BHAVIKK SHAH's BLOG: Always Buy for the Long Term

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 observed	11	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