Every month immediately upon receipt of my paycheck I first make investments and then only start meeting expenses. This is the good habit I strictly follow and advise my readers. I also tell my audience the stocks I have invested in for the month. Continuing this tradition I present here the stocks I bought in April 2018. Of course, I analyse the stocks to check whether they are available in the market at a fair price. I make this assessment according to value-investing proved and time-tested principles.
Rules I set While Selecting the Stocks I Bought in April 2018
I have set the following rules such that besides being a member of our ‘Portfolio 2K15’, the stocks shall satisfy the four criteria prescribed below:
- The Price to Book Value (P2BV) Ratio shall be less than or equal to 1.50 times. This means we will allocate money to a stock under this rule only to those stocks that are available at a discount to the price to book value ratio of 1.50.
- The Price to Earnings (PE) Ratio shall be below 15.
- The product or combination of the first two numbers that is PE*P2BV shall be less than 22.50 (1.5*15)
- The Dividend Yield shall be more than 4.00%.
The total investable sum is taken as multiples of 20,000, that is Rs.20,000, 40,000 or 120,000 and so on, depending on the investible surplus available to you.
The basic unit of 20,000 is equally distributed among the four criteria at Rs.5,000 each.
The Summary of the Stocks I Bought in April 2018
Abbreviations Used:
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Abbreviation:
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Full Official Name
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Formerly Known As
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NHPC
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NHPC Ltd/
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National Hydro Electric Coporation Ltd.
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PFC
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Power Finance Corporation Ltd.
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--
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SJVN
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SJVN Ltd.
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Satluj Jal Vidyut Nigam Limited
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NMDC
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NMDC Ltd.
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National Mineral Development Corporation Limited
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NLC
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NLC India Ltd.
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Neyveli Lignite Corporation Limited
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ONGC
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Oil and Natural Gas Corporation Ltd.
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NALCO
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National Aluminum Ltd.
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MOIL
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MOIL Ltd.
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Manganese Ore ( India) Limted
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HZL
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Hindustan Zinc Ltd.
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OIL
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Oil India Ltd.
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GE SHIP
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Great Eastern Shipping Company Ltd.
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VEDANTA
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Vedanta Ltd.
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SCI
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Shipping Corporation of India Ltd.
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All the 14 stocks that figure in our ‘Portfolio 2K15‘ received an allocation under any one of the four criteria. However, As mentioned before I did not buy SCI because the company is still not making adequate profits. Its PE Ratio is very high and the company is not declaring any dividends. The only attraction is that the stock is selling at a hefty discount to its book value.
How the Stocks I Bought in April 2018 Fare under the Four Criteria
The boxes in red indicate under which criterion the particular stock did not pass the hurdle or failed to qualify. What this means is that the stock did not get any allocation under that particular criterion. It does not mean that the stock was totally rejected. I made an exception to this rule only in the case of SCI. I did not buy the stock even though it earned allocations under two other criteria.
How the Stocks I Bought in April 2018 Fare under the Price to Book Value Ratio?
We can see that only two out of the 14 companies failed to qualify and get allocation under this criterion: NMDC and HZL.
Stocks I Bought in April 2018 Based On Price to Earnings Ratio Criterion
Now, let us examine the stocks under the important price to book value ratio criterion.
PFC, GE Ship and SCI failed to cross the hurdle of a price to earnings ratio number of 15. All others qualified and got an allocation of money for investment.
Stocks I Bought in April 2018: The Combined PE x P2BV Ratios Criterion
The product of the price to earnings and price to book value ratios is also an important criterion. As per value investing principles, this number shall not be more than 22.5 (1.5 * 15). Let us see what stocks pass this test in April 2018.
Stocks I Bought in April 2018 Based on Dividend Yield Criterion
Five of the 14 stocks could not cross the hurdle. Rest got money allocated. Unfortunately, the laggards under this rule were ONGC, NALCO, MOIL, GE Ship and SCI.
