Analysis on returns of Banks

Recently due to the FII pulling out money from the Indian Stock markets a lot of good Public sector banks were available at a good dividend yield and discount. Though the actual reason for discount is not necessarily bad business the dividend yield and discount part attracted me to do an analysis on how public sector banks and private banks performed over a period of time


Following are the graphs of two banks 

As you see both the banks are dividend paying companies though the amount of dividend varies for each bank.

Both of them performed well over 10 years time frame.

Following are the returns of if 1,00,000 is invested in these stocks on 03 Jan 2013.

The amount invested in andhra bank would have been by now 2,50,000 plus a dividend of 2,07,000 so it would translate to 4,57,000 at a market price of 54. However if the market price is 120 then it would be a staggering 7,07,000. I mentioned 120 since the stock was trading at 120 a few days ago. So at 4,57,000 the returns would have been 15% per annum which is good.

The same one lac invested in HDFC bank would be now around 14,88,000 plus a dividend of 55500 which totals up to 15,43,568 . As you see HDFC did not return money to investors buy used it to invest in business which generated better.  The returns are at 28% per annum which is stellar.

The same one lac invested in FD at 9% average would have been now around 2,58,000. 

The above example show why equities are a good bet for longterm so always invest for atleast 5 years of time frame and continue to be stay invested.

New Additions

I had added fresh positions on Cera,Punjab National Bank,Andhra Bank over the past couple of weeks
I would update this post in a few days.

Following is my current allocation to different stocks

Stock Name Portfolio Holding
VST Tillers     6.01%
Allahabad Bank     41.80%
Cera Sanitary Ware     19.78%
GOLD ETF     8.18%
Punjab National bank   6.49%
Andhra Bank     14.59%

As you see i added some huge positions on banks which i would not recommend to anyone...My risk appetite is different so please do your due diligence while doing your investment...

Fresh Additions

Recently i had added positions in some PSU banking stocks for long term. When i meant longterm it means atleast a span of 3 to 5 years. Following is the fresh positions i hold. The portfolio allocation might look a bit skewed since i bought one particular stock.But as time progresses i will be adding other stocks as well to make sure the portfolio is balanced.

Stock Name	Portfolio Holding
VST Tillers	9.96%
Allahabad Bank	49.03%
Cera Sanitary Ware	10.96%
GOLD ETF	13.57%
Punjab National bank	10.76%

I do not understand the technicals of the market since a few days back showing the current account deficit and inflation as reasons markets crashed and it is not even one month after the crashed it hit a high today. So did something change in the way companies operate or fundamentals of economy ...I don't think so. Anyways i am not worried about the technicals of the market since i do not trade in futures n options and i don't trade every day. Waiting for next quarterly results to see if the stock selection is fine and also tracking specific stories 

Someone asked me a why i didn't consider a pharma company which crashed 30% recently.Well i am not convenient with companies in which regulator can have significant say. So even though i found good companies in the past i stayed away from them due to the risks the companies bring along.So pharma,NBFC are mostly out of my interest list most of the times.

Markets Down

Markets are down for the past few trading sessions and are likely to be down for a few more days. I believe everyone know the reasons, if not it is majorly because of the FII's pulling out money from markets which may have happened to our domestic reasons[policy making or current account deficit] and may also be partially due to western markets becoming attractive. The reasons can be many and i am not the best guy to write on this subject. 

I did a check on my portfolio[which is necessary] when the markets are down for 8 trading sessions and  see that my portfolio returns for this year stood at 6.7% compared to 2.57% in my earlier post. 

Well there was marginal fall in the shares i hold [like cera] but due to the gold holdings in my portfolio [gold value increased in the past couple of weeks] the portfolio returns improved.

It feels good that my portfolio did not crash but i think it is just by chance.

Currently as we see most of the papers write about markets in front page,most of the people say its better to stay away from markets. I personally feel these kind of situations open up opportunities for retail investors since there will be lot of good business available at a decent price. These kind of markets can also create great businesses available at good price.  

If you are an investor who can evaluate stocks then its time to look for business who had good returns in past three years with strong management and have scope to do well in the next five years. Select the stocks mostly among big companies which can assure good returns in the next few years to come.

VST Tillers Quartely Report

Recently the quarterly results of VST Tillers had come out. Looking at the sales figures the company had done decent enough compared to the earlier quarters. 

• Sales have increased by 6.3 % compared to previous quarter
• The operating profit had increased by 25% compared to previous quarter
• Net profit had increased by 21% compared to previous quarter
• Recently the company paid a divided of Rs 9 upon a face value of 10.
• The company is debt free
• The market cap of the company is 357 crores with a projected sales of over 500 crores
• India had a good monsoon this year,which might push up the farm merchandise sale[ this is an assumption]

Overall this looks like a good stock to hold for a few more quarters.

During the last friday crash  in stock markets i could notice this company held up in green. The volumes on this company are very low which might be the cause of staying in green.

Steve Jobs - Stay Hungry Stay Foolish

Though this had got nothing to do with investing....its a nice video to see and good text to read upon.

http://www.businessinsider.com/the-full-text-of-steve-jobs-stanford-commencement-speech-2011-10

Added Allahabad Bank

Hello

Today I had added a position in Allahabad Bank bringing down the whole cost price in my portfolio.
I feel in short term [1-3 months] it will go up to 110 levels. I am not an analyst but this is my gut feeling about this stock. Please do your due diligence before investing

Update on Exited stocks

I  would like to provide an update on exited stocks.  I see that CEBBCO had a further slide and came down to 8.40 rupees,while Zylog slide continued to 11. The slide can be due to negative market sentiment or problems with the quarterly results or decline in promoters stake. Anyways i think going forward it would be a good choice to have a stop loss. If the company prospects are intact then it would be a good choice to add the stocks to average out the purchase price. If there is an iota of doubt about the company then it would be wise to exit at the earliest[in case of unrealized loss] and find a promising opportunity.

Portfolio Update for H1 2013

Hello

I would not write a detailed post on the first half portfolio update.
Following is an outline set of numbers of my portfolio performance.

Overall my portfolio returns were -9.89% 

I lost most of my money in two stocks which i thought will turn out to be very good bets..in short term i lost money and  booked a loss. In longterm the story might be different.

As you see i lost money so I will try to get better with time.

Below are my top holdings as of now

Stock Name	Profit/Loss	Portfolio Holding
VST Tillers	2.10%	24.04%
Allahabad Bank	-25.16%	16.79%
Cera Sanitary Ware	20.58%	26.44%
GOLD ETF	2.60%	32.74%
Total holding returns	2.57%

Gold/Precious Metals companies

Last few days seeing the kind of downfall in gold/precious metal companies reminds me of the temptation i had to buy gold companies a few months back. As you can see from below chart gitanjali gems lost 85 % of value in a span of one month. Imagine the plight of retail investors who had invested in this stock and lost money. A couple of months back i had analyzed few gold/precious metal selling companies and thought it would be a good investment choice. I thought of investing in Thangamayil jewellery but stayed back at the last minute since i was not sure of one aspect in business..i.e the buying interest of public. Gold is considered as a very good investment in India  However with the changing demographics in india the general public might slowly move away from buying since it might not excite younger generation[this was an assumption].  Also i did observe that lot of banks & financial institutions started marketing about Akshaya trithiya which made people situp and notice to buy gold[ I was never aware of Akshaya Trithiya in my childhood].So i felt these marketing strategies are helping companies to survive and it is a luxury item. In case of recession the buying of gold might be impacted and of course not the value of gold. So i dropped out at the last moment and instead bought a gold etf[which is linked to price of gold].

I don't say i am correct in guessing the downfall[first of all i didnt predict any downfall of gold companies]. I was not too sure of companies business strategies and so refrained from buying. However one lesson which i learn now is the regulatory change can impact gold companies in India and you need to understand this risk  before investing in gold companies.

Paying Up

An Excellent article by Professor Sanjay Bakshi on Paying Up. Do read


http://business.outlookindia.com/article_v3.aspx?artid=285698

Allahabad Bank

I had recently added a position of Allahabad Bank. One @ 92 and another @ 85.
The stock had gone down since i bought. If it hits some more lower levels i would considering buying some more.
Recently all the public sector Bank stocks took a hit after RBI tightened rules on liquidity. With the fresh set of regulations most of the banking stocks hit a 52 week low. Added to this banking stocks had rising npa levels which made them not so attractive to markets.
I have the following reasons to buy a public sector bank.

Allahabad Bank has a good track record of dividend. So if you buy at current levels or lower levels the dividend declared will be almost equivalent to FD rates after taxation. Anything over an FD rate is a bonus for me  and also a safe bet since it is a public sector bank. Now you may ask me why i bought Allahabad Bank when a whole lot of other banks are available. Well my inclination was towards dividend yield and i observed Allahabad Bank and Andhra Bank had good dividend yield. In these two i added Allahabad Bank since i had been tracking this stock for quite sometime. Now since my average price is higher than the current levels do i consider selling to limit my loss - the answer would be no.  Well if you are not ready to take at least 25% loss on paper then you are not for investing. So i would not sell even if it goes down to 70 levels.

Note : I may be right or I may be wrong...but i had risk appetite so i could buy the above mentioned stock. Please do your due diligence before you buy.


Update on 26 Jul 2013 : The stock is now available for interesting price of 75 and dividend yield[if dividend continues to be same as last year] of 8% fairly making it equivalent to a FD with an appreciation. Further downside also possible. I just wait with fingers crossed

The Pain of Loss

Recently i had to exit two stocks since the markets had punished them hardly, of course with valid reason that both of them had governance issues. The mentioned stocks have left pain for me due to the losses i had incurred,however the teaching from them is very much valuable. The stocks mentioned are my personal view and nothing to do with the working of the company. Here is the brief view

Zylog Systems: The company ran into problems due to cash flow crisis. I had taken a position on the stock at Rs 72. After i bought at 72 the share price went to 55 and fluctuated at the price for a couple of days. I felt i had made a strong bet at 72 and the share price might come up in the next two to three quarters after the results. However the price came down crashing to 30. I didn't try to dig much into why the stock price fell but i just waited for price to recover to some level and made an exit at 40% loss[around 40]. After i made an exit i see the price came crashing down to 13. I did make a huge loss but learnt a lesson that when i put my money into a stock [however cheap i might be] i need to look at management aspect also.This i had ignored when i invested in zylog since i was in a hurry to make a position at 73[obviously expecting a good profit in a few months]. I need to carry forward this lesson.

CEBBCO: This was a company with good track record on management. But something amiss went with the company resulting in share price dropping to 45 levels. I waited for share price to come down further. So i took a position at 30. However it continued its slide till 14. I had booked losses at 18 levels. Though the position i had taken was small it still helped in learning a lesson. May be the bad sentiment continued. The way share transfer took place raised some concerns and reflected some bad sentiments which triggered the slide. I had to book a loss since i was able to find some other promising stocks[of course promising word is an assumption].

The main lesson learned here is bottom fishing can be dangerous sometimes.

Cera

Cera is the third largest player in the Indian sanitaryware market after Hindustan Sanitaryware (HSIL) and Parryware (EID Parry).

Financial results for year 2012-13

• Revenues of 487 cr and net profit of 46 cr
• Dividend of Rs 4 up from Rs 3 as compared to last year
• Company had performed pretty well in last 10 yr - CAGR Revenue of 28 % ,CAGR profit of 43% and ROE of 24
• EPS was 36.51 up from 25.32 a year back (up 44.91%)

The stock had performed pretty well in the past. With the real estate sector going through a turmoil ,the company which is is dependant on construction activity can take a hit. But as per the latest results it looks like the company is not impacted till now. The same progress can keep the stock flaring up to further higher levels.

P.S: I am invested in this stock. Please do your due diligence before making your investment

A subject tracker

Hello

To most of you this might be another blog which you have stumbled upon during surfing internet but i started with the purpose of subject tracking. It would help me keep a record of my perceptions at a point of time.
I would write here on stocks,finance subject which i find interesting and my perception on various forms investment. Stocks and other financial instruments discussed here are for education purpose only and cannot be taken as advice.
Thanks to provide your feedback & advice.