Eighteen months ago in Nov 2010 (with Sensex just below 16,000), we built a virtual portfolio of 17 promising companies (prima facie) available cheap. The quantum of investment in each company (ranging from Rs 2-8lacs) was such that the exposures to sectors were mostly uniform with inclination towards sectors that we felt had the potential for better performance.
After analysis of these companies, we found that six companies are fundamentally sounder than the rest. These six companies that we currently hold along with their returns in the last 18 months are given below in the table. The average returns on the investment in these companies are 135%.
After analysis of these companies, we found that six companies are fundamentally sounder than the rest. These six companies that we currently hold along with their returns in the last 18 months are given below in the table. The average returns on the investment in these companies are 135%.
Of the Rs 50lacs investment, Rs24lacs was in the six companies outlined above, and Rs 26lacs in the other 11 companies, which included unloved sectors. Our other 11 investments returned 16%, almost mirroring Sensex (though with higher risk, as the companies were smaller than an average sensex company). The results confirmed our belief in Environment Management based identification of value stocks. The value stocks with poor Environment Management could just mirror Sensex in good times.
Accounting for dilution of our holdings in the 11 companies, we hold Rs30lacs as cash and Rs 56lacs as equity investments. We plan to rejig the portfolio slightly (selling a portion of lower rated equities and buying some higher rated equities) based on our relative ratings of the six portfolio companies. We believe Sensex is slightly above par at present and will make further investments at 15,000-16,000 level.
Our relative recommendations are as follows:
Highly Bullish: Confidence Petroleum
Bullish: Venky's India
Bullish with close Watch: Om Metals Infraprojects, Dhanuka Agritech
Average: Dr. Agarwal's, Amar Remedies (Partial withdrawal can be considered, if Sensex touches 20,000-21,000 level or stock rises 50%-100%)
We have also identified Excel Industries as a promising prospect, on which we shall carry further analysis before making public our recommendation. We shall make public any portfolio rejig exercise, that we may undertake.
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