Portfolio Update - April 2013

Outlook: 

Economy continues to be in sticky mode with most of the industries going slow in the last month.  Commodity price crash led by gold and crude has been helpful for India to bring down the current account deficit to some extent.  However, in the long term, whether this and the trade deficit can be shrunk is to be seen.  Most of the industry leaders want RBI to cut rates but I am not sure RBI will oblige unless it expects the inflation to come down which remains stuck at high level.  While the WPI inflation had moderated, the CPI inflation continues to be high.

Most of the companies have come up with good results for the quarter and year ending March 2013.  Infosys was the only company that disappointed the market in a big way.  Towards the end of April, market started rallying a bit but not sure if this is a sustainable one.

Given the current situation, one needs to be very cautious in making fresh investments and make investments only in companies that have very good cash flow and are available at valuation with good margin of safety.  If such opportunities are not available, best option would be to sit on cash and wait for right opportunity

Thought on my holdings

Number of stocks in the current portfolio is 28.   Patels Airtemp has gone on auction mode from Apr and I have a residual position which is required to be exited.  Over the next few months, I will be exiting the stocks that will find it tough to survive this kind of economy and consolidate my portfolio to less than 25 stocks.

Some of the companies have declared their results.  While most of them were okay, Ador Fontech disappointed again with its results.  There has been margin erosion in the product segment.  I have reduced my exposure in this stock.

I have added a few new names to the portfolio like MCX, RS Software and Indag Rubber.  These are very minor positions.  My disappointment for the quarter has been Axis bank.  As mentioned in my last month update, I wanted to accumulate a big position in Axis bank and it kept going down from 1400+ to 1200 when I was buying and had a good time accumulating the stock at lower levels.  However, before I could accumulate a large position, the stock started going up so fast that it now above my comfort buying range.  As mentioned in my previous post here, I like to buy stocks like groceries when they are on sale.  Right now all stocks are not on sale.

Balmer Lawrie announced bonus and as far as I am concerned, it is more of a pain than happiness.  My problem of bonus is that I cannot sell the bonus shares for one more year if want to avoid paying capital gains.  If there is not bonus, I can sell anytime now as I have been holding it for more than a year already.  Bonus does not any value to the shareholders.  All it does is move the capital from Reserve part of the book to Equity capital part of the book.  Bonus shares are like cutting the same pizza in more pieces.  No matter how many pieces you make, it is the same pizza.  I wish the price shoots up now so I can exit this stock.

Lumax Auto sent Postal Ballot to approve the additional expense of around 2.5Cr for the medical bills of Managing Director for treatment of ovarian cancer.  They also sought shareholders’ approval for increasing the remuneration by 2cr for this financial year.  All shareholders should refuse the proposal as this is bad corporate governance.  How can they ask for shareholders money to fund a personal expense of Managing Director?  I wonder if they would send a similar thing if one of the minority shareholders had similar problem.  India and specially mid and small caps are not well known for their corporate governance and I am at least happy that they are seeking approval.  There are a lot of promoters that just first steal the money and do not even show it on books.  I stopped adding more to this counter after this postal ballot.