I am not a great admirer of the theory of timing the markets. I firmly believe in the legendary Warren Buffet when he says that “time is the best friend of good businesses and the worst enemy of bad businesses.” So I would like to buy good businesses at reasonable valuations and wait patiently.
As a fund manager, explain the markets in short for the novice investor?
Equity markets mean different things to different people resulting in total cacophony and chaos for the novice investor. One may be surprised at the volatility in the prices of large-cap stocks in the absence of any considerable corporate action to warrant a change in fundamentals. So rather than trying to formulate some arcane mathematical model to understand markets, consider the market to be your moody partner in each business (stock). So each day your partner offers you to buy his share of the business or sell your share of the business to him depending on his moods; sometimes cheap, fair, or expensive. You are not obliged to respond to his offers but when you do, he is happy to fulfill his commitment. What a perfect gentleman as your partner! So keep your cool and respond only if you feel that there is a bargain out there to be exploited.
What are the stocks or sectors you would focus on going forward?
I would be primarily focusing on sectors that can grow in line or better than the GDP of our country because of under penetration (such as power, infrastructure, and banking) or some structural advantages (in case of auto ancillary and IT exports and shipbuilding). Other sectors that are more cyclical but whose long-term outlook is bright such as global commodities (oil & gas, metals), and local commodities (cement, paper, fertilisers) become attractive only on the back of cheaper valuations.
However in the current markets, an investor has to be extremely discerning as all stocks within the same sector are also not uniformly attractive. So it is a bottom-up market ripe for stock pickers. My portfolio is indicative of my top picks within each sector.
| PHANI SEKHAR Fund Manager - PMS, Angel Broking | ||||
| Top Holdings | % of assets | Cost Price (Rs) | Current price (Rs) | Value (Rs lakh) |
| Eclerx | 10.04 | 344.25 | 372.90 | 1.04 |
| Reliance | 9.83 | 2093.85 | 2174.35 | 1.02 |
| Axis Bank | 9.71 | 901.30 | 1009.30 | 1.01 |
| Federal Bank | 9.56 | 245.60 | 248.55 | 0.99 |
| Reliance Infra | 9.29 | 1194.80 | 1207.00 | 0.97 |
| Total investments | 77.21 | - | - | 8.03 |
| Cash | 22.79 | - | - | 2.37 |
| Net worth | - | - | - | 10.4 |
| Returns (%) | 3.96 | - | - | - |
What are the key factors that you look for before selecting a stock?
As stated earlier, I look for sectors that can grow inline or better than the GDP to generate superior returns. However growth cannot be at the expense of profitability and hence I closely look at the return on capital employed (ROCE) for individual businesses.
For other sectors that are cyclical but whose volume growth is decent (at 6 per cent or more), valuations play a key role. Other factors are equally important such as the track record of the management, corporate governance, and business philosophy.
Your advice to investors…
The ability to become a successful investor is inversely proportional to the amount of noise influencing you. To simplify, your chances of succeeding as an investor will reduce greatly if you believe that networking in the markets is important to beat the market or create wealth in the long term. It may sound quite intriguing but if you think hard, it will start making sense. One would agree that the biggest names (individuals and institutions) in the investment world both in India and globally would be the most and best networked and hence they should be not only be beating the market consistently but creating wealth also. Far from the truth! Statistics paint a different picture. In order to be a successful investor, it is discipline in investing that is more important than anything else.
| AJAY PARMAR Head Research Institutional Equities, Emkay | ||||
| Top Holdings | % of assets | Cost Price (Rs) | Current price (Rs) | Value (Rs lakh) |
| Torrent Pharm | 10.43 | 269.00 | 310.55 | 1.09 |
| Bhushan Steel | 6.67 | 1113.90 | 1391.60 | 0.70 |
| Orbit Corp | 6.53 | 194.05 | 272.30 | 0.68 |
| Bajaj Auto | 5.79 | 1494.20 | 1509.75 | 0.60 |
| Hinduja Vent | 5.41 | 391.90 | 376.25 | 0.56 |
| Total investments | 97.06 | - | - | 10.12 |
| Cash | 2.94 | - | - | 0.31 |
| Net worth | - | - | - | 10.42 |
| Returns (%) | 4.25 | - | - | - |
| AMAR AMBANI Vice President (Research), India Infoline | ||||
| Top Holdings | % of assets | Cost Price (Rs) | Current price (Rs) | Value (Rs lakh) |
| ce | ||||