Model Portfolio Performance Review - 2016

On 21st March 2016, model portfolio completed its 3rd year of existence. Though last year was quite challenging for few stocks due to global commodities melt down, 2017 is expected to be quite good in terms of portfolio performance as the stocks in the model portfolio has deep value and are backed by hard assets on ground.

The detailed performance review of the portfolio at market value as on 21st March 2016 is given below:

Post Office Small Savings Rates - Ready Reckoner

Govt of India has decided to review small saving schemes rates at Post Office on a quarterly basis instead of revising the rates once in a year. 

For the quarter effective 1st April 2016 to 30 June 2016, the rates have been reduced by 0.4% to 1.3% depending on the saving scheme. You can download and print the post office rates in India ready reckoner pdf from the following link:

Life is just an employer - Why ask less?

Jessie Belle Rittenhouse in his very inspirational poem "My Wage" termed Life as a generous employer from whom you can get whatever you ask for. If you ask for penny you will get penny and if you ask billion you will get billion. Life gives you exactly what you ask for. The poem also got featured in the very famous book "Think and Grow Rich" by Napoleon Hill. 

Trading Idea: Sell Nifty 6300 put

After a long while trading idea section is being restarted. Will try to publish one trading idea per month going forward. 

For the month of March 2016, one can sell Nifty 6300 put 1 lot (75) at Rs.15 thereby generating decent return on investment. Since 6300 is a very strong support area, it is highly unlikely that Nifty would close below that level in March series. Implied volatility at 6300 strike is quite high due to budget round the corner.

Total Return from the trade:

Considering one is able to sell the March PUT option of Nifty 6300 strike price at current market premium of Rs. 15 he/she can generate following return from this trade:

Portfolio Update Jan 2016

First Portfolio update of Calendar 2016. Sold a holding, averaged another in half and increased cash position to be deployed on further correction for buying Nifty BEES.

You can check the updated portfolio using the marquee at the right sidebar.

Buy Indian Stocks, China stock market crash an opportunity

Chinese stock markets and fear of its hard landing has played havoc on commodities and scaring equity investors globally. But doesn't it feel like it's getting far too much? Oil at $30 with just around a million barrel oversupply when half the world production of 95 million barrels per day is making cash losses at current prices. Similarly doom Sayers are predicting crash in Chinese economy and thus a crash in global stock markets. Lets look at some facts behind Chinese stock markets and if it really can hurt global investors and markets.

CSI 300 5 Year Chart

1. Unlike mature markets of Europe, America, India etc, Chinese stock markets have more than 80% retail investors with barely 2% foreign holding. So a 50% crash in Chinese market would affects these foreign investors portfolio by just 1%. BIG DEAL!

You don't need a bear market to lose money

In past 2 years what I've hated most is people telling me I should be making lot of money as market is going up since then. In fact it hasn't been that very different than my past performance. 2015 specially was quite bad for my equity investment portfolio as I am overweight some commodity companies in oil & aluminium space which had a terrible year in-spite of Nifty Sensex almost flat. That is exactly the biggest problem with general investors. When market goes up they don't participate cursing the market as gone up so much while when it comes down they wait indefinitely to catch the bottom.

You can make or lose money in any kind of market. So you don't need only a bull market to make money while even a raging bull market can make you lose a great deal of money. 

For example in a bull market you lose money if:

Where to invest in 2016?

If Nifty corrects to 7500  - 7600 levels that would be good time to start buying Nifty Bees (Goldman Sachs ETF for Nifty Index listed and traded just like any other stock) as a diversified portfolio of 50 great stocks in India. At 7500 the index would have roughly 7% earnings yield which will also be your fixed deposit yield 1 year forward. With gold & Real estate delivering negative return and thus out of Indian investors portfolio one will not have much choice but to invest in Indian equities. 

Low earnings base of current year, sharp reduction in interest rates, under utilization of factory capacities, govt. spending & reforms, and benign commodity prices will all work together in favor of Indian equities and thus provide floor. A good monsoon next year will add icing on the cake and Nifty could breach 9000 by next Diwali. 

Portfolio Update - Oct 2015

Sold couple of stocks from the portfolio and generated some cash to be deployed once market retraces some of the recent gains.

Are startups in India all about funding?

Bengaluru based food tech startup dazo shuts down due to lack of funding

Thank god I am not running after the startup frenzy aka showing prototypes & raising millions. A business is not just about how much you can raise from VCs and be billionaire on paper but keep burning cash. I believe it's about doing something you are passionate about but makes economic sense. I can sell a 1000 buck product at 500 and show a billion dollar sales in 1 year as long as I ve $500 million funding in my bank and get a 10 times sales valuation of $10 billion making myself notional billionaire. What's that?

I think in India we are repeating of what happened in U.S in 2000 and could cost India dearly. Startup.com (https://www.youtube.com/watch?v=ibuiUXOTE4M) documentary filmed in 1999 is an eye opener. There is nothing like doing something on your own but being a Marwari I understand the importance of starting small, scaling gradually and not do something that requires huge amount of incremental capital to start. I am an old school guy but I like to take home my profits even it's very small and use that to grow the business gradually with small doses of fresh capital. That helps me not go bust even if I do a blunder, which is bound to happen in your early stages of starting a business.

Can Cairn India and Vedanta Merger happen?

Given the current scenario in which metals and mining companies globally are facing brutal sell-off it seems highly unlikely for the Cairn and Vedanta merger to go through. Mining giant Glencore collapsed 30% in a single day on 28th Sep 2015. Vale, another Brazil based iron ore giant, is down more than 80% from it’s 2011 high. Back home we have Hindalco and Vedanta Ltd and both has corrected 65% and 75% respectively from their 2014 high. Cairn India is also a commodity company but the dynamics of crude oil is very different from metals which are recyclable. Beside that China consume 40-50% of most of the global metals produces while crude oil demand is fairly distributed.

Portfolio Update as on Sep 2015

Equity Portfolio Update after three & half months. Some minor adjustments done on existing shares and added a new name where huge value has emerged and has very favorable risk reward ratio. Please check the updated portfolio below to see all the changes:

Amit Agarwal Model Equity Portfolio

Can IDBI bank be privatized?

IDBI Bank is governed under IDBI act which was amended in 1994 to allow 49% private ownership (as shown in the extract below taken from June 2015 investor presentation). As per Memorandum of Articles of Associations minimum govt shareholding in the IDBI Bank has to be 51% (As shown in the second shapshot taken from the presentation).  Use the link in brackets to open June 2015 investor's presentation ( http://www.idbi.com/pdf/investor/IDBI_Investor_Presentation_June_2015.pdf)

Snapshot1: IDBI Bank History

Personal Finance - The James Altucher Way

James Altucher challenges conventional thoughts at every step and compel readers to think and act differently. Here is his take on personal finance and why the terms itself is a big scam in his view. 

I personally agree with him on most of the points and if you really want to get rich in your life his points need serious attention. Following is the link to his personal finance blog post:

LIC & Goldman Sachs backed Amtek Auto destroyed 80% of Investors Wealth in a Month

We all feel safe in stocks which are backed by strong Institutions and get good sleep while owning them believing nothing too bad will happen there. We assume that these institutions that pay huge salaries to hire best in class research analysts have done thorough analysis before putting money into the stock and we can safely follow them. Well in investing world nothing is safe and especially in Stocks where all the analysis is on paper while the actual show is run by the management / promoter. While following Institutions is relatively better than doing personal analysis (if you are not a very seasoned analyst), following them blindly and committing all or major portion of your capital to one single stock could bring you disaster.

Amtek Auto is one such example which is backed by some renowned institutions such as LIC & Goldman Sachs. As on 30^th June 2015 LIC held more than 8.4 million shares while Goldman Sachs had 4.2 million shares of the company. Together Institutions held over 15% of the company as on 30^th June 2015. 

Pitt Bull's Marty Schwartz Interview 2015

Must Watch Q&A session with Pitt Bull's author Marty Schwartz. The 70 years old legendary trader who was featured in the first edition of Market Wizards by Jack Schwager shares tons of wisdom and some key strategies he employed in 80's and 90's and how his trading styles have evolved with the advent of algo trading and HFTs. A bit lengthy interview but worth a watch.

Government of India Divestment Plan FY 2015 - 2016

Stocks to watch where Govt. of India has decided to divest minority stake in the fiscal year 2015-16. ONGC and IOC are among the biggest divestment candidates and are expected to fetch more than 20k crores. 

In total govt has set the target of little over Rs.46000 crores through minority stake sale of listed companies.While divestment in IOC could be little easy as the stock has been hitting life time high, thanks to the falling crude prices, but a 5% sale in ONGC appears difficult as the stock is hitting 52 week lows, thanks again to the falling crude prices.

Among the lot ONGC and Nalco appears very attractively valued at 280 and 38 bucks as on 25th July 2015 for investment purpose with at least 2 years horizon. 

Indian Companies that benefits from fall in crude oil price

60 percent fall in past one year and more than 10% fall in past one week, India being a huge energy importer benefits immensely from the crude oil price collapse. Also there are many sectors and companies withing those sectors that benefits hugely from the fall in crude oil prices. For example Paints industry is a direct beneficiary and Asian Paints in particular with very strong brand positioning. Following is the sector wise analysis on who is going to be benefited the most.

Top 10 crude oil producers in World - 10 Years chart

One magnificent chart that shows the year wise production of top 10 global crude oil producing countries for any year starting 2004 to 2014.

# Crude oil production of top 3 producing countries v.i.z U.S, Saudi Arabia and Russia is up 1.5 million barrels per day in 2014 vs 2013.

Private Sector Banks: 2014 & 2015 results at a glance

Thirteen Private sector banks reported Rs. 37,361 crores of Net Profit for the financial year ended 31st March 2015 against Rs. 31,680 crores of profit reported in the year ended 31st march 2014.

5 Reasons why LIC could say no to the Cairn Vedanta merger

1. LIC till 31st March had little over 1.5% stake in Vedanta Ltd while over 9% stake in Cairn India. If there is more value in Vedanta Ltd than Cairn India then why LIC stake in Vedanta is just over one and half percent. Also the logic of tax overhang on Cairn India for low valuation is meaningless as if the court ruling is in favor of CBDT, it is Vedanta which will have to shell out the tax and penalty amount which will be huge setback considering it's already stretched balance sheet. 

2. LIC had over 11% stake in Hindalco till 31st March 2015 and has recently increased it's stake in the company by 2% to 13%. As we all know Hindalco and Vedanta are somewhat similar company with majority of revenue coming from Aluminium and copper refining. Its must be observed that LIC is preferring Hindalco vs Vedanta for obvious reason. If the merger go through LIC would eventually have very high exposure to metals sector as it's stake in Vedanta Ltd will be go over 6%.

3. LIC currently receives around 150 crores of dividend out of it's investment in cairn India while post merger it's dividend income from swapped shares will reduce to around 70 crores per annum with relatively increased risk as Vedanta has very high amount of debt and Cairn India is a cash rich company.

Minority Shareholders against Cairn India - Vedanta Merger

The relentless fall in Cairn India share prices since past couple of months in-spite of handsome recovery in crude oil smells fishy and hints at share price rigging to benefit the Anil Agarwal group so that the residual 40% public stake in Cairn India can be swapped with least number of Vedanta Ltd shares. Cairn India being the only pure crude oil private player listed in India, existing public shareholders can benefit in no way with this reverse merger and is intended to benefit only the Vedanta group.

In an article titles "Cairn India Stock Analysis", it was really surprising how Cairn India is trading at ridiculous valuations and available at only 4 years of cash flow. Crude oil outlook will also improve in couple of years and hence long term shareholders should defeat this merger. As per SEBI act on M&A of listed companies, a minimum of 2/3rd of public shareholders approval is required. LIC and Cairn Energy PLC holds around 20% while rest is being held by MFs and public. If you are against the merger please vote below and share your comments.

Online Surveys

Cairn India Stock Analysis

Share price of Cairn India has been relentlessly falling since past 10 months and made fresh 52 week low on 12th May 2015. The stock is down more than 48% from it's 52 week high and is trading at very attractive valuation (The stock trading at roughly 37000 crores mkt cap and the company as 17000 crores of cash as on 31st March 2015). Clearly irrational exuberance is playing here on downside and investors are dumping shares on fear and panic. But a closer look at the overall health of the company and it's valuation standing vis-a-vis global peers presents a compelling opportunity for medium to long term investors. Before comparing it's valuation against a large U.S based shale oil producer, some of the key points that go in favor for investing in the company at current price of Rs.198.

15 Stock Investment Tips from Rakesh Jhunjhunwala

1. Always go against tide. Buy when others are selling and sell when others are buying. 

2. If you believe in the growth prospects of a company, invest in the stock and give it sufficient time. 

3. Be an optimist. Pessimistic investors always lose money in stock markets. 

4. Greedy investors will never make money in stock markets. Book profits after reaching your target price. 

5. Never put your hard earned money without proper research. Never invest according to “Stock tips”. 

BOI vs BOB vs PNB - Which PSB to buy?

A brief comparison of India's 2nd tier public sector banks (Bank of India, Bank of Baroda, Punjab National Bank) on parameters of total business, NPAs, restructured loans, profitability, return on equity and valuation reveals that Bank of India is trading at cheapest valuation among the lot in-spite of being largest in terms of global credit and holds promising upside potential in 2 years time-frame.

Model Portfolio: Annual Performance Review - 2015

Having started "Amit Agarwal Model Equity Portfolio" on 21st March 2013, primarily to educate investors on stock selection, diversification (risk management) & portfolio management, the practice completes it's 2nd year of existence and has come a long way in terms of popularity and acceptance among small investors/ traders/ students. 

The detailed performance review of the portfolio at market value as on 21st March 2015 is given below:

Portfolio Update - March 2015

Booked profits in couple of names and allocated the released capital to average some of the existing one and also bought couple of new scrips. The net portfolio at cost stands increased to little over Rs. 2.02 lakhs. 

The model portfolio will complete it's 2nd year on 21st March and we will gauge the performance of the portfolio at market value on that date. 

In case you are on the blog for the first time, we started the model portfolio exercise (the first of its kind in India) on 21st March 2013 with a sum of Rs.1 lakh in order to help small investors in understanding the stock selection and portfolio diversification. Also many investors follow this model portfolio closely and buy and sell stocks based on the portfolio action.

Stock Exchange explained for layman

A 3 minute video tutorial to explain the working of a typical stock exchange. If you are a beginner and want to understand what is a share, how it's traded and what role do stock exchanges play in functioning of stock market then the following video tutorial can be quite helpful. 

Stock Investing Wisdom from India's top Investors

Rakesh Jhunjhunwala, Ramesh Damani, Sujoy Bhattacharya, Ramdeo Agarwal and some of the India's most successful equity investors have learned from the likes of Benjamin Graham, Warren Buffett, Peter Lynch and have applied that knowledge in Indian Stock Markets for creating significant amount of wealth for themselves. 

Following article published in Forbes India features 20 of the most successful investors sharing their investing philosophy and success formula. 

Investing in what you understand, spotting price value mismatch during panic & euphoria, playing for the long term and sticking to quality companies & management are some of the common points mentioned by each of them.

Is America responsible for crude oil fall?

50 percent crash in crude oil in matter of just 6 months has shaken entire world and had left economies such as Russia, Venezuela and other oil dependent countries in shambles. Analysts are puzzled whether the fall is due to the slowdown in world economic growth or is it because we are producing more oil than we can consume. As per the following Bloomberg info-graphic, it seems that later is the more likely case as the world largest consumer of oil is producing more oil today than it produced in last 30 years coupled with falling oil consumption.

Peter Lynch Interview on How to Pick Stocks

In this exclusive video published by Fidelity investments in 2012, Peter Lynch, the author of hugely popular and bestseller book, "One up on wall street", has shared his philosophy and process of picking stocks and building portfolio that can outperform markets by a wide margin. 

As part of his role at Fidelity Investments, he managed the Magellan Fund between 1977 and 1990 averaging a 29% return, making it the best 20-year return of any mutual fund over the period. About an hour long video is full of valuable lessons from one of world's most successful stock picker.

The Teen Wolf of Wall Street

Mohammed Islam, a 17 year old high school student, has made $72 million playing stock markets. The kid from Queens has achieved all this by trading stocks on his lunch breaks, New York magazine reports in its 15th Dec issue.

Islam considers Paul Tudor Jones as his guru and is targeting a billion dollar by the end of next year. He hopes to start a hedge fund after he turns 18. 

Portfolio Update - Dec 2014

As expected market fell sharply in 2nd week of Dec 2014 and is down around 5% from the peak. Lot of quality stocks are down more than 10% since then. As we were expecting correction and had significant cash in our portfolio we are utilizing this opportunity for adding some quality names in our model portfolio.

You can check the updated portfolio here: Amit Agarwal Stock Portfolio

Top 5 Reasons to Avoid ITC Stock

After Tuesday's (26th Nov) fall of more than 5% on huge volumes, the stock of ITC rose marginally on Wednesday (27th Nov) amid brokerage upgrades and their justification that the decision to ban loose cigarettes cannot be practically implemented and thus will have negligible to marginal impact on ITC earnings. However, it appears to be something fishy about the brokerage upgrades which immediately came after the stock took a big plunge. Most of the big mutual funds and FIIs have ITC among their top holdings and fall in price certainly affects their performance specially when there is a an year end round the corner when their YoY performance is measured. 

It is very clear that govt. is trying everything to curb the consumption of tobacco in the country and would go to any extent to curtail it. Here are the 5 reasons you should avoid ITC for the time being.

Top 20 books on Stock Market Investing

At InvestorZclub many popular eBooks and PDFs related, to finance, investment and personal development, has been shared which readers can either read online or download for free. Some of these books such as "The intelligent Investor", "The Richest Man in Babylon", "Rich Dad Poor Dad" etc were the best sellers of their time.  

Below is the list of 20 most popular eBooks (by views) and pdfs reviewed and shared on the blog.

1. The Intelligent Investor by Benjamin Graham

2. Warren Buffet Secrets eBook

3. Financial Crisis of 1914

Where is the bottom for crude oil?

If the given image is of any indication brent crude oil might bottom out at 75-80 range as many of the major crude oil producing countries will fall into chaos and will try everything to support crude prices. 

If oil prices bottom out in this range many of the Indian and international producers such as Cairn India, ONGC, BP, Conco Phillips will provide good stock price appreciation from current levels in medium to long term.

Globally, the weaker oil price means more money in the hands of consumers. World oil exports averaged about 40m barrels a day last year; a $30 drop in the oil price, which is roughly the fall in the Brent benchmark since June, would transfer more than $400bn from oil exporters to consumers if oil prices stay at current levels for a year. This is very good news for FMCG, Autos, Airlines and many other industries that depend on oil and it's by products .

One country to watch out very closely is Venezuela as it needs roughly $160 a barrel to balance it's budget. At half of that price it might be forced to default on it's debt repayment. This event could trigger short term panic in equity markets for the fear of cascading effect on other vulnerable countries.

Top 5 articles on InvestorZclub in 2014

1) Amit Agarwal Model Portfolio - A real time hypothetical portfolio which has outperformed some of the best mutual funds in India. It is one of the most shared and viewed article since the start of this blog and in 2014.

2) Buy Bharti Airtel at every decline - One of the highest conviction idea that was published under Investment Ideas category at 290 bucks in Feb 2014. 

3) Do's and Don't of Investing in IPOs - 6 timeless wisdom before you take a look at any IPO issue and how greater fool theory ruin the chase for IPOs.

4) Indian Stock Market Outlook 2014 - Published on 1st Jan 2014, the article witnessed lot of views and appreciation from InvestorZclub readers and subscribers. 

5) 3 Mistakes that taught me the golden rules of Investing - Published on 23rd Jan it is second most read article on this blog in 2014.

Reliance Industries: Do not buy on dips

If you have listened to the crap analysts on business news channel who were recommending Reliance Industries to be bought at every dip, you have many reasons to worry now. Here are some of them:

1. Very low Gas price hike than anticipated: Analysts were almost sure that gas prices will be hiked to $8.4 per MMBTU and Reliance Industries will make a killing even though it could not fulfill its commitment of producing agreed amount of gas every year. Now the govt has finally hiked the price but far lower that what was discounted in the stock price to just $5.6 per MMBTU. 

2. No benefit of gas price hike to RIL: However small a price hike of more than 30% is positive though less positive than what was anticipated. But what's severely worrying for Reliance Industries is that govt. has denied the benefit of even this price rise to the company. It will have to continue to sell gas at the rate of $4.2 per MMBTU untill the shortfall is delivered.

Consequence of chasing stock prices: The live example

When stock prices move people become impatient both on upside as well as  downside. After 16th may people went crazy and bought whatever they can feeling they should not get left out. The consistent rising prices created perfect trap which sucked in most people. Today some of those junk names are down 50 - 60% from their June 2014 high.

In a post titled "Stocks to avoid under BJP govt." two stocks were specifically highlighted in bold that must have been avoided. But euphoria was so high that those stocks went up significantly over next 1 month. People were excited and still bought those stocks at higher levels without understanding the consequences. Today one of that stock is down 35% from it's level on 16th may and 50% from it's June 2014 high, while the other stocks is flat since 16th may but down 40% from June high.

You can check that post here

Moral: Never chase a running or falling stock price. List 5 solid reasons why you are buying or selling a particular stock. By this practice alone you will be ahead of many stock market pundits on street and achieve superior results. It must be remembered that succeeding in investing or trading doesen't require MBA degree in  finance. People with reasonable knowledge but with very high self discipline and control over emotions are likely to achieve much better result than people with MBA & Phds with fickle psychology and emotions. 

TCS - An IT Company or an Employment Agency?

Well I have not been a big fan of IT companies in India whether it's about working for them or investing in their stocks for long term. The recent run up in stock prices of TCS, HCL Tech, Tech Mahindra and other IT staffing companies has only increased my worries as they are being perceived as technology companies and getting valuations accordingly.

TCS is now valued at around $90 billion in market value and is trading at a PE of 21 times FY-16 EPS. If one believes that TCS is an innovative technology company like Apple, Oracle or Google then the valuations are justified but what PE would you apply to an employment agency who has just grown at the rate of growth in number of employees in the company. With employee billing arbitrage gradually getting narrowed due to very high wage inflation in India and less than 2% wage inflation in western world the margins will gradually decrease over next 10 years on this business model.