TIPBlog Portfolio Update: 2009 Year End
What a year 2009 was? At the beginning of the year, the stock market was trying to find how deep the abyss was. Every other participant in the equity market was trying to run away like there was no tomorrow. Fast forward to second half of the year. The story changed and now the stock market is trying to find its peak. It was in true sense a roller coaster ride.
When the equity market goes up like it did in later part of the year, it gives a false sense of confidence in our abilities to pick stocks. Irrespective of what one thinks, any company stock you had touched in second of 2009, it has zoomed. It really did not matter which company stock it was! Lately, I have seen quite a bit of emails trying to point me towards how the stocks that I negated (or did not pick?) have zoomed up and made them money. I do feel happy for everybody who made good money in 2009. I wish you had shared those winners with readers of this blog. We all want to make money here. Right?
I continue to believe that there is no way any individual can predict what equity markets will do, or predict the future stock price of any given company. So why bother wasting time on it? Keeping with this, irrespective of what equity markets did, I remain rooted to my process. I continued to focus on good companies which I am likely to hold for many more years from now. In essence, there are only two steps that I follow, (1) attempt to find and understand the company and its operations; and (2) assuming I like the company; next step is to determine what price I should pay to buy its stock. My process is focused more on looking for sustainability, and minimizing the loss. If the company is good, and grows its earning, my profits/value will automatically get maximized.
So how did my portfolio perform in Year 2009? I provided two updates during the year, 1H09 progress update and 3Q02 progress update The table below shows the status at end of 2009, stocks in TIPBlog portfolio, and few other metrics. The status update is as follows:
- Annualized dividend cash flow is Rs 15,148 (increased from Rs 8140 in 2008). I achieved my goal set at the beginning of the year to reach Rs 15,000 as my dividend cash flow.
- Yield on original investments, YOC, is 4.05% (reduced from 4.90% in 2008). There was no goal for YOC as it is difficult to determine a target. The drop in YOC is expected because I am still in portfolio building phase. I am continuously buying stocks which do not yield higher. The real benefit on the portfolio basis is when I stop buying (probably after 15 years) new positions. However, when I really look on standalone specific lot-basis (i.e. capital with which I bought that lot), the YOC keeps increasing.
- Year-to-Date portfolio value increased by 115% in total value. This is calculated as, value of portfolio at the end of 2009 vs. value of portfolio at the beginning of 2009. In addition, I added dividends and returns from sale of two stocks GE Shipping (+19%) and Reliance Infra (+20%).
- Life-to-Date portfolio value is at 342%; This is calculated as, value of portfolio at the end of 2009 vs. my original cost basis. In addition, it includes all the dividends received and sales I have done in those years.
- All of these stocks in my portfolio continue to give XIRR of greater than 15%.
- At present, the portfolio has 12 stocks.
TIPBlog Year End Update 2009
I have added few additional metrics and data points to put the results in perspective. LTD is Life-to-date, YTD is year-to-date. Following is the summary of my portfolio activities during 2009:
- Added to existing position in LNT, ONGC, HDFCBank, ABB, Reliance Capital, and NTPC. These additions lowered my YOC, XIRR, and LTD returns.
- Initiated starter positions (i.e. new purchases) in Tata Investments, Hawkins, Aegis Logistics, and Graphite India.
- I sold GE Shipping and Reliance Infra.
In addition, you may notice an extra column in the table above, which shows Div. Portfolio, Div. Reinvest, and Blog Income. I have started to track these from 2009 onwards. It shows the source of capital. I received dividends during 2009. I reinvested those dividends back into buying shares of Aegis Logistics Ltd. Similarly, I bought shares of Graphite India from my blogging income. For now, these two may appear to be very small and may not make a dent in my portfolio, but as time progresses, I expect it to increase in value.
Let us assume that I sell Aegis logistics and Graphite India. I would have added 19% to my dividends, and 22% to my blogging income.
This post shows a very simple way to look for what is important for us in our portfolio. It would be very easy for me to get distracted by 2009 returns. But we have to put our short term results in proper perspective of long term objectives. NIFTY index has given 72% returns for January 2009 to December 2009. Now you know that the big chunk of 115%+ return that I have to show for 2009 is not of my making. When the tide rises, everything else gets raised in its swell.
In future posts, I will provide an update on risk analysis, discuss about selling the long term positions, and dividend reinvestment. Meanwhile, you may read my earlier 1H09 risk analysis and 3Q09 risk analysis update.
2009 NIFTY index retruns, measuring portfolio performance, measuring progress, portfolio management, progress update, risk management, XIRR
Tip-guy,
One curiousity….did the “original” L&T also give you some Ultra-tech? And, since it does not figure here, I assume you sold it!? So, is that factored into the returns of L&T?
If you were to analyze afresh the stocks in the portfolio, how many would pass muster? Some, like HDFC bank, L&T would be way ahead on valuation and a few multiples of their Graham number…. This is a question that you can consider when you write a Sell-side post that I’ve been requesting.
I had held HDFC bank too, for about 6 years now and sold when I felt there were better opportunities and HDFC-Bank had run way ahead of itself in terms of valuations. TO each his own – I know, but want to know your opinion on Selling some of these core holdings.
rgds,
arun
Hello Arun,
Yes, I sold ultra-tech and it is included in LTD.
HDFC Bank and LNT would not be in my fair value range. They are way over valued. It is really difficult for such companies to ever come in close to my fair valuation. They were in Feb/Mar 2009. Those are very rare. That’s when I added few more lots.
Best Wishes,
Thanks for prompt response, Tip-guy.
I guess you’d have expected this follow-on question…so here goes!
If you dont find fair value currently in LnT or HDFC [ just exmples, it can be any stock, and we're really discussing a concept here] and yet expecting it to grow in future, that is essentially relying on the greater-fool theory of stock market for price expansion, keeping aside the earnings growth. And Aslam asks below the same question in a different way – why not sell them? OR, what is the decision point of sale? I know you mentioned in an earlier post that the point of sale is when your objectives are met …in this specific case, what is the objective? For the same money, there are equal opportunities in terms of dividend or capital appreciation, so what becomes a trigger for a sale, if any?
I guess it is now really time to write on the Sale-side story [ like the famous movie- West Side Story]
Thanks for your patience and I really enjoy and learn from all these discussions.
Rgds,
Arun
Arun,
Yup, next one would be sell-side story…..
Best Wishes,
Good Show,
I really appreciate that you could achieve your desired goals during year 2009.
Keep it up and enlighten many amateur investors like us.
Regards
MIP
Thanks MIP
@Tip guy,
I have been following you since last april. Beyond results, I have a very high regard for your discipline. It is such a motivational factor.
i don’t know about others readers but the key message i learnt reading this blog is investing discipline. if an retail investors like me can follow a discipline method and methodical style like you are doing then success is just a by-product. it will happen.
one thing I am curious to ask, your holdings seem to be multiples particular ongc, lnt, hdfc, abb, Don’t you get a feel that you should book profits? you could use those profits to invest in another opporutuntiy and your folio value could increase faster, isn’t it?
Thanks in advance for your thoughts.
Aslam
Aslam,
Good to know that you liked the discipline. Yes, you could say, results are by-product of discipline and style.
good question about why not book profits? I will write a note on it shortly.
Best Wishes,
Hello TIP guy… congrats on achieving your goal for the year. Let me ask one qn on fundamentals….. What fundamental change made you sell the stocks of reliance infra to a zero level, I could not quite understand.
I plan on writing about sell side. To sell, it doesn’t necessarily have to have a change in company fundamentals. My portfolio’s risk also plays a role.
Best Wishes,
Tip guy,
You hold both ONGC and L&T and Reliance Capitol will it be possible for you to share with us the fair value for these stocks? asking this cause you hold them so you must have done your research on them
Vikrant,
I have not done that lately
Best Wishes,
ok i read the post where you are mentioned how to calculate this and provided the sample in the tool section too, so thanks for that, just wanted to say if you already have it with you only then please provide, else i should do it myself sir.
PS: i know you expect your readers to do their own research and after i have read about your work and all i don’t feel like asking you many question, (i will try to reduce the no of questions i ask, cant promise
)
you can as many questions as you like
may be i am asking too much, can you also share your buy price? or tell us when you make a buy.
Thank you
Biren,
yeah, that’s probably too much
congratulations. great stuff. I had some questions on your process. I send you a message through “contact me”. I hope to see your response.
THanks for your help.
Hello Krish,
sent you my response….
what is your criteria to sell?
posted today
I recently came to know about your blog from friend. We were discussing about investing styles and how to go about it. My friend told me to ask the questions I have to you. He said, this guy will genuinely give very good respond, without wanting to sell anything. I did have an email address so putting a personal question in comments sections. I hope you do not mind. In last three days, I have almost read every article. I think it is more than 110. I have few questions
(1) do you have all articles in one place so that I can print them and make a book out of it?
(2) most of the time, I had reading everybody focuses on percentage based performance. Does it makes sense to use absolute rupee amount. All said and done, it is the abosolute money that makes you wealth and rich. Can you let me know if this is the right thinking?
Thanks for your comments and help.
Hello Ravikant,
(1) No i do not have everything in same place or in pdf format. sorry.
(2) good question. But investment strategy or monitoring on basis of absolute value does not make sense, and it is not correct. You should always measure performance, or devise a strategy, on relative basis. It should always be based on your investment inputs. It is very easy to double Rs 100, but difficult to double Rs 10000. You may double your Rs 100 investment, but if it only represent 10% of your assets, then its overall impact is very less on your wealth. Similarly, if you gave only 20% gain on Rs 10000, it could be still better because it represents higher % in your assets. Percentage helps your put your gains/losses in relative to something (cost basis or impact on your wealth). Hope this helps.
Regards,