TEN STOCKS TO BUY IN 2015

A very Happy New Year 2015 to all readers. I am writing after a long gap. There are two reasons for it. One was my professional commitments. Secondly, and more importantly, the markets are fully priced and there are few stock ideas which are available at a discount.

Over the last four years, I have been preaching, talking and writing about investing in good businesses, with good management at a discounted price. When good businesses are priced fairly, what does one do?

That is the differentiator between a good investor and a bad investor. The good investor knows when to sit tight. Put his savings in the bank and keep waiting patiently. For his kill. Ask any army person who has sat in an ambush. All ambushes are not successful. You just need one ambush in a company to execute well and give huge payoffs. What you need in the Commander is loads of patience.

The bad investor is impatient and willing to buy any business at any cost.

What makes money?

Intelligence? No.

Skill? No.

Hardwork? No.

None of these attributes will give an average salary earning guy supernormal wealth. It is TIME which gives you money. Number of years of investments.

I did a small analysis. My elders son is 16 years old. If I had just invested Rs 1000 each in every Nifty Stock in 1998 it would have been an investment of Rs Fifty Thousand. And the present value of that investment adjusted for rights, bonuses, splits and dividends would have been approx Rs 31 Lakhs. What is the analysis? Just Do Nothing, as opposed to Nike which says Just Do It.  It is not that I had no money at that time. It’s just that I was not wise enough and not emotionally disciplined enough to take that action and do nothing.

16 years, 20 years , 40 years are uncertain times. Nobody is willing to stay the course till then. Also, as soon as your fifty thousand becomes five lakhs you want to get out and enjoy that money. Thus you deprive yourself of the huge wealth generation possibility. Warren Buffett started investing at 11 years of age and is 85 years old now. That is an investment period of 74 years, darling. Try staying invested for 74 years in a piece of land or good business and see the returns.

Although I know that the markets will correct by about 12-18% at some point in time this year due to Russia’s problems, oil prices and US QE easing, still do an experiment if you want to test my theory. Buy Rs 5000 worth of every Nifty stock. That would be Rs 2,50,000 worth of investment and leave it for your child’s retirement corpus. If your daughter is 10 year old. Tell her she would get this money when she is 50 years old and would need it. That is 40 years of a span of investment. This money is likely to be upwards of Rs 7 Crores or Rs 70 million or US$1.1 million. It is no small change. Skeptics will talk of value of money then, they will talk of inflation, they will talk of its worth etc etc. Don’t listen to them.

I can only tell you this about my investment life of 28 years. If I had invested Rs 14000/- the price of a Bajaj scooter in Pathankot when I started my service in the stock of Bajaj Auto instead of the scooter. It would have been Rs 10 Lakhs today and if left it for another 12 years, that is when I retire, it should be approx Rs 36 lakhs. So, for the skeptics, at the present rate I could have bought 20 good scooters in the same money or a good SUV today. And if kept it till my retirement, it would be a good corpus.

So my only new year tip. TIME is Money is not an idiom or a phrase. It is the truth. Respect it and give your investments time to grow.

The second gyaan is DO NOT repeat DO NOT leverage and invest in stock markets. Not on margin, not by borrowing. Remember the hare and tortoise. Both reached their destination. The tortoise surely reached and safely reached, the hare raised your adrenaline, some excitement but still lost the race. So be a tortoise.

For the risk inclined investors here is my list of 10 stocks to buy with an outlook of 3 to 5 years. Buy them on any major correction in the market. Even at present rates they may give you a decent return of 12-20% compounded if held for five years.

1. Noida Toll Bridge Company. As interest rates head south, the price of this share will move north. My target is Rs 60 in two years.

2.  Thomas Cook. An international franchise which requires almost zero infrastructure to scale up except an office, a computer, broadband and two people.

3.   Ipca Labs. A great wealth creator in last two decades. Good generic business available at a fair price.

4.   ICICI Bank. Great franchise and brand. Available at a fair price.

5.   Axis Bank. Great franchise and brand. Available at full price.

6.  Stanchart IDR. Only listed foreign bank in India. Great brand. British lineage. Available at undervalue.

7.  United Spirits. A great “sin business” to own. Diageo is working overtime to do course correction.

8.  Asian Paints.  One of the biggest wealth creator of last 20 years. Rs 1000 becomes 1 Cr type of wealth. Great product, great brand. Excellent management. Fully priced.

9.  Indraprastha Gas. Great mini monopoly. You can’t touch me in NCR. Great managers. Steady wealth creation.

10. Larsen & Toubro. Look No further. You can’t go wrong with this one. India Growth=L&T Growth.

Once again, a happy new year to all readers.