fundamentally gud stocks

POSTED BY Ajinkya Darshane ON February 10, 2012 9:46 am COMMENTS (20)

My list of stocks-
1.RIL
2. ONGC
3.NTPC
4. Pidilite
5. Tata steel
6. Balmer lawrie
7. Lakshmi machine works
8. Neyveli lignite
9. Exide industries
10. Castrol
11. L&T
12.BHEL
13. Gujarat gas
14. Axis bank
15. Nesco

i have made list of above stocks which are looking fundamentally sound to me, with a visibility of 6-7 yrs, beyond that i can hold, but i dont have any idea of their technicals, some of them are cheap and some of them are expensive….so can u throw some light on how should i accumulate them? diff people have diff theories…but p/e is not sole indicator to decide whether a stock is cheap or not…so give ur valuable opinions

20 replies on this article “fundamentally gud stocks”

  1. Ajinkya Darshane says:

    shifted to mumbai, no internet access so far, GPRS se kaam chala raha hu, still i m thinking of opening new thread for each stock…i wil start with NTPC…bam bam bhole!

    1. Dear Ajinkya, please take your own time to arrange the internet connection & all other amenities for you. We can wait for you here.

      Thanks

      Ashal

  2. Lalit Tyagi says:

    Dear Ajinkya,

    You have not returned with your rationale/logic of selecting your stocks as promised, for discussion!! What happened? started investing!!

  3. Ajinkya Darshane says:

    @ justgrowmymoney :- I agree on capex front, but I have tried to incorporate interesting ideas from diff sectors, as far as going up and down together is concerned then we must also consider cyclical nature of some stocks..but I was looking at this issue as an opportunity to accumulate some stocks at specific periods., i would love to hear ur opinions on above stocks..there are always some negatives aspects which are associated with each stock but with a perspective of 10-15 yrs..wht do u think?

    @Ramesh – yup, there are high entry loads agreed, but do u think that its the only factor why US consumers are inclined towards index funds? or long term performance of many diversified funds is also an issue? dont u think that with 500 scripts, there is a risk of over diversification? honestly, i dont know ..

    @Ankur Lakhia – you have almost said wht was going thru my mind, there are enough intellectual people around, and its a fact that i m newbie regarding investing in stock markets, but want to learn more.. so lets discuss each script in detail..i would love to read ur posts, and be patient listener..my comments would be immature sometimes, but as u said if we are able to discuss 15 scripts in detail…it would be gr8…i need ur cooperation

    1. Ramesh says:

      Without the benefit of loads and charges, index funds do not make sense. Also, there are 3000, 5000 based index funds also in US. The US market is huge, to say the least.

    2. Ankur Lakhia says:

      Ajinkya,

      No isues in discussing these stocks…..Since you have selected them, please put up reasons for selecting each of them and then we can all discuss the same.

  4. Ankur Lakhia says:

    Ajinkya,

    I would like to know your investment rationale for each of the stock in few words, few lines for each stock. What is that specific thing in each stock that made it attractive for you to buy that stock? Advantage of putting your thoughts on the paper in this manner would be, one – it makes you think in very focused and psecific manner for each stock and two – you can keep looking at notes periodically and see whatever reason you selected the stock is still valid or not and third – but not that important, it will allow person like me on this forum to point out if there is anything obviously incorrect which you might have missed. Please do this exercise and, may be you can put different topic for each stock on forum. That will be useful to you as well as everyone else.

  5. Ajinkya Darshane says:

    @ anshal : i m open to criticism, and i will think over it, thanks

    @ramesh :- i m not making baseless opinions here, and i am talking about financial scenario 10-12 yrs from now on…there are definitely good MFs, no doubt abt it, but plz see what has happened in US, and why financial magazines advocate a low cost index fund there…because when markets mature it becomes tough for MFs to beat the index by wide margins…so they are happy with index returns, because the process doesnt involve any personal bias except tracking error…so i m just worried that this can happen in india after 10-15 yrs…so we all would talking abt ETFs like nifty bees, we are not fan of index investing because HDFC equity, Franklin bluechips, Reliance growth have managed to beat the index by wide margin, but i am worried whether this history will repeat or not…so I said that being too optimistic abt returns would backfire…

    1. Ramesh says:

      @ Ajinkya

      Do not bring US financial guidance here, without due diligence.

      In US, actively managed equity funds, in general, have a frontload of 5-7% (in India, its zero) and FMC of about 1-1.25% (here, 1.25-2.5%). While for passive funds (the index funds), in US there is no frontload and FMC of about 0.20-0.30% (in India, it is 0.5% onwards).

      Indian index funds are expensive and also do not have a wide-diversification (since the market itself is not deep enough). Indian indices use 30-50 companies, while S&P uses 500 companies.

      As you can see, the biggest factor is the frontload gap. Removal of the initial frontloading has more-or-less removed any incentive to buy index-funds, in my opinion, or even to construct a well-diversified portfolio on your own. Unless, there are drastic changes in the way, MFs conduct business, there is no need to bring US financial guidance here.

      Ramesh

    2. @Ajinkya – I am completely with you on the Index fund scenario – but perhaps after 15 years. But until then it is likely that a handful of MFs will beat the market big time. The dream run in Indian stock market is far from over. There are decades of economic and stock market returns left. When our markets mature we will all chase index funds – true.

      I agree that a carefully selected stock portfolio of about 20-25 stocks can beat MF returns if managed well. [There is this famous efficient frontier theory that diversification benefits increases exponentially until you have ~ 20 stocks then starts increasing at a highly decreasing rate. So buying a larger market with S&P 500 does not provide extremely high diversification than a set of carefully selected 20-30 stocks – higher yes, not extremely higher]. As Ashal mentioned this appears to be headed for a confirmation bias.

      At a top level I see all stocks (barring Axis Bank) are very Capex intensive and can be impacted by interest rates which means they will all mostly go up and down together – so where is the diversification you are bringing?

    3. Dear Ajinkya, I ‘m not crticising you. I’m sorry if you feel so. All I want is to help you for your financial matters & the queries asked by you.

      But one thing is sure, before posting this query, even you were not aware of so many ways to look differently for your own selected stocks.

      Thanks

      Ashal

  6. Dear Ajinkya, Thanks for sharing your views. In my opinion, you are a typical example of ‘Confirmatory bias’ in the field of behavioural finance. You have already made up a choice & now you just want to confirm it for the satisfaction that what you are going to do, others are also following the same path.

    Thanks

    Ashal

  7. Ajinkya Darshane says:

    @anshal:- my statements are not at all contradictory…a good and well managed portfolio of stocks gives better returns than MFs in long run… last past 10 yrs we have experienced a speedy growth but as markets mature the pace slows down and the opportunities also become less…ie. no of gr8 growth stories becomes less…so MFs also suffer from this, thats why portfolio of carefully selected scripts gives better returns…because we achieve much needed focus…regarding MFs they have lots of restrictions…you know them very well…

    1. Ramesh says:

      @ Ajinkya

      Your observations are wrong. Please try and give some objective evidence.

      ‘good and well managed portfolio’- very vague definition. good MF (dont tell me, there are no good MF) do exactly that.

      do you think Indian markets or for that sake, US markets, have matured (remember, many of the US companies have become multinational)?

      Focused portfolio is not a well-diversified portfolio, and is more risky.

      But, yes, it is your money.

  8. Dear Ajinkya, can you clarify your own contradictory statement –
    Quote
    ” i know india growth story is intact but last 10 yrs were a dream run…we cant expect same returns in next 10 yrs, reliance growth- 10 yr CAGR – 30%, HDFC equity – 28%…these are gr8 nos…but rather than becoming too optimistic abt it, we can assume MF returns to be 15%, but if we want more…we should go for stocks…. ”

    On one hand, you are not sure of sustained Indian growth story & another hand you are ready to put your hard earned money into the same stocks. Please be clear in your vision, all I can say.

    Thanks

    Ashal

  9. Ajinkya Darshane says:

    thanks a lot for ur suggestions!
    let me clarify, this is for start up, that means i m going to initiate my position in these stocks in above manner, i will accumulate more in coming 6-7 yrs but that i cant predict now, because it will depend on market opportunities….i knw dat corpus is low, but it is for start up and i am going to follow these stocks religiously, and invest in them
    @anshal – it is quite hard to get any mutual fund which has all the above stocks…
    basically if you look at closely my portfolio is well diversified, and if i chose index fund then also i wil not get same returns nd if i chose mutual fund their portfolio is too cluttered and it will definitely carry more no stocks+ as usual its capital appreciation would be slow, some stocks which i have listed down also provide regular divedends when u peek into their dividend history, and lastly selecting stocks is just a start up, how well u invest, and accumulate and hold ur nerves in testing times is more important…i know india growth story is intact but last 10 yrs were a dream run…we cant expect same returns in next 10 yrs, reliance growth- 10 yr CAGR – 30%, HDFC equity – 28%…these are gr8 nos…but rather than becoming too optimistic abt it, we can assume MF returns to be 15%, but if we want more…we should go for stocks….

  10. Dear Ajinkya, a better option ‘ll be to search for the MF who has holdings closest to your list & then invest the full 1L Rs. in to it.

    Thanks

    Ashal

  11. Ajinkya Darshane says:

    i have 1 lakh, i m thinking of allotting 6.6% to each stock ie. Rs 6,666, this is for start up and i will accumulate further as per the opportunities in the market, i will have buy and hold strategy rather than buy and forget strategy…so will keep an eye on the news, management, reports..if some fraud like satyam happens and in worst case stock value comes to zero, then i will not lose my all money, basically thats the logic behind all this list

    1. Ramesh says:

      Your corpus is very small (in some of the stocks, you will only be able to buy 4-5 shares).

      Unless you can allot 50k-1 lakh on a single company (with diversification across many companies), your output would not make any significant impact.

      Buying a MF is a better option (I dont see any perceivable benefit between choosing a single MF and your combination). If you think there is, please tell.

  12. Ramesh says:

    How much money do you have?
    How will you divide that money into 15 stocks?

    How will you manage henceforth?

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