Sunday, April 15, 2018

Stocks I Bought in April 2018

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:
  1. 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.
  2. The Price to Earnings (PE) Ratio shall be below 15.
  3. The product or combination of the first two numbers that is PE*P2BV shall be less than 22.50 (1.5*15)
  4. 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

Stocks I Bought in April 2018: Summary of Stocks Bought

Abbreviations Used:

Full Official Name
Formerly Known As
National Hydro Electric Coporation Ltd.
Power Finance Corporation Ltd.
Satluj Jal Vidyut Nigam Limited
National Mineral Development Corporation Limited
NLC India Ltd.
Neyveli Lignite Corporation Limited
Oil and Natural Gas Corporation Ltd.
National Aluminum Ltd.
Manganese Ore ( India) Limted
Hindustan Zinc Ltd.
Oil India Ltd.
Great Eastern Shipping Company Ltd.
Vedanta Ltd.
Shipping Corporation of India Ltd.

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

Stocks I Bought in April 2018: How the Stocks Fared under the Four Key Selection 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?

Stocks I Bought in April 2018: Selection Based on Price to Book Value Ratio Criterion

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.

Stocks I Bought in April 2018: Stock Selection Based on Price to Earnings 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: Stock Selection Based on Combined Price to Earnings and Price to Book Value Ratios

Stocks I Bought in April 2018 Based on Dividend Yield Criterion

Stocks I Bought in April 2018: Stock Selection Based on Dividend Yield Crriterion

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.


To conclude I bought the first 13 stock appearing in the summary at the beginning of this post (first table image). Even though the table indicates that I bought 15 number of SCI shares, I stopped buying at the last moment while placing the order. I recommend that you may also buy the 13 stocks in the recommended numbers for each 20000 of your investment.
Happy investing!

Sunday, April 8, 2018

My Passive Income Report for the Year Ended 31st March 2018

I publish my passive income report every year. Passive income is the key to financial freedom and getting rich. Investing is the only way to create passive income for a majority of us who are not gifted with special talents. I write this post to show you how small but regular monthly investments can build streams of passive income
Let me present here my passive income report for the just-ended financial year 31st March 2018.

Let's study the following bar chart. This graphic shows the growth in the passive income.

I also add the following supporting information that makes the chart more readable.

Passive Income Report: 3 Streams of Passive

We can see that there are three categories of passive income here. These three forms are as follows:
  • dividend,
  • interest and
  • profit from the sale of investments.

You can also observe from the chart and the table that the dividend income is steadily growing. This is on the back of increased investments in stocks. It is equally important to note that interest income has fallen drastically from Rs.70,512 in the year 2016 to Rs.38,846 in the year 2017. This is not because of any reduction in the investments of interest-bearing assets but owing to the steep cut in the interest rates on bank deposits. You will appreciate this from the graph showing various forms of investments.

Passive Income Report: Total Investments

We have maintained the bank fixed deposits (FDs) more or less at the level. You can see that direct investments in stocks are steadily climbing. In the financial year ending 31st March 2018, the life insurance company had pre-closed a mutual fund linked life insurance policy for an inadvertent delay in paying the premium. I do not intend to invest in life insurance policies anymore as they are beneficial for those who begin when they are young.

In the year 2018, I have added two new investment products namely public provident fund (PPF), equity-linked savings scheme (ELSS)and special, tax saver bank fixed deposits. I was primarily trying to take the tax deduction under section 80C of the 'Indian Income Tax Act'. This act allows a deduction while computing taxable income to the extent of Rs.1,50,000 a year on certain investments.

ELSS is the only equity-linked mutual fund instrument that qualifies under the section 80C. Though I made a beginning with ELSS I restricted the amount to just Rs.20,000 as the fund managers were investing only in the blue-chip companies which were very expensive. I will increase the allocation when the markets become more reasonable or depressed.

I invested Rs.10000 in PPF this year. PPF offers a higher interest compared with bank deposits and also brings certain legal protections. One limitation is a very long investment lock-in period of 15 years. This is actually not a concern for a value investor, who anyway is a long-term investor. But the real concern is that PPF does not give the kind returns that stocks can. However direct investment in stocks does not enjoy deduction under 80C. Therefore, I will slightly increase the allocation for PPF within the overall eligible investment limit of Rs.1,50,000 in the coming years.

I invested a total sum of Rs.1,05,000 in the tax saver bank fixed deposits. I also had to break and use a sum of Rs.1,00,000 from the existing, conventional fixed deposits, for replacing my old car. So the net increase in bank fixed deposits is a mere Rs.5000.

My Passive Income Report: Small but Uninterrupted Investments

My monthly investments are small but uninterrupted. Please see my investment habit monitoring table below.

The Conclusion of my Passive Income Report

I am glad to see and share with you the steady growth in the passive income in just three years (I created Portfolio 2K15 only in February 2015, virtually the very end of the financial year ending 31st March 2015). My small but regular investments could contribute such good results. You too can surely benefit the same way.