Stocks picked during the calender year 2013, performance analysed upto 31 March 2014
In 2013, the markets were indecisive for the almost the entire year. High inflation, a depreciating rupee, policy inaction by the UPA-2 government and fears of tapering by the US Federal Reserve, dampened investor sentiment. However, a few months into 2014, investors were filled with hope and the markets began to rally as the new government came into power offering an optimistic economic outlook. Despite the volatile market movements of 2013, the stocks picked by Moneylife during the year delivered an average return of 13%, since the time of recommending the stock up to 31 March 2014, or the date of exit, whichever was earlier. In comparison, the Sensex delivered an average return of 9%. Our stock-picks of 2012, delivered a similar performance, beating the Sensex.
From a database of over 1,200 stocks analysed by Moneylife, we wrote about a total of 42 stocks between January 2013 and December 2013. The stocks picked featured in our Street Beat section and Cover Stories. Of these 42 stocks, 26 stocks touched their recommended price. The remaining 16 stocks either never hit their recommended price or were not given an entry price as they were too expensive at the time of analysis.
Moneylife believes in analysing corporate performance, coupled with a sensible approach to finding the right price (or ‘margin of safety’) for picking stocks. It isn’t that only stock-picking is important; equally important is exiting from a stock, for whatever reasons, either for profit or to cut losses.
Out of the 26 stocks that hit the recommended price, 15 were profitable and delivered an average return of 38%. Of the 11 loss-making stocks, seven have hit their stop-loss level; the remaining four stocks still remain ‘active’ as on 31 March 2014. The average returns of these 11 stocks works out to -21%. The positions in most of these stocks were squared up when the market dipped in 2013. However, with the market rally in the past few months, most of these stocks have gone up from their lows.
Our big winners are some of the unlikeliest names that stockbrokers usually don’t discuss, since they usually focus on big names. These stocks are rarely followed. Among the top performing stocks was MPS, a company which provides outsourced services to publishers, including full-service editorial and project management facilities. The stock price doubled in about four months from the time of our recommendation. We exited at a gain of 110%.
Three other stocks gained over 50% in a tumultuous market. These stocks are still active and have not yet been squared up. Alkyl Amines Chemicals, a company which manufactures amine-based chemicals used in pharmaceuticals, gained 78% as on 31 March 2014 since its recommendation on 18 April 2013. Fluidomat, which manufactures a wide range of fluid couplings for industrial and automotive drive shafts, gained 58% as on 31 March 2014 since its recommendation on 28 November 2013. AVT Natural Products, the largest exporter of marigold oleoresins (a type of spice), has gained over 52% as on 31 March 2014 since its recommended price on 12 July 2013. Over similar periods, the Sensex gained between 10%-12%.
Apart from these, nine stocks gained over 15%. These include Unichem Laboratories (41%), National Buildings Construction Corporation (40%), RS Software (37%), Good Year India (36%), Shriram Transport Finance (27%), Elantas Beck India (24%), FDC (23%), Elgi Equipments (15%) and Mahindra & Mahindra Financial Services (15%). While these stocks averaged a return of 29%, over the same period, the Sensex averaged just 14%.
The other ‘active’ stocks which delivered meagre or negative returns as on 31 March 2014 were: Shriram City Union Finance (3%), Gujarat Gas (-6%), Greenply Industries (-6%), National Peroxide (-9%) and Balmer Lawrie & Co (-20%). These stocks have now benefited from the market rally and have gone on to deliver double-digit returns.
For long-term holdings, it is crucial to get out of stocks which have not met certain criteria. Out of the 26 stocks, 17 remain ‘active’, while we have exited from nine stocks. Out of these nine stocks, two were squared up at a stop-profit and the remaining seven were squared up at a stop-loss. We exited from Venus Remedies at a gain of 8% on 24 May 2013 since its recommendation on 2 May 2013, at a price of Rs277. The stock went on to hit a low of Rs140 on 2 August 2013. Even on 28 July 2013, the stock was trading below its exit price.
One of the common traits that separates good investors from average ones is the ability to cut losses. Ador Fontech, which we exited at a price of Rs60 in August 2013 and a loss of 28% since its recommendation in January 2013, went on to hit a low of Rs50 a couple of months later. An average investor is reluctant to get out of such stocks because of a behavioural bias known as disposition effect, wherein winning stocks are sold too soon and losing stocks are held on for long periods. Though this stock would have rallied recently, its market-cap is 1.14 and 6.53 times its sales and operating profit. When we had recommended this stock, its market-cap was 0.81 and 4.11 times its sales and operating profit. This stock has gone up with the broad-based market rally.
It is essential to review one’s portfolio periodically. This is an integral part of investing. By reviewing your overall portfolio, you can exclude the losers and improve your performance. Our stocks are reviewed on a fortnightly basis. If you would like to gain access to stocks that are picked though our analysis and you are updated about the performance every week, you can subscribe to Moneylife Stockletters (https://www.moneylife.in/promotion/Stockperformance/index.html). If you would like a holistic review of your investment portfolio, including the right mutual funds to buy and require solutions on your regular savings, do check out Moneylife Smart Savers (https://savers.moneylife.in/).
Crooks clog the courts, denying the honest the time to have matters heard
Friday afternoon. It was getting late in the Thane district court. The next day was a holiday. The opposing advocate had not turned up. We asked the judge to consider our situation, coming all the way from Mumbai and not getting ahead.
His Honour was sympathetic but asked us to be patient, saying that he had to hear the other side and, maybe, they had a legitimate reason.
Now you be the judge.
What would you have done?
We got to talking of cabbages and kings—of how overburdened the judiciary was; the pay increase meant longer hours. Saturday meant work with the Lok Adaalat, not a holiday like the lawyers and others got.
As we were discussing ways to tweak the system for speed, the opposing lawyer arrived and all was well. We progressed. Patience had paid dividends.
Three days later, a news report carried a story about the Thane court’s Lok Adaalat and how a Rs79-lakh award was granted by it in just six months. The speedy settlement was applauded by all, insurers included. The system had worked well. Good had prevailed.
On the Internet that morning was another bit of news. Two Delhi women had approached the West Delhi District Consumer Disputes Redressal Forum, asking for relief. They had two bills from a beauty parlour. The bills guaranteed ‘life-time’ service, something denied to them.
As in all cases, documentary evidence is of utmost importance. The bills had the words ‘life-time’ written on them. The women said that was proof enough. They must be compensated. The complainants had told the Forum that they had registered for the beauticians’ life-time course for limited services from Global Looks Beauty Parlour in June 2010, but the salon neither gave any services of this particular course nor did it refund their course fee of Rs16,000.
Open and shut case? Well, not exactly. On proper scrutiny of the bills, it was found that the words ‘life-time’ had been added later. Even the handwriting was different.
Now you be the judge.
The consumer forum is not a place to be toyed with. It held that the complainants tried to take undue advantage of the system, tampered with the receipts (forgery would be the correct word) and filed the complaint on frivolous grounds. Anyone so inclined, it said, must be shown the door.
“The legal system is meant not only to protect the poor litigant and a consumer who is not having enough bargaining power in comparison to the service provider but it is also meant to do justice to both the parties before it….” the Forum member, Urmila Gupta, said.
At a Moneylife Foundation seminar, the topic of bogus cases had come up and it was pointed that a very large majority of cases is filed by dishonest people. The beauty parlour case is one more instance of crooks that clog the courts, denying the honest the time to have matters heard.
If readers are at the receiving end in something similar, what should they do? First, win the case. It is easy, if you are in the right. Next, take the perpetrators to court. Forgery is a crime. Coupled with malicious prosecution, you will be awarded costs, for expenses and harassment. And you will find that the courts are, surprisingly and quickly, decongested. To cry oneself hoarse with suggestions of 24X7, 365-day courts, more judges and more staff, is not the answer. The real solution is before us. It is up to us.
Bapoo Malcolm is a practising lawyer in Mumbai. Please email your comments to [email protected]
For years, Dr Michael Reinstein prescribed the powerful drug clozapine more than any other doctor in Medicare or Medicaid. His patterns were the subject of two ProPublica articles and he faces a federal civil lawsuit alleging health care fraud
Illinois medical regulators have indefinitely suspended the medical license of psychiatrist Michael Reinstein, who prescribed more of the most powerful and riskiest antipsychotic drug clozapine than any other doctor in the country.
The decision by Illinois' Department of Financial and Professional Regulation, signed Friday, suspends Reinstein's license for a minimum of three years, at which time he can apply to have it reinstated.
The state's medical disciplinary board recommended the sanction in May after determining that Reinstein, 71, received "illegal direct and indirect remuneration" from the maker of generic clozapine; did not consider alternative treatments for his patients; and disregarded patients' well-being because of potentially life-threatening side effects of the drug. Reinstein's motion for a rehearing was denied Friday, making the matter public.
Clozapine is approved to treat patients who don't respond to other medications. But it can have dangerous side effects, including seizures, inflammation of the heart muscle, and a drop in white blood cells. The drug is considered particularly dangerous for elderly patients.
Reinstein's prescribing patterns have been explored in two ProPublica reports.
In 2009, ProPublica and the Chicago Tribune detailed how he had prescribed more of the antipsychotic clozapine to patients in Medicaid's Illinois program in 2007 than all doctors in the Medicaid programs of Texas, Florida and North Carolina combined. Autopsy and court records showed that, by 2009, at least three patients under Reinstein's care had died of clozapine intoxication. At that time, Reinstein defended his prescription record, arguing that clozapine is effective and underprescribed.
Last year, as part of an investigation into Medicare's failure to monitor problem prescribers, ProPublica reported that Reinstein prescribed even more clozapine in Medicare's prescription drug program for seniors and the disabled. We found that the program continued to let him prescribe even after the U.S. Department of Justice accused him of fraud and Illinois' Medicaid program suspended payments to him.
Reinstein's attorney did not return a phone call or email seeking comment. An outgoing message on Reinstein's cell phone said, "Due to a personal emergency I will not be working as of today. I will return to work as quickly as I can."
In their response to the medical board's accusations, Reinstein's lawyers invoked his right against self-incrimination.
The state of Illinois has the authority to permanently revoke a doctor's license, but typically only does so for sex crimes or assaults on patients, a spokeswoman said by email.
When a doctor's license is indefinitely suspended, as is the case with Reinstein, the doctor must apply after a set time to return to practice; the state's approval is not automatic.
The federal fraud lawsuit against Reinstein is pending in U.S. District Court in Chicago. In a November 2012 news release announcing the case, the government said that Reinstein "received illegal kickbacks from pharmaceutical companies and submitted at least 140,000 false claims to Medicare and Medicaid for antipsychotic medications he prescribed for thousands of mentally ill patients in area nursing homes."
Prosecutors allege that Reinstein's prescribing decisions were motivated by money and perks from pharmaceutical companies. He allegedly switched patients from one brand of clozapine to another based on money and other enticements he received from a drugmaker.
In March, Teva Pharmaceutical Industries Ltd., the maker of generic clozapine, agreed to pay more than $27.6 million to settle state and federal allegations that it induced Reinstein to prescribe the drug.
Reinstein's prescribing of clozapine appears to have declined after the 2009 articles about him. From 2007 to 2009, he wrote an average of 20,000 Medicare prescriptions annually for clozapine and a brand-name version, FazaClo. That figure dropped to about 8,000 in 2012, according to data obtained by ProPublica.