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How can Narendra Modi help improve your Investment Portfolio?

Now here is something for you to think about. What would happen if the current Prime Minister of India, Mr. Narendra Modi became an investor?

I think he would be a really savvy investor focusing more on growth investing and less on value investing. But irrespective of the type of investor he becomes, there are 2 very important things which he has said, and which can be used in the context of investing.

Narendra Modi Investing India



And those things are the two calls for action given by him:
#GiveItUp

#SwachhBharat

Now the second one may not seem like something relevant. But please hear me out for some more time.
I know you have made an online portfolio tracker, which you check regularly. Almost daily.
Don’t worry. It’s your portfolio and you have every right to check it as many times as you want. You can even do it on an hourly basis. No one will stop you. So open your portfolio and have a look at all the stocks you own. And here, I am talking about your investment portfolio and not the trading one. I assume you have two different ones. 🙂
Now you need to find out two things. And I want you to be really honest with yourself.
The first thing is…
To look for stocks, which you bought at really high prices and which are now trading at a fraction of your purchase price.
Found some? Great.
Though I might be generalizing, but chances are high that you are waiting for these to come back (atleast) upto the purchase price levels – after which, you will sell them. Sounds right?
Now this approach is fine if the business behind these stocks is doing great and is a sustainable long-term business. But if the business in itself is not great (like airlines, etc.), or if the management is driven more by ego and less by common sense, and regularly ends up borrowing thousands of crores (and which they in no way can ever pay off), then you are only hurting yourself by waiting.
So for all practical purposes, the probability of share prices of such business, going back to the levels at which you bought them is very low.
So here is where Mr. Modi’s first call-to-action comes.
You need to #Give It Up.
You need to give up the hope that stock of that not-so-great (or honestly speaking, shitty) business will ever come back up. Book your losses. Move on. And invest in better businesses.
Please do it. Because if you don’t do it, you are losing out on investing in far superior businesses which might be available at bargain prices.
Now lets see what the second call-to-action by our PM can do for your portfolio:
#SwachhBharat
Now I will modify that a bit:
#Clean Portfolio
(For those who don’t understand Hindi, the word ‘Swachh’ means ‘Clean’ in English)
Once again, I request you to have a look at your portfolio tracker.
Do you see more than 15-20 stocks?
Have you bought most of these in recent times? In less than a year or so?
Then I will assume that you are up-to-date with all the important developments and data about all those 15-20 businesses. Not stock prices. I am talking about the actual businesses.

Am I right in my assumption? Are you really tracking how the business behind the stock is performing?
If you did not answer the previous question with a ‘Yes’, then it means that you are doing something similar to making blind bets in the game of cards.

You are putting your hard-earned money in something which you don’t understand completely. Doesn’t that sound stupid? 
If it doesn’t, then best of luck with that guys!! It is a mistake similar to this one.
Now it’s possible that some stocks in your portfolio are quite old and big-multibaggers. And hence, you don’t need to worry too much about them. In such cases, ignorance might not be very dangerous.
But if you are buying stocks frequently, even though with an intention to hold them for long term, then you don’t want to create a zoo within your portfolio. Isn’t it? Some great investors like Peter Lynch were able to do it. But please understand the importance of the word ‘great’ in previous sentence and how applicable or non-applicable it is on people like us.
So give your portfolio a clean up. Only keep a manageable number of stocks in your portfolio. And by manageable, I mean a number only those many companies, which you can actually understand and track regularly. And by tracking, I don’t mean tracking price movements. I mean tracking the developments in the industry and company’s own business. 

So Go on. #GiveItUp and have a #CleanPortfolio.


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10 PSU Banks which pushed up Portfolio Returns by 47% in last 3 months!!

I still remember my last portfolio update post in February 2014. The post was titled PSU Banks are Losing Hell Lot of Money, and rightly so. After just three months of starting this portfolio, it was down -12% compared to Nifty’s -1.5% returns. 

It seemed that markets were hell bent on proving me wrong. 🙂

But thanks to Modi-Wave sweeping the country, last month has pushed up PSU banking stocks like a eagerly awaited IPO’s price in first week of its listing. And because of which, the overall 6 months returns of this portfolio has reached a stupendous 27%!!

And if you include dividends, it touches almost 29%. And this is against Nifty’s return of 15.8%. And here we are talking about big, country-wide banks and not small cap stocks.
PSU Bank Stock Returns 2014
Note – Returns based on prices upto 14th-May-2014

But before you put your money in PSU banks, please remember that on the business front, almost nothing has changed for these banks. Its only because of the so-called-hope, that these stocks have charged ahead. But having said that, prices these shares were trading sometime back were ridiculously low compared to historical valuations. And because expectation from this portfolio is to give better returns than index in next 5 yearsthis current out-performance should be taken as an exception and not as a rule.


But there are two simple yet important observations which I would like to highlight here:

  • Sometime in January 2014, concerns about asset quality were getting a lot of media attention & hence stocks of these banks reached almost absurd levels of undervaluation. But when the markets turned euphoric due to elections, it was the group of larger banks (SBI, BOB, PNB, etc) that bounced higher than smaller ones (Syndicate, Allahabad, Andhra, etc). This came as a surprise as I expected smaller ones to be more volatile and prone to movement due to market noises (even though asset quality of these smaller ones pose a bigger question than that of larger ones.)
  • Another interesting fact is that this Portfolio of government owned PSU banks is quite a volatile one. And as you can see in table below, quarter-on-quarter portfolio returns have fluctuated from -14% to +47% over the last 6 months. And that is a very high level of volatility. So, those who have difficulty sleeping at night due to stock markets, please avoid this group of stocks 🙂
PSU Banks Volatility

In last post, I had specifically mentioned (read speculated) that it was possible that these stocks would become volatile in coming quarter. Never thought volatility would be so high. 🙂

PSU Banks Prediction
A screenshot from previous post dated 15-Feb-2014
If you are interested in knowing further details of these 10 banks’ share-price performance & dividends in last 6 months, please click on image below to enlarge:

Detailed Portfolio Tracker – Last 6 Months – Click to enlarge
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Why I Want Indian Elections To Fail This Time?

Don’t get me wrong guys. I am not against our country.

If one was to take the current national mood (as suggested by opinion polls) and mediaproduced content as dependable indicators of election results, there are decent chances that India might get a strong and stable government.

India Elections 2014 Voting Machine
Indian Elections 2014 – To decide course of markets for next 5 years

Who would it be?

I don’t know. And atleast for this post, its immaterial which party or alliance it is.

But before I tell you why I want Indian elections to fail, I want to caution everyone.

What I Am Concerned About…

In last 6 months, Indian stock markets have made new highs and moved up from 19,000 to a new high of more than 22,000. This means a good 15% increase in less than 6 months!!  And if one thinks carefully, it has only been in last 6 months that various political parties have become ‘electionally’ active.

Fundamentally, almost nothing has changed apart from Rupee appreciation.

So as far as I am concerned, this rally is fueled mostly by hope and people’s expectations.

And there is nothing wrong in being hopeful and optimistic about a strong leader. But to think that someone has a magic wand and would change everything with the word go is like… being very unintelligent.

People have already started talking about newer and bigger targets like 40,000 for Sensex. 

And headlines like the below ones have become very common
India Elections 2014 New Headlines
Common Newspaper / Online New Site Headlines
So guys..

Let’s be a little rational, if not wise.

Stock Markets are riskier when moving up. And as of now, markets are moving up pretty fast.

A number like 40,000 or 42,000 is not unachievable. And it is possible that it might happen over the next five years. But stock market history bears witness that whenever things get a little too optimistic, and markets run up without any improvement in fundamentals, there is a reversion towards the mean, which means…


When will this happen?

I don’t know.

Will this happen?

Of course.

And gods forbid, if the new government is unable to deliver on its promises within the first year, the markets would definitely overreact and start grinding down.

So..

Why Do I Actually Want These Elections To Fail In Giving A Clear Majority To Anyone…

Once again, don’t get me wrong. I am not against our country. But I am an investor too.
Anyways the government would be formed. But in case there is no one with clear majority, then markets would not take this as good news.

And that is what I like. Markets go down because of bad news or because of absence of good news. So to bring sanity back to Indian markets, it would be a good correction to have. And for long term investors, what better can happen than a decent correction?

I will get to buy stocks I like & want to buy in high numbers but at lower prices. And to be honest, I regularly pray for stock market corrections.

These are my views and you can throw bricks on me for these thoughts about 2014 election results. I accept all kinds of bricks. 🙂

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