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Tuesday, December 20, 2011

Why Long Term Investing Pays you Back !!!

This morning has been unusually busy……for TV anchors of Blue & Red business channels. There’s a news report from a leading international institutional brokerage known for its bearish views on India which predicts that BSE SENSEX could hit 11,000. And TV anchors are doing their best to whip up panic based on it. Just ignore all this ‘noise’…….
Stock market will rise and fall – This is a given fact. But what matters to you as an Long Term Investor is where the stock markets will be in say next 3 years or 10 years for that matter. And when it comes to that, things does not look better at least this is what the picture drawn (0r made seen) by the reports from FII’s saying that index could touch 11,000 or so….
Most of us would be out of markets and would be asking questions that why should one invest? – I will argue to that report and will Strongly advocate LONG TERM INVESTING. Just look down at the history and you will find that markets have always given returns in long term, the only thing  one needs is to have patience and selection of stocks. If you buy a strong fundamental stock with good Return on Equity (ROE) and with good management which you hold it over years, will surely give you the best returns over the period of time. The present stock market crisis has thrown up exciting money making opportunities and in particular select the Stocks which commands good fundamentals & which are available at their best valuations –
But, First read the tables below -
NIFTY
1 Yr Return
3 Yr Return
5 Yr Return
10 Yr Return
No. of Occurrences
15
13
11
6
(-)ve return observed
5
2
1
0
Probability of Loss
33.33 %
15.38 %
9.09 %
0.00 %

SENSEX
1 Yr Return
3 Yr Return
5 Yr Return
10 Yr Return
20 Yr Return
No. of Occurrences 32 30 28 23 13
(-)ve return observed11 6 3 1 0
Probability of Loss 34.38 % 20.00 % 10.71 % 4.35 % 0.00 %

The above tables clearly show that the probability of losing capital is highest if the holding period is around 1 year and lowest or nil if the holding period is increased to 10 or more years.
It means your capital is safest if invested for long term. It also depends on what  kind of stock you hold on, if you hold stocks with good fundamentals, the probability of losing capital nearly vanishes...
Here, down below, I have tried to give a list of stocks which commands RETURN ON EQUITY of 15 % or more which may have potential of money making opportunity - 
*ROE as on 31st March 2011


Stock Name
EPS (Rs.)
Book Value (Rs.)
*ROE (%) 
PAT Margin (% )
AXIS BANK
91.51
505.87
19.34
2.78
BAJAJ AUTO
121.10
219.34
85.21
19.72
BERGER PAIN
4.57
23.26
22.03
6.48
BHARTI AIR
16.92
122.63
19.20
20.30
CRISIL
25.60
70.24
50.53
37.02
COAL INDIA
7.43
39.67
25.73
30.33
CONT.CORP
68.26
418.07
18.86
22.95
CIPLA
12.57
89.25
15.36
15.53
GAIL
30.19
168.17
19.76
10.82
HERO MOTOR
104.77
206.20
60.05
9.33
HDFC BANK
19.18
118.26
16.75
4.05
HDFC
26.12
129.86
21.74
27.50
HUL
11.67
18.26
82.66
10.60
IDFC
10.32
75.55
15.03
28.09
INFOSYS
119.24
487.23
27.69
25.38
INDRAP.GAS
20.97
82.94
28.40
13.21
ITC
7.09
24.11
33.35
16.30
ILFS TRANSP
13.32
98.20
17.14
17.83
JINDAL STEEL
21.58
102.20
26.80
16.98
JSW STEEL
86.07
764.35
15.65
8.00
L & T
66.54
375.93
19.71
8.78
M & M
43.71
189.32
29.46
10.40
MARUTI SUZU
69.73
507.32
17.81
5.64
MOIL
35.00
139.18
30.90
51.34
MUNDRAPORT
5.45
24.05
25.36
52.31
NMDC
18.62
57.92
38.85
57.13
ONGC
26.43
127.92
20.67
28.61
PETRO.LNG
11.92
42.63
25.21
4.70
POWER FIN
17.96
148.55
18.42
25.47
REC
26.83
142.52
21.53
31.12
RUPA & COMP
4.68
23.12
21.09
5.01
SESA GOA
31.24
140.95
36.52
41.38
SUN PHARMA
15.22
72.82
22.32
43.83
TALWALKARS
7.33
55.76
18.34
17.60
TATA STEEL
72.31
526.27
16.4
21.52
TCS
48.29
126.35
43.89
25.86
TITAN IND
5.78
15.33
49.20
6.55
TECH MAHIN
51.54
286.81
22.32
14.03
ULTRATECHCEM
73.26
424.11
18.39
9.45
WIPRO
19.66
95.88
24.96
18.35
*The list is just for explanation and should not be taken as stock recommendation
This, by now, would have cleared your doubts, fears and worries of investing in the stock market.
Happy Investing!!! 

Visit the Presentation to learn more on CLICK - RETURN ON CAPITAL EMPLOYED

11 comments :

  1. Thanks for nice explanation about long term investment.

    ReplyDelete
  2. You have given periodic table but if somebody wants to make investment just for 6 months then chances of loss would be higher, so many people are arguing not to invest right now.

    ReplyDelete
  3. HI Harindra,
    Thanks for asking my views...
    Yes you are right buying for 6 months then the chances of making losses are high, thats the reason I always say to invest for long term...
    If you see my previous posts you will find that I have mentioned 6 months to a year target...
    I believe that India is a long term story & to participate in this one should hold on the best fundamental stocks like L&T, MUNDRAPORT, HUL etc for long but this wait will definitely give you fantastic returns...
    Yes many experts are not advising buying right now..but I argue that no one can time the market - No one in the entire world can say that he bought at the bottom or sold at the top - So my friend buy at time when you feel its right valuation - Stock is fundamentally strong but due to market sentiment its at low price - see its historical performance - Buy in parts - AND DO ALWAYS REMEMBER TO KEEP A STOP LOSS OF 8% ON YOUR EVERY PURCHASE - EVEN IF YOU BUY FOR LONG TERM PROSPECTIVE - THIS IS FOR CAPITAL PROTECTION !!!
    I hope you got the answer..
    Do visit again..add your self up...
    Till Then Happy Investing...
    BHAVIKK SHAH

    ReplyDelete
  4. Nice article. Can you please explain what you mean by "ALWAYS REMEMBER TO KEEP A STOP LOSS OF 8% ON YOUR EVERY PURCHASE - EVEN IF YOU BUY FOR LONG TERM PROSPECTIVE".
    I invest in small parts when markets go low and my investments for long term. So what do you mean by stop loss of 8% for long term? Should one sell if the bought stock goes below 8%??

    ReplyDelete
  5. HI Santosh !!

    Thanks for visiting my blog.
    Yes you got it right - When I say maintain stop loss of 8% means you should sell when the price hits your stop loss of 8% - e.g. If you buy at Rs.100 even if it was for long term and its prices fells to Rs.92 hitting your 8% stop loss exit immediately taking Rs.92 in hand. Now you know that this stock commands best fundamentals & the only mistake by you was pricing - so buy again when it falls to Rs.84.60, This way you maintain the first rule of investing i.e CAPITAL PROTECTION

    Do add your self up in JOIN THIS SITE -
    MAIL ME AN REQUEST FOR REGULAR UPDATES FROM THIS BLOG IN YOUR INBOX FOR FREE !!!!!
    Recommend the blog to your friends and family...

    TILL THAN HAPPY INVESTING
    YOUR FRIEND
    BHAVIKK SHAH

    ReplyDelete
  6. Hi Bhavikk,
    Nice one- Keep on

    ReplyDelete
  7. ur blog is interesting. i a new investor in shares. i go with one of my frndz guidance. he has done a fairly gud job so far. my 1 lac has become 3.5lacs.

    ur blog suggests for long term. i too want safety for the money invested. which stocks u wud suggest me?

    ReplyDelete
  8. HI,
    Thanks for visiting and commenting on my post. It was nice to know that you made 3.5 from 1..gr8...
    Just mail me your email id at montyuu@yahoo.com for further assistance..for free...

    Your friend
    Bhavikk shah

    ReplyDelete
  9. Great analysis. Kissan Products reminds us about the challenge currently being faced by Vijay Mallya regarding Kingfisher Airlines. Kissan Products ( and Dipy 's )were inherited by Vijay Mallya. Vijay Mallya decided to disinvest Agro Products companies like Kissan nd concentrate on Petroproducts companies (like UB Petroproducts ( earlier Kamar Petro ). It did not work. There also was a dispute between Hind Unilever and Nestle as to with whom has Vijay Mallya negotiated for the sale of Kissan( It seems Vijay had signed with both Hind Lever and Nestle .

    ReplyDelete



  10. Now for the first time SOOKSHMA STOCKS gives you power of building your graphical stock-watch, Compare and analyze market in the most simplest way on your Android Phone.

    ReplyDelete
  11. Kindly nifty optiok ka stoplss batya...

    ReplyDelete

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