It ain’t broken, so let’s not fix it!” is what comes to mind, as I try to tweak our two model portfolios this fortnight. At 9.6% appreciation, after a choppy 12-week ride, Wealth Zoom hasn’t done too badly for itself.
And with momentum coming back into the markets, Safe Wealth has held steady and delivered a whopping 12.5% so far. Cash levels are also decent, at 15% in Zoom and 11.5% in Safe. We have no changes this fortnight!
What we’ll do for now is agonise over the “better” stuff we could have bought. And whether, indeed, it was possible to spot this stuff clearly in June when we started this exercise. The infotech sector has been badly hit by the rising rupee.
Thankfully, our two picks in Zoom (Northgate and NIIT Tech) have actually delivered positive returns after some nasty hiccups. And we have the redoubtable Infosys as the only loser in Safe Wealth. I can’t find a large-cap infotech stock that has performed better or promised more than Infy.
In construction two companies have made it to the honours list of performers in Safe Wealth—Grasim and GMR Infra. We think we did well here. But among the mid-caps, there are several winners among the cement companies that we ignored, in our monsoon worries over cement prices, not realising the bigger picture of cement shortage driven by construction and infrastructure spending. JK Lakshmi, Mysore Cement, Mangalam and Prism have all outperformed Valecha and Punj Lloyd (in the Zoom portfolio).
It’s in the consumer sector that we have struggled. We think our ideas are all long-term picks with strong stories and will deliver sooner rather than later. But Shringar has not (yet) performed in line with our strong expectations, while RCom, HULand Idea have stumbled into minor gains. It is in this sector where we really need ideas from you, dear reader.
Show me a mid-cap finance or banking sector stock better than Yes Bank and I will buy it for the Zoom portfolio. The highly aggressive and expertise-laden management of Yes Bank has delivered all of 20% return so far in this portfolio and is going to earn even more for us, I’m convinced.
You can criticise me for being conservative in picking HDFC Bank for the Safe portfolio, but don’t forget we’ve earned over 33% so far with PFC, the other pick.
In the power sector, we missed out on Torrent Power’s 30% uptick for Wealth Zoom. Torrent’s commissioning of a new gas-based power plant will drive profits, apart from a distribution licence in Bhiwandi. But Safe Wealth did well to latch on to sector bigwig NTPC, whose decade or so of assured growth is likely to be matched only by the recent IPO candidate Powergrid.
Reliance Energy, GVK Power and Tata Power are the two big private sector misses here, in case you are allergic to PSUs.
We have lost money, howsoever small, in two out of four picks in the capital goods sector for Wealth Zoom. Inexcusable, if you look at what Walchandnagar, Voltas, Blue Star, Voltamp Transformers, Genus, Indotech, Cummins and Diamond Cables have achieved in stock performance recently.
Was it easy to pick a solid set of reasons to buy these stars in June? Frankly, the surge in the capital goods sector has left me breathless.
I’m feeling stupid, having actually met the Voltas folks at 90 or having written about Diamond Cables when it was in the 230s! In Safe Wealth, Arevaand Bhel are doing much better than their peers but feel free to send me other ideas that can compare with these two in terms of sheer quality.
Health care is one sector that stumps me. No amount of memorising API names and other miscellaneous jargon helps in deciphering the winners. You’ve just got to go by management guidance and, more importantly, quality vibes, consistent growth and event triggers.
That’s what hooked me to our picks in this space — Sun, Opto, Dishman and Shasun. But I could have lost my job as your fund manager for purely one stock’s movement. And that is the great CRAMS story called Divis Labs.
I have this funny feeling that stocks like Ranbaxy, Biocon, Cipla, Dr Reddy’s, Nicholas Piramal, Wockhardt, Jubilant Organosys, Aurobindo, Lupin and Glenmark have had an extended indifferent phase, and may soon swing the other way. If you think that these (or any other pharma or health-care stocks) are likely to outperform our current picks, please mail me with your reasons.
That leaves energy/oil, metals, textiles, auto, logistics and chemicals. We’ll review our picks in these sectors next fortnight.