2009 for me and my fund was a time when we booked profits. To be honest and fair – there was a lot of easy money made as we had picked up stocks in the crash of 2008 and simply sold stocks sometimes at prices that were 700% higher from the lows. Whenever I tell people something like that, they seem shocked and surprised, but all those who have been investing in the markets for long know that every now and then there are companies that change your financial situation almost instantly. The stock I am speaking about is Jindal Steel and Power. Compared to that, others which gave us 350%-400% returns appear to be underperformers. But you need to remember this money was actually made when we purchased at the lows of 2008. Large amounts of money are made – when we buy and not when we sell. This is a well known fact that very few people really talk about or pay attention to. All those who missed out on such opportunities better be ready with cash in 2010.
There were a few companies which we missed, for instance I was told by a close friend and investor how he picked up Kwality Dairy at Rs. 6 and sold it at Rs. 130. That means a return of over 2000% in about a year. I’m not sure of the business model or fundamentals and might look into it whenever I get time.
2010 is going to be a year to buy undervalued assets. It will present the same type of opportunities that were presented to us at the end of 2008 during the peak of the crash. As the world economy crashes, India will present excellent opportunities for anyone who believes in the long term growth of this wonderful nation.
There are already several companies that have immense growth potential and I wouldn’t be surprised if they too go on to give returns in triple digits. For instance there is a company with a land bank of over Rs. 10,000 crores, but the market cap is only Rs. 800 crore. If the stock price of such a company falls 50% in 2010 to make the market cap only Rs. 400 crore, imagine how much juicer the investment will become?
At the same time there will continue to be companies that will make sure investors lose a large part of their wealth. Overvalued and overhyped companies will list in 2010 and unfortunately I can see a lot more people entering the markets with starry eyed dreams only to be cheated of their hard earned money. People will continue to be cheated by a few junk Mutual Fund NFOs and Insurance companies(offering ULIPs) who are almost certainly going to cause you to lose wealth in the long run. If you want to make money in 2010 or 2020, you need to know what you are buying. The basic rules of investing will continue to be the same.
I will continue suggesting investors across the world to look at gold. This had been suggested way back when gold was at USD 700. I rarely advice people to invest in anything on a blanket basis – but have been doing it with gold. The reasons behind a rally in Gold will be discovered by the world soon. Physical hard pure Gold is one of the few things that can’t be printed. More than returns – it is going to be used to preserve your wealth which maybe in the forms of dollars or pounds right now. At present prices also, it isn’t overvalued. I will also continue to be bearish on the real estate prices both in commercial as well as residential pockets of the country. Only farm land, far away from major towns and cities will be a good investment – the only challenge for most will be managing the farm land.
I will always remember the well known fact that, markets have the power to remain irrational for longer than most people can stay solvent. Luckily for me I am not a trader. If I was a trader who had gone short on the market, I would surely be bankrupt by now – as in the last few days stock markets rallied upwards. Similarly if I had gone long when the markets were at 9,000 – they would have fallen more to 8,000 levels. Life is much harder for traders and their life spans are much shorter.
Coming back to my question, is it possible to once again make 700% returns in 2010? As I mentioned earlier, wealth is created when we buy, and going by that logic I am most certainly sure that 2010 will offer several such opportunities for the long term. Keep hunting and you will surely find whatever you are looking for.
Let us all thank God for blessing us in 2009 and pray to him for a beautiful future. Wish you a very Happy New Year and I hope that it is filled with smiles, love, happiness, health and wealth!