Dear readers,
It’s been an eventful 2022. Inflation, the Russia-Ukraine war, unscheduled and unprecedented rate hikes – this year has had everything to fuel volatility in financial markets.
As always, amidst all the action, our sole focus has been on how best to protect and grow your hard-earned money, be it stocks, mutual funds, fixed income or any other asset class. We have been steadfast in not being swayed by the hype and frenzy that at times dominates the markets, ultimately only causing pain to those who end up believing “this time is different!”.
right calls
Looking back at 2022, we can look back with satisfaction that our broad market assessments have been proven correct. With markets still peaking and looking fearless, in our January 23 issue, a full month before the war, we were among the first to warn of the risks to equities of a looming war between Russia and Ukraine . As markets corrected below 16,000 mid-year, we rightly recommended investors to sector rotate our Big Story in the 26th June issue to take advantage of market rallies. Our forecast from the beginning of the year that inflation and interest rate hikes will rock global markets has also come true. In March we wrote about protecting your investments from inflation, which turned out to be good timing as inflation hardened in the months that followed.
In international equities, we have rightly refrained from buying the famous US-listed Big Tech stocks in 2021 due to their inflated valuations. However, as this year’s rate hikes have sent global tech stocks fleeing, we recommended investors enter some specific names this year to seize the opportunity. We’ve also brought you voices from global investment legends like Jeremy Grantham in our Big Story section.
With Nasdaq funds on everyone’s lips for all of last year and early this year, we published a note in our New Year’s 2022 issue to wait for the Nasdaq 100 to correct by at least 25 percent before you start investing. A 30+ percent correction in the Nasdaq 100 happened as expected during the year and we followed suit recommending investors to start SIPs.
When it comes to newer and edgier investment opportunities, our consistent advice over the past two years to stay away from crypto investing is vindicated. Staying with newer investment options, we continued to write about the pros and cons of curated equity portfolios, NFTs, as well as ESG investing—topics that were in vogue in 2022.
We also warned investors not to seek financial advice from social media in our Big Story in the June 12 issue. Towards the end of 2022, there were reports that market regulator SEBI was working on guidelines to regulate social media influencers.
How we fared with stocks
Risk-reward analysis remains at the heart of our stock recommendations. If there are positive arguments for stocks, there are also negative arguments, and we remain aware of that while analyzing out-stock calls. We resolutely refuse to be swayed by one-way stories or to be swayed by contemporary bias.
While broader markets have been reaching frothy levels since mid-2021, we turned cautious for a few simple fundamental reasons and maintained the view for most of 2022. We knew interest rates wouldn’t stay low forever, and we also knew that stocks will reflect fundamental value over the long term, even if they diverge wildly in the short or medium term.
When we analyzed our recommendations made between July 2021 and June 2022 (this gives a minimum timeframe of six months for evaluating/evaluating our fundamental calls), we made 24 “book profit” calls, 17 “buy” calls and 25 accumulation calls ‘ Calls (excluding IPOs). The rest were hold calls.
We had a good 83 percent hit rate on our book win calls, with 20 of them falling in absolute value and also the Nifty 50 underperforming, confirming our view. Amber Industries (down 47 percent since we recorded book profit), Route Mobile (down 45 percent), Happiest Minds (down 43 percent), and Clean Science (down 40 percent) have emerged as our top targets in this category. Our calls to sell at Adani Green (up 79 percent) and ABB India (up 56 percent) did not perform as expected.
The bearish view of the IT sector with book profit forecasts for most stocks in the sector from mid-2021 has worked for us in 2022.
As far as our long calls are concerned, our approach was to factor in the likelihood of a market correction and as such we recommended more ‘accumulated’ calls than ‘buy’. The difference between our Buy and Accumulate calls is that Buy allows investors to enter immediately with a long-term perspective, while Accumulate allows investors to start buying in increments of 5-10 percent or more declines/corrections over a period of time. Of our 17 buy calls, 9 have had positive returns and 8 have outperformed Nifty 50. US-listed Abbvie (up 47 percent) and Cochin Shipyard (34 percent) perform best there, while Aurobindo Pharma (down 54 percent) and US-listed Meta Platforms (down 50 percent) performed not as expected.
Our accumulated calls currently have a hit rate of almost 45 percent. As we expected declines as opportunities to accumulate, these calls are a work in progress. With an investment horizon of 2-3 years, we also expect high hit rates in this area.
A common feedback we’ve received from you is follow-up calls. Rest assured, we are vigilant in following our stock recommendations and whenever we believe the time is appropriate to revise calls (sell to buy) or reiterate calls (when the movement is in the opposite direction), we will do the same issue.
Like 2021, 2022 was a busy year for IPOs. We appreciate that we have refrained from recommending investments in new age companies. The fall in New Age stocks this year reinforces our call to refrain from underwriting their IPOs. After the IPO, our sell calls have worked well for those who held Zomato and Paytm.
Steady income
On the debt side, our forecast earlier in the year was that rates would rise in 2022 and as such we initially advised investors to focus on short-term fixed income investments. This was done to take advantage of opportunities to reinvest at higher interest rates as they moved north. As this trend played out, we recommended several debt instruments in different risk categories to investors, including seniors. In several columns throughout the year, we’ve selected the best options among target maturity gilt and SDL funds. We rightly advised investors to invest in these funds when government bond yields were peaking at 7.4% to 7.5%. As NBFCs and banks keep revising their deposit rates upwards, we have consistently selected the best among those that focus primarily on capital safety. As interest rates rose, we wrote a timely column for seniors on “Shaping a Stress-Free Retirement,” which was well received.
Technology
Our Technical Analysis and Derivatives sections are popular with investors with a higher risk appetite. Our in-house technical analyst’s view on market direction was spot on from January to June. However, we missed the trend reversal in the markets from July to August. Outside of those three months, the technical talks have been going well. Our Investment Focus column, which regularly features tech calls on page 1 of the print edition, had some good hits on tech recommendations – Aegis Logistics, ITC and our Muhurat pick – Indian Bank as examples Good. At this point, we would like to reiterate to readers the importance of strictly adhering to stop losses when it comes to trading based on technical analysis.
As well as providing focused coverage of derivatives and trading ideas, this year we’ve also sought to demystify this complex space with introductions in our Big Story section. Also, in 2022 we initiated the F&O query column.
New initiatives
One of our most successful new initiatives this year has been our weekly video series from our technical expert – BL Guru. By the end of the year we will have completed 36 episodes. The feedback was very positive. This encourages us to expand this format to other areas as well.
We’ve also made our bl.portfolio podcast a weekly feature this year. Topics from the weekly print edition, as well as other exclusive and timely topics, have been picked up for the podcast to cater to the segment that prefers content in this format.
While bl.portfolio is a weekly product in print format, in recent months we have also significantly expanded our daily content for online and print audiences, providing timely analysis of key developments and product launches. . Exclusive web content, particularly mobile-friendly infographics-based content, has been a focus area in 2022. The web’s best and most popular content throughout the week is now featured in the Sunday edition of bl.portfolio.
In 2022 we introduced an updated version of the very popular bl.portfolio Star Track MF Ratings with important added values.
Last but not least, in addition to the redesign of the print and web editions of businessline, the bl.portfolio area of our website and the Sunday print edition will also shine in a new guise in 2022.
looking ahead
As the year draws to a close, we want to thank you for your unwavering support and encouragement year after year
Also in 2023 we remain your reliable friend when it comes to personal finances. We will work with renewed vigor to bring you the best insights, analysis and recommendations. In the words of our RBI Governor, we assure you that we will keep your financial well-being in mind.
We urge you to continually provide us with your feedback – both positive and critical, both equally important inputs so that we can become better at what we do.
Happy New Year and happy investing.
DIVIDE
Published on December 24, 2022
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