC Medium Term LOSS
IDFC Bank Medium Term PROFIT
Subex Ltd Medium Term LOSS


3. Short Term – Swing Trade Basket (Few Days to Weeks)

* Last action: Booked profit on Tata Motors (DVR), Added ITC

Stock Name Investment Horizon Status
Coal India Short Term LOSS
ITC Short Term LOSS


My Investor profile

I am retired Software professional who took an early retirement from the IT industry to pursue a few simpler interests in life. I have been an investor in the equity market for many years but stopped the same just about an year before my retirement due to change in risk profile. However, seeing the new majority government in action at the center (and my own need to build wealth post retirement), I decided to get back to the stock market again to ride the bull run. I intent to build a portfolio of 5-10 stocks in the coming weeks with special focus on mid caps with good valuation that I intent to keep from 6 months up to 5 years. At the same time, I plan to allocate a bigger chunk towards well known large caps and blue-chip companies with very long term view (5-25 years). There’s also some swing trade or short term positions that I hold from time to time.

By the way, direct equities form only about 20% of my overall portfolio due to my investment risk profile. I also do trading in equities once in a while but that’s more for fun. I am 99% an investor (and less of a trader) with medium to long term goals. I am also invested heavily in mutual funds (~30%) and that’s what is giving me real good returns from long term point of view. Having said that, I must say that I have the knack of picking the right stocks at the right time but since I exited them too early, I ended up having limited profits from stocks as compared to my funds. I plan to rectify this with my new approach of having buy-and-forget large/mid caps stocks in one basket, medium term picks in another and swing trade/short term picks in yet another as shown in the three tables here.

Disclaimer

The stocks listed here are actually part of my portfolio and it doesn’t necessarily mean a recommendation to your investment goals. Further, here in this forum, I will NOT be discussing why I bought certain stocks, when I bought/sold, target price etc. All financial details, disclosures, news and research reports of the stocks mentioned here are available on portals like Bombay Stock Exchange or Moneycontrol.com. Hence, you are requested to do your own research and adjudge the suitability of the stocks mentioned here for your kind of investments.

The long term portfolio mentioned here may not be of interest to many people who are in the look out of quick bucks from the stock market. However, some of the stocks mentioned in the short to medium term portfolio (second table) may interest some of you.

Further, I am not a qualified Financial Adviser or portfolio manager to help you with your investment needs. Any loss or gain that may be resulted from investing in the stocks mentioned here may not be attributed to me.

Good luck in your equity investments!

Investment strategy for 2007 and beyond

7 Mar

The jittery that the Indian equity market is offering right now might make one wonder as to what instruments are right for this kind of conditions. A lot of people had hope in the real estate and infrastructure until the middle of 2006. This does not seem to hold good anymore with the financial minister rolling out a very ordinary Union Budget 2007-08. Interest rates are further heading northward and cement sector has been hammered with additional excise duties stamped on them.

The Indian market, unlike the not-so-recent-past, seems to be reading and vigorously reacting to the global cues. Earlier the upcoming economies and bourses were generally driven by one or two major factors such as global crude prices, local agricultural and manufacturing growth predictions, monsoon/rain forecasts etc. Nowadays FII (Foreign Institutional Investors) activities, far eastern market movements, US employment rates, terrorist threats, Greenspan’s untimely statements (and may be even George Bush’s mother-in-law catching a mild cold) etc seems to be taking the Indian market for a roller coaster ride. The volatility is so high that small-time retail investors are the worst suffered in most cases.

(Before trying to analyze what is the best form of investment going forward, let me put forth a disclaimer. Here I am going to talk only from the view point of young – includes middle-aged persons like me – investors. I cannot really talk on behalf of the older and matured lot of investors.)

Equities for long term

I still believe that equities are the best instruments to meet your long term financial needs. This is because of the fact that no other options could yield good enough returns to beat the high inflation rates. With proper planning it is possible that the equities can yield upward of 12% annualized returns in long term. No other instruments can possibly guarantee this kind of returns on investment. So if you are below thirty or thirty five, it may be a good idea to expose 50% of your portfolio to equity market (stocks or equity oriented funds – both with long term horizon in mind). Now I am sure that most of the youngsters out there have already taken care of this aspect. The missing trick could the ‘long term’ factor. Most of the younger lot that I interact with want fast money that matches their fast lifestyle – This does not quite work with equities. Long term investment is preferred (Tip 1) over risky trading. Also, stock or fund picking becomes easier in this case.

The most critical aspect is in picking the right stocks with long term (10-20 years) value in mind. If you look at the past performance of certain blue-chip companies this may not be all that difficult. But any portfolio will get some extra punch (Tip 2) if it has one or two mid-caps that offers greater mid-term growth. Most of the time the difficult part is picking these strap-on boosters that mostly keep changing in your portfolio every other year or so. In this case one might need professional advice (and not rumours) and help from company research reports. One can afford to have one or two such scrips (Max 15% of your equity exposure) in a portfolio of 12-15 pure long-term plays. If you are sure about your long-term picks, don’t let the market fluctuations affect your decisions. Ups and downs are common in the market and you never loose in holding a good long term play that temporarily goes down. In other words, even if the current market price (CMP) is less than your purchase price, it is only notional. i.e. You don’t loose anything unless you sell them. So never sell your shares at loss (Tip 3)!

Mutual Funds

Equity oriented mutual funds are for those who don’t want to take risks on which stocks to pick. If one goes for a mutual fund he/she is basically delegating this management risk to the fund managers those who have better insights and scientific research capabilities and tools to analyze potential companies to invest and their shares better. This is always a wise choice for long term growth.

Picking an equity oriented fund is far easier than picking a stock. Most of the fund performance data (as well as fund manager’s reputation and profile) is published on various portals and is available for your reference. One needs to consider at least past three years’ – preferably more than 5 years – performance of a fund before making a decision. One might want to pick a mix of funds than just one to make sure that the equity exposure is spread across a good blend of large cap stocks of huge companies and mid cap stocks of upcoming companies. One should take care not to invest all the money in mid cap oriented funds

Systematic Investment Plans (SIPs) are very good for those have as steady income and who don’t want take decisions on when to invest. This is indeed a very good mechanism to make sure that investment as a ‘systematic’ habit is built into an individual. But please remember that SIPs are only worth if you have a longer investment horizon. Ideally, one should think of investing in SIPs if you opt of 2-5 years (or even more) of monthly recurring investment. If you don’t want to commit for a systematic plan and you are an adamant investor, you could still invest systematically by entering your selected funds on low market days of every month. But then you should stick to your own resolutions and plans. Go sip is my tip 4 for you.

SIPs can be really good for entering mutual funds. But why not SIP or similar approach for buying stocks? Say, you want to purchase 100 shares of ITC this year. Why not buy 10 each every month at possible dips? It is always better to buy shares in smaller quantities (Tip 5) over a number of times until you acquire as much as you want.

All that glitters is GOLD!

As long as the Indians have their craze for the yellow metal, investing in gold is a very effective mechanism for wealth creation. If you see the way the gold prices have been shooting up for the past six years you will realize that purchasing gold is a lot better option than investments such as bank deposits or post office schemes. So whenever the gold prices are having minor dips or if it is non-wedding seasons in India, make it a habit to buy some gold (Tip 6). One can have as much as 15% (ideally 10%) gold in his portfolio. Also, never buy gold as jewelery but buy them in the form gold bars or coins which is easier to sell and will not have any depreciation or making charge related issues. The purity of the gold should be confirmed before buying the same. A good bet could be purchasing the same from banks like ICICI that offers 99.9% pure gold bars at market rates. Those who travel via gulf countries like UAE may make it a habit to buy gold abroad which is probably 10% cheaper than Indian gold prices. Also purity is guaranteed in that case.

Another excellent way of investing in gold is via the newly launched Gold Exchange Traded Funds (ETF). This option also provides you the protection that comes along with the dematerialized form of investing – you don’t need lockers and strong rooms in this case. Systematically adding a few units every month to the gold scheme may help in the long run.

Plan your Provident Fund

One of the other ways to passively invest for long term is via additional contribution to your provident fund. Why is this important? It is important because it is the only guaranteed mechanism towards your retirement planning unless you opt for some pension funds. Also, I personally believe that it is meant for the times when India becomes a developed nation (20-25 years from now) where interest rates are below 2.5% or 3% and inflation is almost nil. You will realize the value of money that you saved then. However, it is not a good idea to put more than 10% of your monthly income into PF in addition to what the employer contributes. From time to time the government will announce additional interest towards PF contributions. One needs to exploit these grace periods by adding more contribution to his/her PF whenever these offers are valid (Tip 7).

Commodities

Commodity trading is the other form of strap-on boosters that one can experiment to make short term money out of price variations in the commodity market. The commodity market in India is huge now since the government allowed the trading of the same via exchanges since 2004. Earlier only bullion trading was possible. However, I do not have any tips to pass on here as I am yet to experiment trading in commodities. But I am told that it is a very good money making mechanism in India where there are predictable patterns on the price movements as we have hundreds of festivals and seasonal events.

Real estate

25 years from now, having own land on earth may become a luxury. That will be the time when part of the human crowd will be living in other planets or may be living in one of the closets in a 250 storied apartment complex. So investing in real estate (not apartments but land) is a vise choice any day. As an investment, one does not need to be in the look out of prime locations or within city limits. Grab whatever you can (Tip 8) at throw away prices in remote areas or mountains or marshy lands or wherever. The land that comes at Rs 10 per sqft in timbuktu will be fetching you Rs. 5000 per sqft in another 20 years. Also technology will be developed to convert even wastelands into attractive home or business areas. But beware, if you want to lead a very peaceful retirement life, real estate may not be the long term thing for you.

Managing and looking after real estate in itself is a physically tiring and highly demanding activity that might deny you sleep. But it will always remain an ever-appreciating asset. Lastly, if you want to accumulate assets that will appreciate, you should also cut down on your ‘early spending’. The current consumerism and youth’s lifestyle is such that they want to be the first one to buy a new model of mobile phone, mp3 player, plasma TV or a better car as soon as it hits the market. The cost of an early buying could be double compared to differing that decision by six months or an year – especially when it comes to buying electronics. The more you cut such expenses the stronger your wealth creation path is.

Happy investing!

(Personal note: With the above words on investment wisdom one would naturally think that a seasoned investor is sitting at the other end. I should apologize that I am one of the losers on the bourses thought the blame goes to Harshad Mehta, Ketan Parekh, dot com fall or World Trade Centre attack :) But the good news is that I have started thinking long and the bad news, I am yet to put some of these thoughts into practice)