“Long-term investors as a breed do not exist,” said an investment consultant from his long years of experience as a fund manager. But S Krishnan is one of those rare examples in a market where a three-year outlook is considered long enough. He has been an investor ever since he started his career as a graduate engineer trainee with a private sector company in Mumbai 20 years ago.
Krishnan got interested in equities watching his father buy shares during his student days. He learnt to read the quotations, watch share price movements, charts and evaluating a stock based on its fundamentals from his father, who was serving a large public sector financial services company. “His philosophy has been to buy blue chips and forget about it and pass it on to the son or grandson as an inheritance,” says Krishnan.
Unlike his father who has not even dematerialised his shares, Krishnan buys and sells shares entirely through the internet and has found it to be a very good tool for research and investing.
But one dogmatic principle Krishnan has held on to over the years of investing is his policy of picking up stocks only from the manufacturing sector. Being a chemical engineer, who started his career with a particular company and grew with it, his belief in the potential of buying stocks in industries like auto, steel, oil and petrochemicals and pharma is unshakable.
“I look at the top three companies in all these segments and select companies based on their background and performance,” he adds.
Reliance, Tata Motors, Tata Steel, Dr. Reddy’s are few of the stocks
he bought in his initial years of investing and held on to them even as the BSE Sensex hit all-time lows
and traded sideways for quite a long time.
“My attention got diverted to the house purchase and paying EMIs at the time markets dipped and in a way it was good I didn’t disturb those investments,” says Krishnan.
His conservatism has paid him rich dividends as these stocks turned around smartly and have enjoyed a good valuation in the bull run since 2003. From then on, his portfolio has recorded an average of 80 per cent returns.
There have been some dead stocks in his portfolio and even they started performing as those companies shut down their manufacturing base in Mumbai and converted them into real estate, bringing unexpected value to the shareholders. One needs the holding power and patience to live with dud investments to await such a windfall.
Slowly, he has started looking at adding IT and bio tech stocks to his portfolio. That is the kind of diversification generally recommended.
He has started investing periodically in initial public offers (IPO) of companies, retains half the shares allotted and offloads the other half on listing.
“This way I am able to pay for the holding cost as well preserve some money for the other IPOS.” If one does get a decent number of shares allotted, it would be a good idea. Holding some portion of stocks that are fundamentally good will see the investment through the speculation of IPO/listing period.
His initial experience with mutual funds was bitter and he distrusts them till date. Units 64 was a total let-down and the only mutual fund he retained was Mastershare. “In 1993, I had the choice of investing in Infosys instead of Mastershare. But that was one opportunity I missed,” recalls Krishnan. Probably it is a risk to put all the eggs in one basket, equities, as there are no fixed income instruments and mutual funds in his current portfolio.
If the mutual fund experience was bitter, then Krishnan’s foray into the property market had been disastrous. Twice he has seen his money getting blocked and finally written off when the properties he booked didn’t get completed.
Actually, it was after his property debacles that he shifted his attention to stocks in a serious way.
Today, he feels that he missed the chance four years back to buy a property and wants to unlock 50 per cent of his portfolio value to buy a bigger home.
Realty prices may be considered overvalued in some pockets, but Krishnan says that it is a call one has to take given the fact that all asset classes have moved up sharply.