Stocks for the long and short term portfolio

[jamit_05]

Hi Amit,

what do you think of the below strategy to buy a blue chip...

Sometime it happens that we want to buy a good blue chip stock for long term/mid term holding but we feel that it has run up too much and will buy when it corrects but that correction never comes and stock keeps on running like Sun pharma, Lupin, TCS etc...

SO the strategy is buy 25% to 50% of your target investment in the stock any time or at some minor dip and now if the the stock keeps on moving your investment has been perfect and you enjoy the profits but if the market corrects then buy more of the stock this will enable you to buy at your desired levels. Only caution one needs to exercise that their should not be any fundamental downgrade in the stock leading to price correction.

Every strategy has its pitfalls. The one you mentioned above has its own. Let me illustrate.

If someone started investing in HuL, just newly started, in 1999 and bought at dips. Then his investment wouldn't reach break-even till as late as 2011. Considering inflation, his ROI would only be at par with FD at Current Market Price.

Now this is dismal. The company is bluest of blue chips, we bought at dips, held for a decade... did everything by the book. And yet, returns are dismal.

Same with Infy.

Therefore, one must ascertain, what does investment mean to him?
To me it means, buying good stocks for cheap (very cheap). Else, I will just hold my money in liquid. Surely, just like the ebb and flow of the tides, a sharp correction will come.

 

[stockman]

Amit, I just read your above post & it sounds contradictory to me (being an long term investor) & that made me to work out on the below,

See just in case if a guy have bought 100 shares of HUL in the year 1999 for 220 rupees a share where in the FV is 10... Post that in the year 2000 (July) the FV was split into 1 rupee, so considering that he will be having close to 1000 shares (price doesn't matter here).. And then he keeps on buying 100 shares every year (may not be at the lowest price exactly.. lets assume that he buys at 20 to 30 rupees higher than the lows) for the next 8 years i,e., till 2008 (refer the below).. Based on the calculations made by me he would have invested close to rupees 1.5 lakhs for the 9 years stint & will have 1650(post split) shares as of now..

Year No. Of. Stocks Price Total Cost
1999 100 225 22500
2000 100 180 18000
2001 100 205 20500
2002 100 197 19700
2003 100 188 18800
2004 100 140 14000
2005 50 169 8450
2008 100 208 20800

Total 750* 142750

*actual numbers without stock split.

At the current market price of 550 a share his total investment worth would be close to 9+ lakhs as of today excluding the dividends that he receives year over year.. Company pays average dividend of 5.50 rupees every year since 2002.. So considering all this & inflation, it is far better to invest in companies with good growth, able management & investor friendly.. than FD..

 

[jamit_05]

Amit, I just read your above post & it sounds contradictory to me (being an long term investor) & that made me to work out on the below,

See just in case if a guy have bought 100 shares of HUL in the year 1999 for 220 rupees a share where in the FV is 10... Post that in the year 2000 (July) the FV was split into 1 rupee, so considering that he will be having close to 1000 shares (price doesn't matter here).. And then he keeps on buying 100 shares every year (may not be at the lowest price exactly.. lets assume that he buys at 20 to 30 rupees higher than the lows) for the next 8 years i,e., till 2008 (refer the below).. Based on the calculations made by me he would have invested close to rupees 1.5 lakhs for the 9 years stint & will have 1650(post split) shares as of now..

Year No. Of. Stocks Price Total Cost
1999 100 225 22500
2000 100 180 18000
2001 100 205 20500
2002 100 197 19700
2003 100 188 18800
2004 100 140 14000
2005 50 169 8450
2008 100 208 20800

Total 750* 142750

*actual numbers without stock split.

At the current market price of 550 a share his total investment worth would be close to 9+ lakhs as of today excluding the dividends that he receives year over year.. Company pays average dividend of 5.50 rupees every year since 2002.. So considering all this & inflation, it is far better to invest in companies with good growth, able management & investor friendly.. than FD..

The discussion, which Jain brought up, was about buying little now, at CMP, although it is expensive. And if market collapses buy bulk.

I presented a view point saying, buying little now often does not bear fruits. How many companies do we know that are likely to keep going up and up? But buying in bulk at cheap prices, but high value, almost always bears good results over the long run.

 

[jamit_05]

My expectations and a wish for 2014.

Election results are good and BJP comes in with a majority. The progressive neta that Modi is, brings in a lot of confidence amongst the market participants. As a result market touches and comfortably breaks all time highs. At which point, participants get euphoric. Average traded daily range and delivery % drastically increase.

But amidst all this, the economy is still sluggish due to bad policy making from the past and poor governance. The bad businesses are still dragging their sick operations by pouring in debt. FIIs see this as an apt time to adjust their positions mark-to-reality. They start unloading; first slowly for a month. Then they go all out, selling hundreds of crores everyday.

Then the reality sinks in. The fact that BJP is a realistic govt. It does not promote capitalism all-out the way congress does. It controls inflation and promotes business from the grass-roots. All of this takes time. In the meanwhile, markets have already touched 2011 lows and are consolidating. People realize that most leaders in the sectors need debt restructuring and all of this will take time.

Then the real growth will start. And hopefully long term investors will be well positioned to welcome the next bull-run with open arms.

 

[shreeux]

Hi Jamit

What about HT Media....recently i see this link...http://goo.gl/8jA9kI

 

[jamit_05]

Hi Jamit

What about HT Media....recently i see this link...http://goo.gl/8jA9kI

For the past three years, the sales are not growing nor is the eps. It is not a growth stock. It has a positive FCF every year and it judiciously spends in property plant and equipment in proportion to each years FCF.

It is a good company. But, there is no growth.

 

[shreeux]

For the past three years, the sales are not growing nor is the eps. It is not a growth stock. It has a positive FCF every year and it judiciously spends in property plant and equipment in proportion to each years FCF.

It is a good company. But, there is no growth.

Thanks for reply...ok..now i like to invest...kindly suggest what are the scripts to watch......my strategy is buy on dips and accumulate only...

 

[jamit_05]

Nifty rallied from 6000 to near 6400;
Whereas, CIPLA made negligible gains in the period.

I am getting pretty hopeful about getting a good price on it, in the near future.

 

[malsawm]

Hello everyone, i have been following this thread for quite sometime and it has been quite helpful in helpming me build my portfolio.
I would like to ask the seniors here for their views on adani port and sez.
is it a good stock to buy at the current price point, and what are the longterm prospect on this stock..

regards

 

[angira]

Jamit,
what's u'r view on Reliance CMP -877, i've bought near 815 ?


angira...