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.
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