Nirav Panchmatia's Blog

Common Stocks, Uncommon Profits

If you regularly watch business channels then you would have noticed the change in tone of media and the market experts on TV channels with respect to the advice they give on markets. Since last couple of months, and in case of some experts since last year or so, are coaxing you, the retail Investor, to INVEST in Equities (i.e. Stocks) /or Equity Mutual Funds.

However, this is my advice to you, the INVESTOR my BLOG readers…

Please IGNORE what the pundits are saying & I strongly urge you to NOT invest in Equities

(I.e. Stocks & Equity Mutual Funds) in the year 2013…

Although this goes against what I usually speak on CNBC Awaaz financial planning show YOUR MONEY on which I appear regularly

(click on the links below to watch my recent show on CNBC Awaaz):

Link1
Link2
Link3

I have a selfish motive involved here when I say that I do not want YOU to invest in Stock Market/Equities:

I do not mind if you stay away from EQUITIES because:

1.  While you keep your money in low interest bearing Savings Account (earning a meager 4, 5 or at best 6% per annum) or while you earn taxable 9% per annum in Fixed Deposits, I shall continue to buy HDFC Bank, Indusind Bank or the likes of Yes Bank which are up 3.5x times, 11.0x times & 5.9x times respectively since DEC 2008.

2.  I also urge you to pay all your EMIs diligently and on time so that retail loans given by banks do not get into trouble and my banking stocks appreciate further from here.

3.  I would also urge you to continue buying GOLD even at these inflated levels (please ignore what the Indian Govt. is saying) so that I continue making supernormal returns in “Titan Industries “and other jewelry companies because while GOLD might be up 2.58x times in last four years, the stock of Titan Industries, which retails gold, is up 6.90x times during the same period.

4.  I would also urge you to buy “Real Estate” and do not forget to take a Home Loan for the same especially from HDFC & LIC Housing Finance. That is how I made 2.8x times & 5.7x times respectively in these stocks over the past 5 years.

5.  Also, while you buy or construct your house, please insist on buying the best quality construction material, may it be Cement, Sanitary Ware or anything else. Because it is because of you that I could make 192% on ACC and 4.5x times on Hindustan Sanitary ware since 2008. Also, please buy decorative paints from Asian Paints only, so that I can make 4.8x times on it over last 4 years.

6.  If you are done with putting money in Bank FDs, Real estate & Gold, and there is still some money left to waste, I would urge you to buy Insurance products so that while you pay hefty double digit commissions to your agent and yourself make low single digit returns on your Money back & Endowment plans, I would have made 6.0x & 2.0x times returns respectively on Insurance company stocks like Bajaj Finserve & Max India.

7.  Also, having invested intelligently in Bank FDs, Real Estate, Gold & Insurance, please feel free to pamper yourself by going to a mall, watch movie in a multiplex and munch some popcorn so that while you have been spending on movies & entertainment, I have made 2.7x times, 3.0x times, 3.0x times & 3.5x timesreturns respectively on stocks like Phoenix Mills, PVR, Zee telefilms & sun TVsince 2008. Hey, do not forget to take your dinner at Dominoes so that I continue making 5.4x time’s return that I have made on Jubilant Foodworks since its IPO in 2010.

8.  Also, your car must be pretty old now. Why don’t you upgrade to the latest model and let me do the boring job of owning stocks like Maruti & Bajaj Auto that are up 2.9x times & 10.8 times respectively since 2008. Or keep buying the macho motorcycle Enfield so that I keep making 12.0x times returns that I have made on Eicher Motors since 2008 and continue making some more money.

9. Also, please continue smoking & drinking so that I continue making 3.80x times return on ITC, 10.3x times on United Breweries & 2.2x times on United Spirits in four years.

10. Last but not the least, god forbid, if you over indulge yourself & have to visit a hospital, or buy medicines, I shall continue to make 3.8x times on Apollo Hospitals, 4.0x timeson Dr. Reddys & 2.3x times on Cipla.

So now I have given you 10 strong reasons to NOT INVEST in EQUITIES but continue being the CUSTOMER of the companies whose stocks I own…that way, you are happy enjoying their services or products & I am happy making triple digit returns by owning the stocks of the very same companies…

Top Stock Performers since Dec 2008

Stock

Returns over the past 4 Yrs.
(%)

Value of Rs. 1 Lac invested in
Dec 2008  (Rs.)

How many
times (x.0)

Sensex

19.28%

 1,19,280

 1.19

Eicher Motors

1034.00%

 11,34,000

 11.34

Bajaj Auto

968.00%

 10,68,000

 10.68

Bajaj Finserv

543.00%

 6,43,000

 6.43

Titan Industries

539.00%

 6,39,000

 6.39

LIC Housing Finance

491.00%

 5,91,000

 5.91

HSIL

351.00%

 4,51,000

 4.51

Dr. Reddys

289.00%

 3,89,000

 3.89

Apollo Hospitals

260.00%

 3,60,000

 3.60

HDFC Bank

247.00%

 3,47,000

 3.47

PVR

198.00%

 2,98,000

 2.98

ACC

192.00%

 2,92,000

 2.92

Maruti Suzuki

183.00%

 2,83,000

 2.83

Cipla

118.00%

 2,18,000

 2.18

Max India

108.00%

 2,08,000

 2.08

If you have a hard look at the table above, you will notice that while Sensex has given a meager 19.50% returns over 4 years between Dec 2008 and Dec 2012, Stocks like Eicher Motors have gone up 10.0x times or Titan Industries have gone up by 6.40x times and so on over the same period.

Now I leave it up to you to decide whether you want to be a consumer only of the above mentioned companies are do you want to join in their wealth creation party by partly owning some of the above phenomenal stocks…

Now a few caveat here….

Please don’t think that I am recommending you to buy the above-mentioned Stocks….

Because since these stocks have gone up so much over the past 4 years, some of these are no more cheaply valued & hence are not a very attractive investment options today.

By writing this article I am trying to bring home the point that there is no better investment option available in India today than investing in Stocks or Equities especially because this is a rare asset class that is not overvalued today as returns over past four years of Sensex companies are nothing to write home about.

Gold, Real Estate is already overvalued. Not that they may not give returns going ahead but that party is already in midnight whereas the Equity party has just started. It is still not late to enter that party. and it absolutely makes no sense to me why somebody would park his money in Bank Fixed Deposits earning a meagre 9 to 9.50% and then paying 30% tax on the same. (Please read my article “The Rich Man’s bank accounts” to get a perspective on the same (http://niravpanchmatia.blogspot.in/2011/03/rich-mans-bank-accounts.html)).

Also, this is the first time that I have borrowed an article. Till date whatever I have written on this BLOG was all Original content. This article appeared in Outlook Business recently and was penned by Samir Arora. I found it so enlightening & full of wisdom that I thought it fit to share it with you all.

EQUITY shall be the asset class of 2013, 2014 and so on…

Those who will be out of Equity (read Stocks and Equity Mutual Funds) in 2013 will miss the party…

The CHOICE is yours…

By the way, the title of this blog, Common Stocks & Uncommon Profits is also the name of a very famous book authored by Philip Fisher, one of the most successful stock market investor who was admired by my Guru Warren Buffett himself. If you can get hold of that book, it is worth a read…

HAPPY  INVESTING in 2013…


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3 comments for “Common Stocks, Uncommon Profits

  1. raj
    February 5, 2014 at 6:50 am

    hi There. good blog Nirav

  2. Kartthik
    February 5, 2014 at 6:53 am

    Thanks for the wonderful post. I think it will definitely help everyone.

    • admin
      February 12, 2014 at 2:26 pm

      this Karthikk

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