Tuesday, March 31, 2009

Investment Strategy-other way

I wish to share my views on portfolio building with the readers. It is expected that a minimum of 6 months are still ahead of us to build a strong and worthy Portfolio. The election menace may bring some more downfalls in the market but there is some favorable aspects also developing around which may help a gradual recovery by the end of 2009.
The research before investing in a scrip includes a number of factors like companies’ assets, liabilities, earnings, managers, competitors, the nature of business, the amount of debt etc. You can find many of this information in the balance sheets. If you have done your homework and closely studied all the aspects of a company, you should be rewarded with a high returns.

I would like to share a raw investment strategy which I am planning to apply with this extreme volatile and uncertain bear market. It is not much the conventional or intellectual way of investing. But I believe in this system and it is proved as the best strategy in any long running bear markets.

Full or partial of the following factors should be considered while selecting each of the stocks listed below.

(a) The fundamentals
(b) A bit of Technicals
(c) The product trend and applicability issues
(d) The future scope of products/Services
(e) The Management
(f) Assets/Infrastructure of the Company
(g) Certifications and Awards
(h) Market Response
(j) Previous Products/Projects
(k) Investor relations
(l) Dividend History

I am planning to accumulate stocks with a long term vision of 3 -15 years. Gradually wish to filter them down and would like to keep the best 2 to 3 in every sector. I am basically not concur with the logic, that one should not maintain a portfolio of more than 15-20 stocks. I prefer the most proved and worthy practice (in other areas) of filtering down to reach your specified numbers of stocks that as much you can monitor.

Managing Your Portfolio

For example, its some way similar to selection of a Football team. You are the coach of this team. Suppose, you have a 25 member team of best players from which you will select the first 11. Remember that they are the best in their respective play positions and you have an unambiguous trust on their abilities. You have selected this 25 people after stiff and exhaustive selection process. You should have more than one choice to play in every position, like good Stopper Backs, good Goal Keepers and good forwards.

You will not hesitate to skip any player at any time if he creates a burden for you. You will also not allow to play an injured player in the first eleven. You will replace the position with other best player who is sitting in the pavilion. Don’t keep any emotional attachment to any of the players and the performance should be the only criteria to keep them with you. Closely watch their performance and rotate them which best suits your team.

Buy in dips & Averaging

You can buy as little batches of 100, 500 or 1000 at every falls depending on your cash reserve. It is also possible to accumulate below the 9000 level of Sensex. Sort your portfolio frequently in ascending order on “Overall Gain” or “Net Profit figure”. Keep averaging from the bottommost scrip which shows the lowest overall gain percentage. Do these practices until some steadiness come to the market.

We cannot predict the exact sector which is going to be emerge in coming days. And its harder to find the best too. Even if we found one …what’s the matter? Satyam was one of them.

I wish to propose that,

Select 3 to 4 companies best in each sectors and do filter down on the basis of frequent performance review. The time has to show us the best. And for the non-performers, leave them simply on the way.

I am not responsible for your investment decisions. Please do your own analysis before any bulk investments.


  1. Hi Shabu, cannot see the list of your favourite stocks. Thanks Shalu

  2. Hi Shabu, cannot view the list of stocks. Thanks

  3. Hi Shabu, Nice list of the companies...

    I have a query regarding Bartronics.

    The Company has outstanding FCCBs of US$ 56 million (US$ 6 million – 2012 and US$ 50 million –
    2013). The Company has not created any redemption reserve for FCCBs. In case the company fails to
    buy back these FCCB or they are not converted it would put an additional pressure of Rs 222 Cr on the
    company’s balance sheet. If these Bonds are converted to equity, the equity capital would increase to Rs
    37.63 crore and so would dilution of earnings.

    What will be the impact of this on company's financials...?

    Also the promoters have been reducing their stake in the company in the past years...

    Can you analyse this thing...

  4. VAS - Geodesic... why not Tanla...?

  5. Dear Sheel,

    I am agree with you on Bartronics issue and closely watching the company by last few months. Pledging of shares is also an issue with the company. But I am not consider all these as a reason to exclude this scrip from my list. The sector they involved is unavoidable and as of now, they are the leaders.

    And Tanla is there in my list ?

    Thanks for the comment

  6. Thanks...

    ABG Shipyard(PE 2.9) and Bharati Shipyard(PE 1.4) are having very low PE, also they been growing companies having growth of about average more than 30 - 40%.
    They have good order book too.

    Also today the government has approved the subsidy for them.


    Please can you check it out and tell how the subsidy will affect their balancesheet.
    I think its a value stock...

  7. sabu sir

    excellent idea and good examble

  8. sir in one of u r earlier past u said u would recommend some penny stocks.

    i hope u would soon comme out with it.

  9. Dark Knight Abhay

    I am working on it... and hope will post it very soon. I was busy with some official engagements and all... Sorry for the delay...

  10. Dear Shabu,

    What views do you hold on Shipping sector? As one of the readers in the above comments have asked?

    Which one do you prefer GE Shipping or SCI ? And your reasons for the same too pls.

    Thank you for the article on portfolio building.


  11. Dear Viral,

    Thanks for the comment. I am positive on the sector, especially with Bharship, ABG and GE. But will buy in small batches only in dips. I think..Barship will be emerge as a multibagger with in 4-5 years. The order book of the above companies are really mouthwatering. In my oppinion, the other Dark Horse in this sector is Western India Shipyard. Just 4.73 now, but I hope it will give a minimum of 600-700% return within 2-3 years.

    Regards and thanks to all...

  12. Hai Shabu. The efforts behind this site is very much appreciable. Keep it up and congrats!.

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The blog is associated with information on Indian stock market and author’s investment view points on various emerging stocks/sectors. The contents discussed in this blog are purely my own personal opinion and in no case weigh it as any kind of recommendation for stock market investment. The sheer purpose of this blog is to educate the interested community on market related subjects based on my experience and I am, in no way, responsible for investment decisions based on the contents described in this blog.

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