TIPBlog Portfolio Update: 2010 Year End

The Year 2010 can be summarized as continued optimism, scams, change of guard at IPL, food rotting in warehouses, revolutions in middle-east, deflection from fragile European economy, etc. As an individual investor, should I care about macro economics? or Should I care what a bollywood celebrity’s dog does? They are all interesting stories, beyond which it has no value. This post summarizes TIPBlog portfolio update and measures progress. Earlier updates are listed under progress updates.


The 2010 year end status update is as follows:

  • The annualized dividend cash flow was Rs 22,371 (increased from Rs 15,148 in 2009).

  • Yield on original investments (YOC) is 4.3% (dropped from 4.9% in 2009). 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 29%. This is calculated as, value of portfolio at the end of 2010 vs. value of portfolio at the beginning of 2009. This includes all buy/sell activities in both of my portfolio.

  • Life-to-Date portfolio value is at 389% on cost basis. 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.

  • The dividend portfolio has 12 stocks, and 1 position as opportunistic.

  • All stocks in long term buy-n-hold portfolio continue to give XIRR of greater than 12%, while three new positions are still in early stages to have any meaningful results.

 

TIPBlog: 2010 Year End Status Update

 

Following is the summary of activities during 2010:

  • Initiated new position in Sutlej Jal Vidyut Nigam Ltd (SJVNL). This was through an IPO.

  • Added to existing position in Power Grid through an IPO.

  • Started opportunity portfolio. Bought and sold positions in Aditya Birla Chemical India Ltd, Transpek Industries, Jyoti Ltd, and Camphor & Allied Products. These were not my typical buy-n-hold position, but more of valuation driven opportunistic ideas. I have decided to sell them when my desired growth is achieved. I will discuss this more in future posts.


Some more observations and thoughts:

  1. I had set a goal to reach annualized dividend cash flow of Rs 23,000. I came closer, but I could not meet this goal. I had an ability to reach this goal based on availability of funds. But the challenge was to find good sustainable dividend paying company at a price I would be willing to pay.
  2. Percentage allocation to single position like LNT, ONGC, and HDFC Bank has started to come down. Most of it is coming from either change in value of shares in the market and buying other companies.
  3. In year 2010, total portfolio dividends reached critical mass where I can now buy at least one or two additional stocks per year.
  4. Similarly, the income from this blog has also reached critical mass where I can now buy at least one or two additional stocks per year.


For me, the highlight of the year was starting opportunity portfolio. The combination of total dividends and blog income reached a critical mass wherein, I do not need to allocate funds from my primary source of income. Considering my allocation limits and portfolio size, I can easily maintain four to five positions using these funds. While I have decided to limit my total exposure on opportunistic positions to 20%, I do not believe I will remain fully allocated. The opportunity portfolio is on auto pilot now.


On this blog, I have not discussed any of my opportunity positions, in detail, similar to my long term position. The reason being; this was my first year and I wanted to identify and experiment with process to determine valuation. Readers, who are fan of TIPBlog on facebook, would likely know that I provided regular updates on my buy/sell activities. This year, 2011, I will add more on this aspect.


That’s all for the update. I hope all of you made some good progress. Can you share some of the highlights of your 2010?









Facebook User Comments:


16 Responses to “TIPBlog Portfolio Update: 2010 Year End”

  1. Young@market says:

    Hi,
    It wasn’t bad for me.
    - became more systematic (thanks to your knowledge sharing)
    - I almost use the parameters same as you as I think they hold good for me

    - My positions at the end of 2009 was increased by 38.55%
    - My XIRR(whole portfolio from mid 2008) at the end of 2010 was 38.48%
    - Dividends increased from 403 in 2009(YoC 2.95%) to 1976 (4.80%).
    - Sold 1 stock which I had bought based on what analyst say (which was bought before I started learning what is investing), but gave a decent return.lucky me.
    - Most of such stocks (which is like an impulse buy 1st half of 2008) were sold in 2009 (I started direct stock purchase in 2008).. only one more stock remain which is Binani Ind (At 29 Rs, giving me 10% YOC and is not a great portion of portfolio.. will continue to hold till I figure out the company in detail… still learning about it.. but I can take the risk to hold it till I figure out.)

    - No such benchmarking on expected return.. but my aim is to keep it around 15 – 18% in the long run. but will be happy even if I keep it at 12 – 14% in the long run.

    • TIP Guy says:

      Hello Young,

      I like the results you got. Assuming you are focusing on building your core portfolio, it is good start to have YOC of 4.8%.

      What are your plans on dividends? How do you plan to deal with them? roll them into new purchases? How do you plan on tracking them and the impact it has on your overall returns?

      Best Wishes,

      • Young@market says:

        Hi Tip,

        Yes.. My AIM is to build a core portfolio, so that it gives good +ve cash flow over the years. I put back all the Dividends to purchase new/add any existing core stocks. I do track the dividends i am getting and will look how are they increasing year after year(does not have a actual long track record to give details now) apart from the div history which I have when I look at them during analysis.

        - I do plan to compare it with some good performing Funds like (HDFc top 200 or may be some one else) to see how I am faring against the fund manager.. to make sure that I am not under performing by a huge margin…

  2. Raja says:

    My first active year into DIY investment was a great year of learning and i have enjoyed every bit of it so far. Summary would be something like this.

    1. Started the year by putting in place a framework for my expenditure and savings pattern. Stuck to the percentage allocation to savings. Looking to improve my annual budgeting process taking better account of all the expected annual expenditures and providing for them in monthly budget.

    2. The first year target was to build a cash holding of about 6 months expenditure as contingency fund by March’11. On my way to success.

    3. Read my first few Annual Reports, and quite a few books like IE, Poor Charlies Almanack etc.. on investing and learnt a few things.

    4. Did some trades (holding mostly for a month or 2 mostly) in companies like Pondy Oxides, Camphor, binani cement delisting etc…keeping my exposure restricted to 20% of my corpus and earning a return of 10% on that allocation. Felt comfortable with a mental retriction to limit my loss to 15% in any individual position and call it quits if it fell below that.

    5. The best part was buying of some long term holdings like TIC, ITC, Reliance Capital and my first few hundred rupees of dividend income. They were yummy and am just waiting to receive the hard copy of AR of these companies to get a real feel of how part ownership of a business feels like :) The idea is to learn more about these companies and increase my holding in them as my comfort level increases and i get them at better prices.

    6. Took part in the employee share purchase program of my employer too. The share were bought at 40% discount to market price around a year back and are now quoting at 100% gain on my price. waiting for the dividend payout on them too.

    7. Will do a detailed annual review in April 11 and make it part of my process henceforth.

    Motto is to keep learning and improving!!

    • TIP Guy says:

      Hello Raja,

      It seems 2010 would be watershed year for you w.r.t long term wealth building. It looks like it was a transition year for you. Great start.

      Do you have a process through which you decide what you need and how you going to execute?

      Regarding ESPP holdings….
      I am believer that I should not hold much of my employers stock. It is enough for me to depend on them for my salary. Beyond that, cash out as much as I can, and not have any equity in them. I do not know your company’s dividend payout, but with 100%+ gain, did you think it would cover dividends for next 10 years? If I was in your position, at least for the employer equity, I would cash out on 100% gain.

      Best Wishes,

      • Raja says:

        Oh Absolutely! It was year of good learning and as you said a watershed years w.r.t to long term wealth creation.

        Regarding process, i can’t say that i have got a well established process as of today. But i think i have been able to put a ok kinda framework on which i hope to build on future. A thing which i am able to think more clearly is the explicit no list in investment’s considering my risk appetite. Kind of trying to follow charlie’s suggestion on trying to find out and plug/close the ways in which i may fail.

        Regarding my employer stock. I have put only 4-5% of my current years savings with them and am waiting for a 3-4% dividend yield on my cost in May 2011. Although the appreciation has been 100% on my cost, it’s only paper profit. This investment is not tied to my continued employment with my employer, i can sell my holding anytime. But if i stay for 3 years i get a 33% extra no. of shares on my purchase. So, these points made me go ahead with the purchase. Otherwise i had similar thoughts as your.

        Regards
        Raja

  3. Aditya Modi says:

    Hi Tipguy,
    please suggest where am I wrong in my approach. Can I consider the dividend income from my MFs investment in dividend payouts also under dividends? Esp in the calculation approach you have taken?

    Regards
    Aditya

    • TIP Guy says:

      Hello Aditya,

      My viewpoint is, I do not consider dividends from MFs of good quality. It is not clearly known to general public (i.e. retail investors) where it comes from. Many times MF managers mix and match or club with return of capital. Any it will come at a reduced level compared to what MFs receive from company. It has lots of uncertainty.

      Certainly, I would not use my approach described here to MF dividends. Since I do not invest in MFs I am not in a position to critic your approach.

      Best Wishes,

      • Aditya Modi says:

        thanks Tipguy,

        you are right, this infact further confuses the return. Hence forth i will avoid the div gains from MF .

        But for your tax planning you dont use ELSS ?

        • TIP Guy says:

          Hello Aditya,

          Regarding ELSS…. that’s the topic in the realm of personal finance which I stay away from. PF only gets my few hours per year, its not worth writing a blog post. Here, I only focus on equity investments, that’s what I believe the real challenge is!

          Best Wishes,

  4. sunil says:

    Hi Tipguy –

    1) your core portfolio has stocks like l&t, hdfc bank and abb – which are really not dividend paying cos. (all are high p/e low yield stocks) How come they are part your portfolio?
    2) how do you rate ongc at today’s price (with decent yield)- a good long term buy?

    regards

    • TIP Guy says:

      Hello Sunil,

      (1) Your question suggested you did not understand the notion behind dividends, since you are looking at present. Thanks for pointing those are not dividend paying companies and have low yield. How did I missed that?
      (2) My apologies, I cannot comment on that type of question. No individual stock opinions/recommendations/suggestions/comments.

      Best Wishes,

  5. sunilp says:

    Sorry tip guy. That was a genuine question as I wanted to learn(probably I haven’t got your point on dividend portfolio strategy). May be since the buy was low, at today’s rate of dividend the yield comes out very good (I will have to look at your blogs more carefully!) Thanks for your response..really appreciate that. Please note it was just the doubt that I had. Keep up your good work! regards

  6. Mayank Gupta says:

    To me, One must add City Union Bank, a small cap banking stock to his/her portfolio

    Thanks

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