Posted by:S. G. Raja Sekharan
My readers would know that I had sold off all my stocks in Feb 2016 and entered gold through the ETF route – this was done as I feared a market crash due to China. My forecast was wrong (thankfully) and things improved from March onwards globally and there was a semblance of stability and small growth since then. Big investors like Soros and Druckenmiller had also moved to gold and predicted a China induced crash at that time.
In the past 9 months- I have been sitting and seeing markets go up and select stocks zoom up and the stocks that I know well and had invested (and sold) had all zoomed up and were not in a price range to re-enter. My investments in gold in the meantime did OK - thanks to Brexit and the general volatility, I did appx 10% in the past 10 months. But I have been waiting in the side-lines to enter my favourite stocks for the past two months.
The Trump win has given the opportunity that I have been waiting for. Thanks to Trump, global money is moving back into US stocks. FII’s are taking money out of emerging markets (like India) and gold globally and entering US stocks. Indian stock market has fallen due to that and given me the opportunity that I have been waiting for. Incidentally, Soros and Druckenmiller have also exited their gold positions in the past months.
Now, I also have exited most of my gold positions and am buying stocks.
Which stocks am I buying?
Well, I am conservative in approach and will buy my own favourite stocks – companies that I had invested in the past – companies that I have been tracking for over 10 years and understand their businesses quite well.
I am entering Asian paints, HDFC Bank, Pidilite, Page Industries and Gruh finance (appx 15% allocation to each stock). Not all these shares are at my buying range. The prices I am waiting for are Asian paints - Rs. 950 ( already reached and I am buying), Pidilite – Rs. 650 (already reached and I am buying), HDFC Bank – Rs. 1100 (not yet reached and I am waiting), Page Industries – Rs. 12,500 ( almost there and I am waiting), Gruh Finance – Rs. 275 ( almost there and I am waiting).
There are two or three more stocks that I am entering in smaller quantities - Kitex ( at Rs. 415, I am buying), Bharat Financial Inclusion, Havell’s and Dabur (the last three, I am still calculating the entry price).
All these are good businesses, market leaders, good ROE, decent managements (some stock analysts may not agree with Kitex and Havells being a decent management – but I feel otherwise) and I believe this Demonetisation and Trump effect will impact these stocks for may be 3-4 months and then things will be back to normal. I am expecting a ROI of 15-20% per annum from these stocks over a period of 3-5 years.
If you are not into stocks – then you can look at investing in the following MF’s:
Those with a large cap focus can invest in Birla SL Frontline Equity or in HDFC Top 200.
Those with a mid /small cap focus can invest in HDFC Mid cap Opportunities or in DSP Blackrock Microcap fund.
Those with a focus on Debt can do long term gilt funds like HDFC Gilt fund (Long term plan) – I believe that interest rates will still go down and these funds will give appx 12% per annum with the low risks of a gilt fund.
If you are looking at beyond stocks and bonds, real estate and gold are the other options.
Gold, I believe, will be range bound, unless there is a global upheaval like China crash or a Trump induced event. I believe that the global economy has slowed but is not moving towards a crash. Gold will not do great in such conditions.
Real estate in India is not going to be doing well for at-least one year due to demonetisation.
If you have booked a flat in the past two years and have not taken possession of it, be ready to see delays as builders will be short of liquidity.
In case you are looking to buy a house, it would help to wait for a few months as you can get better prices.
The best deals are likely to be in resale houses, where the seller is an individual – not a builder.
If you are looking at investing in land, please wait. As land deals had always more cash component when compared to buildings, there is a good chance of prices going down in land transactions over the next 6 months.
As always, if you any specific queries - would be happy to help. Please do write to me at email@example.com.