Another Fruitful Year for Share Market

For stock market in India, 2012 was a fruitful year posting biggest gain after 2009. BSE Sensex gained 26%, NSE Nifty 28% while my portfolio gained 30%. H

As at the end of the year, my most successful investments are in Wim Plast, Mayur Uniquoter, Astral Poly Technik, Hawkins Cooker and National Peroxide. These five stocks account for 95% of my total net gain (Unrealised gain/loss till date and realised gain/loss of 2012). All of them are in my top 10 holding in terms of current value as on 31st December 2012.

My worst Investments are in Opto Circuits, Ess Dee Aluminium, BHEL, Technofab Engg and TIL. These five stocks together swallowed 23% of my total gain (Unrealised gain till date and realised gain of 2012). Out of these, I sold Ess Dee Aluminium completely while I have considerable holding in BHEL and Technofab Engg. Loss on BHEL largely comes from shares I bought in 2010-11 and I have been buying it during 2012 which fared better. I have been buying Technofab last two years, but still at loss. I remain hopeful about the future of Technofab Engg.

In the year, my top 5 buys were BHEL, eClerx, Clariant Chemicals, Titan Industries and National Peroxide. Investments in some companies in which I had very marginal holding were completely offloaded. Top 5 in value sold are Mayur Uniquoter, Hindustan Zinc, NESCO, Tata Sponge Iron and HUL. All of them were partial profit booking and I currently hold a considerable number in some of these stocks.

As on 31st December 2012, my top ten holdings are Wim Plast, BHEL, Page Industries, Clariant Chemicals, National Peroxide, eClerx Services, Mayur Uniquoters, Astral Poly Technik, Hawkins Cooker and Titan Industries. These account for 49% of my total investments.

As the quarterly results will be coming out in coming months, a review of the investments becomes imminent.

What’s your best and worst?


Companies Suggested for investment this month

A friend of mine contacted me for suggestion of shares to invest. He wants to invest INR 10,000 per month.
I suggested to buy any two from the four companies given below for around INR 5,000 each this month and asked to contact me next month for suggestion for next month investment. These suggestions are for long term.
  1.  Eclerx Services – Current Price 716.10
  2.  Mayur Uniquoter – 326.20
  3.  National Peroxide – 344.85
  4.  Wim Plast – 179.50
I reminded him about my disclaimer:  These shares are what I am currently buying. Invest at your own risk. Share Market investments are high risk and high reward investments. Hope you are investing with money which you can hold for at least 1-2 years. You know the volatility in the market, and even if it is good company, it can go up and down in the short term. Never invest in shares with the money that you need in the short term.
I select shares based on information gathered by me and my own number crunching and analysis. I  also use research reports from other professionals in the field.
I thought to post this here so that it may benefit those who follow my blog. Happy investing :)

11 companies for my portfolio!

For the last couple of months, I have been working to filter out companies in my portfolio to reduce the number of companies from the 54 to 20 or 30.  To find out the ones that I want to keep, I put all my companies to a quantitative test with investment criteria of Benjamin Graham, Kenneth Fisher and Martin Zweig as I mentioned in one of my recent posts.  I decided to keep those companies that pass any one of these three filters – and I got just 11! As usual, I am sharing with you what I found.

1. Opto Circuits

It is a technology company catering to healthcare industry. A multinational medical device company head-quartered in India and its products are used in about 150 countries.

Its revenue have been growing consistently every year for the last 10 years. Last four quarters also have shown impressive growth. Its EPS have grown at an impressive compound annual growth rate of 33% over the last five years.

Its debt equity ratio at 65% and not so healthy cash flows are points to be cautious!

2. Astral Poly Technik

Astral Poly Technik is a manufacturer of PVC plumbing systems. It has the license of Lubrizol of USA, equity joint venture with Speciality Process of USA and tie-up with many international names.  Its corporate clients include big names across various industries! Its products cater to the domestic and industrial applications.

Its revenue have been growing consistently every year for the last 10 years. Last four quarters have shown impressive growth. Its EPS has grown at an impressive compound annual growth rate of 32% over the last five years.

Its debt equity ratio is moderate at 27% but its cash flow is not very healthy.

3. Page Industries

Page Industries Ltd. is the exclusive licensees of JOCKEY International Inc. (USA) for manufacture and distribution of the JOCKEY® brand Inner-wear/Leisurewear for Men and Women in India, Sri Lanka, Bangladesh, Nepal and UAE.

Its revenue has been growing consistently every year for the last 10 years. Last four quarters have shown impressive growth. Its EPS has grown at an impressive compound annual growth rate of 36% over the last five years.

Its debt is huge at a debt-equity ratio of 93%  and its cash flow is also not very healthy.

4. Technofab Engineering

A 40 year old engineering and construction company, serving the Power, Industrial and Infrastructure Sectors, by executing comprehensive balance of plant (BOP) and auxiliary systems on a complete Turnkey EPC basis.

It is clearly a cyclical play which is affected by economic cycle and government policies due to its dependence on power and infrastructure sectors.

Its revenue have been growing consistently every year for the last 6 years. Last four quarters also have shown impressive growth. Its EPS has grown at an impressive compound annual growth rate of 91% over the last five years.

Its debt is moderate at a debt-equity ratio of 11%  and its cash flow is not very bad.

5. Clariant Chemicals

Clariant Chemicals (India) Limited is one of India’s leading specialty chemicals companies and is the No. 1 player in Pigments, Textile Chemicals, Leather Chemicals, Biocides for Paints. Its products cater to the wide range of industries.

Its revenue growth in the last few years are not very impressive and  last four quarters also have shown muted or negative growth. Its EPS grown at an impressive compounded annual growth rate of 31% over the last five years.

Its is a zero debt company. Its cash flow is not very impressive and cash and cash equivalent in the balance sheet has been coming down in recent years.

6. Hinudstan Zinc

Hinustan Zinc is India’s largest and world’s second largest integrated producer of zinc & lead, with a global share of approximately 6.0% in zinc. Hindustan Zinc is a subsidiary of the NYSE listed – Sterlite Industries (India) Limited  and London listed FTSE 100 diversified metals and mining major – Vedanta Resources plc. Its core business comprises of mining and smelting of zinc and lead along with captive power generation. It has four mines and four smelting operations in India.

Its revenue have been growing consistently every year for the last 10 years except a dip in two years – 2008 and 2009.  Last four quarters have shown impressive growth. Its EPS has grown at an impressive compound annual growth rate of 35% over last 10 years.

It is a zero debt company and its current ratio is 3.01! It has been paying dividend in all of the last 10 years.

7. Mayur Uniquoters

Mayur Uniquoters is manufacturer of PVC Vinyl. Its major clients are from Auto-mobile and footwear industries.

Its revenue have been growing consistently every year in the last 10 years. Last four quarters also have shown impressive growth. Its EPS grown at an impressive compounded annual growth rate of 65% over the last five years.

Its debt is moderate with a debt-equity ratio of 13%  and its cash flow is not very bad.

8. Wim Plast

Wim Plast manufacture plastic moulded furniture and bubble guard extrusion sheets in the brand name of Cello.

Its revenue have been growing consistently in the last 5 years.  Its EPS grown at an impressive compounded annual growth rate of 74% over the last five years.

It is a zero debt company and its cash flow is also healthy.

9. Mphasis

An IT company delivering Applications services, Infrastructure services, and Business Process Outsourcing (BPO) services globally serving clients across a wide range of industries.

Its revenue have been growing consistently every year in the last 7 years. However its last four quarters results were disappointing. Its EPS grown at an impressive compounded annual growth rate of 60% over the last five years.

It is a zero debt company and its cash flow is healthy.

10. National Peroxide

National Peroxide Limited manufactures Chemicals “Hydrogen Peroxide”, “Sodium Perborate” and “Per Acetic Acid”. NPL, a pioneer in India for peroxygen chemicals, is the largest manufacturer of Hydrogen Peroxide in India. Hydrogen Peroxide is a highly versatile chemical used in various industries for bleaching, chemical synthesis, environmental control/effluent treatment, sterilisation etc.

Its revenue have been growing consistently every year in the last 5 years except a dip in 2010. However the sales were down in the June 2011 quarter. Its EPS grown at an impressive compounded annual growth rate of 62% over the last five years.

It has no significant debt with a debt equity ratio of 7% and has an healthy cash flow.

11. Voltas

Voltas Limited offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, mining and construction equipment, materials handling equipment, water management & treatment, cold chain solutions, building management systems, and indoor air quality.

Its revenue have been growing consistently every year in the last 10 years. However growth in last four quarters were not consistent and was low. Its EPS grown at a compounded annual growth rate of 25% over the last five years at 31% over 10 years.

Its debt position is low with a debt equity ration of just 7% and has a healthy cash flow.

 

Investment Criteria of Benjamin Graham

Benjamin Graham is the man credited with founding the entire value investing field. When it comes to investing in shares of a company, only two simple factors are important to Benjamin Graham – The real value of the company and how much you are paying to own it. Value investing looks for good companies with low price. Here is a short summary of his investment criteria.

  1. Non-technology stocks.
  2. Large and prominent companies.
  3. Current ratio of minimum 2
  4. Long term debt less than net current assets
  5. Long-term EPS growth of 30% or more and no negative annual EPS in last five years
  6. P/E (Price-Earning) ratio of less than 15
  7. The product of P/E ratio and P/BV (Price to Book Value) ratio less than 22
  8. Total debt-equity ratio of not more than 100%
  9. Company had been paying dividend every year during the past twenty years

To decide if a company is large and prominent, look at the sector or industry the company is in, and its sales and be sure their sales are sufficiently high.

Low current ratio may indicate the low liquidity and short term financial trouble for the company. But a high current ratio may also indicate a problem within the company. For utilities and telecom companies, he allows current ratio of less than 2.

Long-term EPS is calculated based on the average EPS of last three years and average of EPS of first three years of last 10-year period.

For the calculation of P/E ratio, he considered average EPS of last three years.

For the P/BV, it is total assets minus intangible assets minus liabilities.

For debt-equity ratio, it is short and long term debts excluding other liabilities. For utilities and telecom companies, he allows more debts up to ratio of 230%.

These days, followers of his investment principles do not give much emphasis on the criteria of dividend payment as companies may re-invest their earnings for its growth instead of paying dividend.

 

Reference:

The Guru Investor (2009), John P. Reese

Portfolio Review: 20 August 2011

Having the number of companies in my portfolio shot up to 51, in retrospect I thought it is time to trim down to a maximum of 30. So the next question comes what to get rid off, what to retain and in what to invest more! I went back to books to refresh my mind with investment strategies of some great investment gurus of the past and present. For the last couple of weeks, I have been looking into each company that I possess and revisited the fundamentals of those companies to make an ultimate decision. Strategies of Benjamin Graham, Kenneth Fisher and Martin Zweig are mainly followed. So far completed study on 7 companies and decided to get rid off some of them. Besides that, also sold out some companies which are close to my target or have a minimal investment. Altogether, reduced number of companies by 6 and now it stands at 45. Minimum 15 more to go!

Companies sold in the current month

Honeywell Automation: Largely because of its earnings – poor growth last quarter, lack of earning persistence and acceleration. Its long term earning per share over last 5 and 10 years are also not very impressive.

Cera Sanitaryware:  It failed to meet the criteria of quarterly sales growth and long term EPS growth to qualify for Martin Zweig and long term EPS growth criteria of Fisher.

Bharti Airtel: Its debt level shot up multi-fold in the last financial year. Its debt-equity ration in no way satisfy the criteria of Graham or Fisher. Quarterly sales growth, Earning persistence and long term EPS growth are not up to the mark.

Company to retain in the portfolio

Opto Circuits India: It meets all the criteria of Martin Zweig and its valuation is also within the buy range. It also meets criteria of Graham and Fisher except that of long term EPS growth.

Page Industries: It meets all the criteria of Martin Zweig and its valuation is also within the buy range. However it fails debt ratio of Fisher and long term EPS growth of Graham.

Swaraj Industries: It meets all the criteria of Fisher and valuation is also attractive. However it fails earning acceleration criteria of Martin Zweig and it is too small company to fit in Graham’s portfolio.

Portfolio Review: 31 July 2011

It is after one month that I revisited my portfolio today. When the market is too volatile and uncertain, for a long term investor, it is good to go to hibernation for a while. I remember I kept my portfolio untouched and completely kept myself out of the market for six months a few years ago. Then when I went back, everything was well and better! And it was not quite different this time too. When the Sensex lost 3.44%, my portfolio gained 1.22% in the month of July.

The shocker was Crompton Greaves which lost 35% during the month. Mayur Uniquoter (17%), Selan Exploration (23%) and NIIT Technologies (24%) saved me!

Good buys in my watchlist

Bajaj Auto (1,464.85)

Selan Exploration (345.20)

Mphasis (447.35)

Opto Circuits (286.80)

Note: I buy shares for long term, may be for 3-5 years or even more. One should see the above buys in this perspective. It is not a recommendation to buy, but what I intend to buy.

Portfolio Review: 02 July 2011

My buys for this week

NIIT Technology (184.35)

Shanthi Gears (43.00)

Dabur India (116.45)

Honeywell Automation (2,557.55)

Crompton Greaves (264.40)

Mayur Uniquoter (352.05)

Balmer Lawrie & Co (607.15)

Mahindra Satyam (84.55)

Lupin (448.50)

Ashiana Housing (145.70)

TCS (1186.35)

Hindalco (186.40)

Exide Industries (161.40)

Asian Paints (3,308.30)

Note: I buy shares for long term, may be for 3-5 years or even more. One should see the above buys in this perspective. It is not a recommendation to buy, it is what I intend to buy.

Portfolio Review: 14 May 2011

My buys for this week

Astral Poly Technik (176.65)

Cera Sanitaryware (195.95)

NIIT Technology (194.85)

Shanthi Gears (38.15)

Godrej Consumer Products (392.10)

Maharashtra Seamless (363.65)

Portfolio Review: 08 May 2011

My buys for this week

Astral Poly Technik (175.65)

Tata Sponge Iron (353.20)

NIIT Technology (191.05)

Exide Industries (153.65)

Godrej Consumer Products (392.10)

Opto Circuits (300.25)