Breaking the market myths in current times through long term and safe Investing

Hello Readers,

I have always been an unabashed and tireless advocate of the long term India growth story and potential of Indian economy to beat all the other nations hands down in the coming few decades, and many of my blogs have referred to the strong fundamental underpinnings of the India growth story – demographics, skilled manpower, English speaking capabilities, burgeoning middle class market, democracy and independent judiciary etc . I will refer you to the following blogs:

Has the "Great Indian Bull Run" started? Dated 16th Nov 2013

Indian economy growth story: Is it over?? Dated 8th July 2013

How to take advantage of the Biggest growth story of 21st century- Indian economy? Dated 11th Jan 2011

I am glad that my conviction around this theme is coming to be true with India finally getting a decisive single party government mandate and a strong, execution oriented and decision making leader –NAMO – emerging at the right time.

I had forecasted about the beginning of Great India Bull run and India market (Sensex) reaching 24000 by early 2014 and reaching 30,000 level by 2015/2016 in the my blog on 16th Nov 2013 (titled “Has the Great Indian Bull run started).I had again forecasted the same in my blog titled My 2014 Top stock picks and 2013 portfolio performance , dated 15th Jan 2014.

It’s good to see that both the forecasts have come true with Indian markets starting the Great Indian Bull run in early 2014 and markets (Sensex) reaching their life time highs and crossing 24000. In fact, if the current trends continue and new Govt. delivers to the expectations, then we should reach 30,000 levels by end of 2015. Hence , if you are still waiting in the sidelines and have not invested enough yet , you can still invest in every decline/ consolidation and harvest the benefits of the bull run which could continue for another 4-5 years. However, the key is to exercise caution and choose the right blue chip businesses/ stocks which are still under-valued or fairly valued with favorable long term economics and sustainable competitive advantages, backed by competitive managements and stay invested for long term.

My stocks and sector specific advice in my initial blogs in 2014 about going for the best and fundamentally strong businesses in sectors like Banking &Finance, Investment cycle related sectors like Infra/ Power/capital goods, Energy sector and interest rate sensitive sectors like Auto have also been accurate and these sectors and my 2014 stock portfolio (Pls refer to my earlier blogs in 2014) have done very well and have handsomely beat the market.

My 2014 stock portfolio has delivered 32% returns for 2014 till last week (week ending 23rd May) while sense delivered about 17% (almost double than the sensex returns) . My 2013 stock portfolio has delivered 35% returnstill last week (week ending 23rd May) while sensex has delivered 27% returns. Hence, my portfolios have beat the market in short run (2014) as well as long run (2013 on-wards). Following are the returns of my 2014 and 2013 portfolio

2014 Portfolio returns

Business	Price on 1/1/2014	Current price	Gains
Axis Bank	1292	1864	144%
Bajaj Auto	1917	1976	103%
Bajaj Fin	1570	2027	129%
BOB	657	954	145%
Coal India	292	397	136%
GAIL	343	425	124%
HCL	1258	1341	107%
ICICI Bank	1097	1460	133%
IDFC	109	143	131%
L&T	1068	1514	142%
LIC Housing Fin	221	329	149%
M&M	948	1159	122%
Power Grid	99	131	132%
REC	219	350	160%
Reliance	889	1127	127%
Average			132%
Sensex			117%

2013 Portfolio returns

Business	Price on 1/1/2013	Current price	Gains
Bajaj Fin	1352	2027	150%
BOB	866	954	110%
GAIL	356	425	119%
HCL	622	1341	216%
ICICI Bank	1138	1460	128%
LIC Housing Fin	291	329	113%
M&M	932	1159	124%
Power Grid	115	131	114%
REC	245	350	143%
Lupin	613	924	151%
BHEL	228	272	119%
CorromondelInt	263	269	102%
Jain Irrigation	75	123	164%
Average			135%
Sensex			127%

Breaking the market myths: 

One of the market myths propagated by brokerage houses and pundits about stock markets is “High risk-High returns“(For high returns, one has to take high risks). Interesting thing about my stock portfolios is that I have managed to beat the market handsomely without taking any un-due risk and without investing in high beta mid-caps and small caps. All the stocks in 2014 and 2013 portfolio are large cap/Blue chips stocks and have strong underlying businesses with consistent growthrecords,financial performance, strong balance sheets andcapable management teams. I have been investing in them for last few years as I had strong convictions in the strength of their businesses and management. Eventually, the shortsighted and over-reactive market recognized the true intrinsic values of these stocks/ businesses and fairly priced them, leading to handsome gains. I strongly believe in Low risk-High returns.

The other market myth is that you have to constantly monitor the markets and churn your portfolio to beat the markets. One should not heed to this myth as you can beat the market consistently without actively churning your portfolio. I have always done safe and long term investing. Once I have bought fundamentally strong and safe stocks, I hold them for long term and don’t keep on churning them so that I get the full benefit of the long term growth potential of these businesses. Consequently, my 2012 and 2013 portfolio of stocks has done better than the market. The key is to choose the right businesses which have favorable long term economics and sustainable competitive advantages and invest in them at right prices. Once you have done it, follow your convictions and stay invested for long term, regardless of how over-reactive market treats them in short term. Hence, safe and long term investing is the only way to make money consistently in the market while preserving your capital.

Hopefully these insights will help you to choose the right businesses and invest safely with long term perspective – the value investing way.

Happy and safe investing

Cheers

Amar