Forbes India Portfolio delivers 27% returns over last year

While Forbes India’s Investment Special gives you the big picture, we don’t forget the small stuff: Stuff that is valuable and can help you preserve and enhance your capital. So, last year we created two stock portfolio: One for those who need stability, and the other for those who like a bit of adrenalin.

The Capital Preservation Portfolio (CPP) last year was a list of 15 companies with strong fundamentals for those seeking stability; and the Cheap, Cheerful and Contrarian Portfolio (CCCP)—for the adrenaline seeker—had companies that had hit rock bottom prices in 2011.

Now it has been almost a year, and we decided to look at the performance of these two portfolios to see if they have performed to our expectation. The simple answer is yes. The CPP has given a return of 25 percent and the CCCP portfolio has returned 27 percent over the past one year.

We decided to look at these portfolios in detail, and are giving you a lowdown on how both portfolios performed against their respective benchmark.

CPP:  This comprises large cap companies with some exceptions. Our basic rule was to look at companies that have been profitable throughout the past decade and have managed to protect shareholder wealth. If an investor had invested Rs 1,000 in each of these 15 companies, by the end of 11 years she would have made Rs 2.9 lakh or 32 percent annually. That is more than twice the number when compared to the BSE Sensex, which delivered 14 percent during the same period.

Over the past year, the CPP returned 25 percent, Outperforming the Sensex. Two of the companies we had strongly recommended—Infosys and Hero Motorcorp—failed to perform. But we believe in the management of these companies and we expect them to start scaling in the year to come.

What we got right The smartest of fund managers were betting on FMCG for the past two years. We got this theme right with four companies: Godrej Consumers returned 84 percent over the past year, VST 71 percent, Asian Paints 66 percent and P&G 35 percent. Castrol India delivered a return of 39% after a bonus issues of 1:1 shares.

All these stocks are trading at high valuations but, again, we would like to believe they still have the steam to deliver for the coming year. Most of the professional fund managers will stay away from these companies. This is a portfolio for the super long-term investor, and even with high valuations they remain attractive.

CCCP: This portfolio is for the investor who likes to go against the market. These are companies that had hit rock bottom on the bourses at the end of last year. The only way forward for them was up. While the Forbes India portfolio is a defensive play, with the guidance of our consulting editor, Sanjoy Bhattacharya, we decided to go on the offensive. This portfolio is more intuitive and more cheerful. These companies are well managed and their fundamentals are intact. But they were ignored by the markets. These companies were available at cheap valuations.

The CCCP has delivered 27 percent over the past one year, while the BSE 200 index returned 29 percent. What is interesting to note is that, in general, the large cap funds have given around 17 percent on an average over the same period.

What really worked for us is the fact that stocks like Shriram Transport and Berger Paints, which were generally ignored by the market earlier, were back into action and moved up by 60 percent over the past one year. Will these stocks go up further?

Although these stocks still have some serious growth left in them, we would like to look at some other alternatives as well.

Gujarat Gas IL&FS Investment (one of the few private equity companies listed in the market) and Ador Fontech were the companies that failed to perform. Will they do well in the future? We believe they will.

What next?
We are now looking at a theme for investing in 2013. We believe the year might be a difficult one in which to invest in equity markets. To understand investing for the future we had some of the biggest fund managers in our office who shared their views with us.

So, look out for our Investment Special available from January 11, 2013, where you will have Prashant Jain of HDFC MF,S Naren of ICICI Prudential MF, Kenneth Andrade of IDFC, and Ajit Dayal of Quantum MF discussing investments for the year. The discussion was moderated by Ramesh Damani. We will carry excerpts from the conversations in our magazine, and the full versions online.

Also, expect a brand new theme for the Forbes India portfolios for 2013. Again, we will have a conservative portfolio for the weak at heart and the contrarian portfolio for those who are in the habit of bungee jumping.

The thoughts and opinions shared here are of the author.