Hello readers,
Wish you all a very happy and wealth generating New Year
-2013.
How Indian markets performed in 2012 vis-à-vis my 2012 Forecast:
Before we get into 2013, let’s
look back and see how the Indian markets performed in 2012. The Sensex was up
by 26% with respect to 2011 closing levels (from 15454 to 19426 levels). This
was in line with my 2012 forecast (Pl refer my blog on 31st Dec 2011"My
2012 forecast and Top 10 stock picks) when I had predicted the Sensex to touch
20,000 by 2012 end. It almost touched and missed 20,000 by a mere 500 points (2.5%).
The Indian Sensex did better than the world markets and US market(S&P 500
Index) and was one of the best performing markets, justifying my bullishness on
Indian economy and market. The MSCI All-Country World Index of equities increased
16.9 percent in 2012 & S&P 500 Index increased by 13% in 2012, while Sensex
increased by 26%.
How my 2012 portfolio performed(Top 10 stock picks) :
Pl refer to the same blog (dated
31st Dec 2011) where I had mentioned my top 10 stock picks for 2012.
In order to put my investment ideas to test, I invested in the same stocks in
2012 with great results (as shown below). My portfolio showed gains of 36%
versus 26% of Sensex gains. I was more bullish on stocks like AXIS bank, BOB (Bank
of Baroda), REC (Rural electricity Corp), BHEL, IDFC etc and hence put more money
(higher weight) on them. The 4 top gainers were Axis bank (56%), IDFC (78%),
REC (66%) and L&T(57%).The only 2 big disappointments were BHEL and GAIL . However,
am still bullish on these 2 stocks and strongly think that market is being
short sighted and not fully pricing their long term earnings potential and
durable competitive advantages. Hence I
am going to hold them on for 2013 when they will show excellent gains.
2012 Portfolio results:
Company
|
Weight
|
Gain%
|
|
Axis
|
19%
|
56%
|
10.4%
|
BOB
|
15%
|
30%
|
4.6%
|
BHEL
|
14%
|
-3%
|
-0.4%
|
REC
|
13%
|
66%
|
8.7%
|
GAIL
|
10%
|
-6%
|
-0.6%
|
IDFC
|
9%
|
78%
|
7.2%
|
L&T
|
8%
|
57%
|
4.7%
|
Reliance
|
8%
|
18%
|
1.4%
|
Jain Irrigation
|
2%
|
-3%
|
-0.1%
|
Coromandel Int
|
2%
|
-14%
|
-0.3%
|
Total Gain%
|
36%
|
My 2013 forecast of the Indian markets:
Though I am a
long term investor who focuses on long term trends and predictions of the
economy/ market and the businesses, I would dare to venture into the medium
term forecast again and predict that India economy and the markets are at the
threshold of starting a big and long bull run. The Sensex could be
touching 24000 by Q2/Q3 of 2013 calendar year (16 X FY14 forward PE). This
is about 25% gains from the current levels. This means that if we chose the
right businesses/ companies (fundamentally strong businesses with competent
management at attractive prices), we could potentially make 30-40% of returns
in 2013. I am most bullish on interest rate sensitive sectors like Banking
& Finance, Automobiles, capital goods/ infrastructure etc as they have been
battered badly in recent times and will benefit from the Govt. policy reforms,
investments and RBI impending actions on interest rate reduction .This market
forecast might get battered only if we have sudden upheavals or catastrophic events
like US fiscal cliff not getting resolved and US getting into recession or
severe Euro sovereign default or Indian Govt falling etc.
My 2013
Portfolio of Top12 business/ stock picks:-
I am going to
retain many of the stock picks of 2012 while dropping 4 of them and adding 6
more new businesses/ stocks.
I am retaining
BOB(Bank of Baroda), REC(Rural Electricity Corp), BHEL, GAIL , Jain
Irrigation and Coromandel International while dropping Axis Bank, L&T, IDFC
and Reliance. These 4 dropped businesses/ stocks are still great businesses/
companies but they are no longer available at great prices which can provide
enough margin of safety and returns for me. In case they drop by 20-25%
anytime, I will invest in them again. Apart from these businesses, I will add 6
more businesses as they are best in class in their sectors with great
financials, business growth track records, excellent ROE, strong balance sheets
with very competent management available at attractive prices. They are ICICI
bank, M&M, Bajaj Finance, LIC Housing Finance, LUPIN (pharma) and Power
Grid.
The final 2013
portfolio looks like the below
Businesses/Stocks Sector
1)
ICICI bank Banking
& Finance
2)
BOB Banking & Finance
3)
Bajaj Finance Banking
& Finance/Retail
4)
REC Power
5)
Power Grid Power
6)
BHEL Capital Goods
7)
M&M Auto
8)
GAIL Energy
9)
LUPIN Pharma
10) LIC Housing Finance Construction/ Real
estate
11) Jain irrigation Agriculture
12) Coromandel International Agriculture/
Fertilizers
All these players are dominant or
big players in their sectors with consistent growth and profit
performance, robust business models, well managed companies by competent
management teams & strong balance sheets with sustainable competitive
advantages in their areas. And they are available at attractive prices now with
respect to their intrinsic value & historic PE, providing a great
"margin of safety" for the value investors.
Wish you a very happy New Year again and Happy
investing,
Cheers
Amar
