Non performing stocks.

Excellent thought process and implementation of idea

 

Really enjoyed reading this thread..summarizes all the travails, frustrations and learnings of a stock market investor.

 

put all your eggs in one basket and watch the basket carefully

 

@ MrKharb. Words of wisdom --"A good retail merchant does no hang on to dead merchandise, hoping a perticular style or product will come back in vogue a year latter.If he is smart he marks it down and gets it off the shelf as quickly as possible and looks to restock selves with something that everybody wants to buy." -- MARK MINERVINI.

 

@RAMA MURTHY SASTRY CHALLA

On the above I guess after Bihar results i.e. Nov 8, 2015, would be safe for new investor to enter stocks? or Is it Jan 2016?

Which are the safe months in India that investor can enter stocks? I guess after one is after bugdet results i.e. April.

 

Dear Sonia ,
You are correct ...after bihar results investment some amount in stocks and remaining invest after budget in 2016 is safe for you....

 

I have stocks of both Reliance group, RIL and ADAG group.Both group has been wealth destroyer for last few years as mentioned in my earlier posts.But as earlier also said that ADAG pack seems to be in business repairing mode and both brothers are working in tandom.More over on policy front also there is huge positive for ADAG and RIL.First ,spectrum trading and than merger of systma and RCom brings huge positive in terms of spectrum. This spectrum will be used by by Rel Jio 4 G.This arrangement is much much more positive than present market perception. I can purely guess that ultimately RCOM and RIL Jio will be much closer than market can think of.So both Ambanis are working more closely than market understand. I think game is changing for ADAG and RIL.Investers of both groups ,specialy of ADAG can hope for better days in next two years.Those like me who has waited for long can hope for the better times ..Simialry ADAG is taking good steps in R Capital also.So both Reliance groups will be in recovery mode in next two years and you will see surge in market cap of both groups.Fortunately market need some thing like this to sustain.Wishing U a good ride on both groups.

 

Right. But deciding whether the stock is a looser or not is sometimes difficult. You think it is a looser, you exit and the stock starts running, then what?

 

Kharb,

This is a superb thread especially for its honesty and earnestness. I wish you good luck as you restructure your portfolio and ride its benefits.

I have been similarly burnt but from the other direction. I would research one or two stocks in great depth, park my money there and check in on it once or twice a year.

The key lesson was : All great stocks are great companies, but not all great companies are great stocks. I would repeatedly land in stocks that were fundamentally solid but not discovered by the market. One example was a company named Time Technoplast.

From a business and financial point of view nothing wrong with it. But for the last six years it has been in the range from 54 to 70 and has once dropped to 30s. I had a fairly large position ( large for an average investor like me) and year after year I would look at it and not bring myself to sell it. Finally after six years, I exited with grand return of 11 per cent. My wife did not forget to remind me we would have been better off in a FD.

I say this because I understand your difficulty in letting go of a stock. After that fiasco, I have a better approach.

1. More than 1 but not more than five stocks in my portfolio.

2. Clear cut off filters for operating margins, net margins, operating cash flows , ROE and ROCE.

3. Long term potential is all very well but it must grow in the short and mid term as well.

4. I agree with your observation on Anil Ambani and Reliance Capital; but there are so many good firms. Why be enamoured by a dodgy promoter whose talk is greater than his action?

I apologise for this rather meandering post but I could totally feel your pain!

 

A common problem . Needs serious deliberation by personal experiences and opinion about possible solutions.

 

These both Relince group stocks R following my assumptions since I started this thread,all the stocks of ADAG are almost doubled from their 52 weeks low when rest of stocks including Sensex and NIFTY is melting .Rel Capital is around 410 from low of around 240,R com to 70 from low of 45.Rel power up to 50 from low of 29.Rel infra though I have sold few days back and converted to Rel capital has also brounced back to almost double..Similarly RIL is holding better now and may be outperformer of NIFTY in which many stocks will find difficult to go up in next two years.Past underperformance looks to be past for next two years for both groups. .So my assumptions have backing of Govt policies and direction of these both Reliance group stocks which have started going up when most of stock market is melting down sliently.Never under estimate stocks going up or refusing to partcipate in downward trend in a falling market.More over many stocks presently in market are near to 52 weeks low or far off from their high with downward direction but these stocks of ADAG and RIL are far off from 52 weeks low and movement of these stocks are in opposite direction of 52 week low specially ADAG.I don't recommend any stock to any body,but just sharing how I am trying to deal with my under performers ,many of which are already sold off and few of them are also in Firing line.But still few of them I expect to cover their past under performance and both Reliance group falls in that category for next two years.So to me ,it would have been best if I had got rid of these two group in 2007,but failing to do so and after going through pain of 2008 onward,I need to hold on when some positives are visible to capture possible upside.

 

"Never underestimate stocks going up or refusing to participate in downward trend in a falling market"

Very wise words, Karb. Words of experience and an insight we should benefit from.

I agree with your views on RIL. It could surprise many with its outperformance even in its core operations.

ADAG I stopped tracking a long time back when I took a call on the promoter. He is too mercurial and volatile to ever have a steady hand at the wheel.

Mukesh Ambani is no angel either but I have no doubt whatever he does will benefit RIL in the long run.

 

But, Sir, kindly suggest the solution you must have thought under such circumtances,which is quite common, as guidance in nutshell .

 

I think it starts with our approach to stock selection.

In other words, first pick three stocks of companies researched really really well by you. Then if you want to add a fourth or fifth stock do it only if you are convinced it can do better than the first three. Else allocate the incremental capital to your existing portfolio. This way you avoid losers creeping in.

If a stock reports numbers over two quarters which you do not understand it is time to review. It is ok if a stock reports flat numbers as long as you understand the reasons and your initial investment thesis is valid. In other words, know your company's numbers and their drivers really well.

if a stock does not offer a meaningful delta over fixed income ( for me a premium of 8 per cent over FD) for more than 12 months, I exit. At least it goes on a serious watch list with a bias to exit.

Essentially if you worry more about the quality of the business than the valuation , in the long run one will preserve capital.

One loses money not because one bought a slightly overvalued business but because one bought a poor business. Of course when buying overvalued businesses one needs to be very sure about the quality and earnings growth of the business.

A friend of mine has this rule of thumb: exit in three years or when the stock doubles, whichever is earlier. Works brilliantly for him.

 

@Fun_Da_Mentalist

Portfolio of more than 1 and not more than 5 stocks, If I am a new investor with Rs 10lacs to invest
what would be the %allocation to each stock?

Dont you think having 30-34 stocks with 3%-5% allocation may reduce the risk? compared to only having 5stocks in my portfolio?

 

I am interested to know your present three stocks .Is it 50% Shilpa medicare and 25% each Granules India and Camlin fine chemicals ?

 

The core holdings are Shilpa Medicare, Granules India, IDFC Bank, RIL. Kitex and Camlin are in accumulate mode. Others are in trading portfolio.

 

Portfolio style should be a function of ones natural style. Both concentrated and diversified portfolios work , for different reasons. It is critical to find a style one is comfortable with.

Personally I would never have the time to understand 30 stocks really really well. But some else might have that ability,

In the end, the key things are :

- risk diversification should not become code for inadequate research or conviction.

- research has long established that in a falling market no amount of diversification is good enough. Conversely, concentrating is no answer either.

- the real answer is detailed research and conviction and passing it thru filters in a disciplined and rigorous manner.

 

Dont want to blame ramdeo but invested after rec.of central bank@130.In stock market no one should blame.take your own call.right selection of stocks with patience pays.in 2010 bought dlink@28 .patience is last word..

 

Reliance Capital is in the race for banking license. It may perform if it gets banking license. Last time, It was performing when the list of banking licenses was to be declared (However, Rcap did not get the license). Rcap is still hoping to get banking license.