Struggle to make money from stocks

Well, finally the market makes the 13000 level. As I have been writing, this is a very strange situation. It essentially seems that the market is truly being driven by the sensex. Large caps such as Infosys, and Reliance have hot lifetime highs and show no sign of dropping (and hopefully they will not except for technical corrections from time to time).

The surprising part is the mid-caps, especially some of the construction and real estate stocks that I hold. All of them are still way off the May positions, even though they are climbing from the positions that they had dropped to. Some of the stocks that I have held onto which are now looking up are Era Constructions, Ashiana Housing, Ansal Housing, Noida Toll (although it is now a disappointment), Atlas Copco, Greaves, Garnet Construction, Madhucon Projects, Pratibha Industries, IVRC, etc.

Now am back to the same waiting game, not sure whether this is a time to book profit, or whether this is the start of another secular run propelled by India's promise and good performances. So, will keep a close watch and decide whether to sell on a case by case basis. This however has a problem where a crash one day should not lead to an impulsive decision to sell.

For some time now, I have been reading about the hotel situation. There is an acute shortage of quality hotel rooms in the country, and we are currently experiencing a period when there is sufficient demand. Rates have been going up over the past 2 years, and the rates are currently pretty high. From personal experience in the Delhi market, I have seen people getting charged fairly high rates and having problems in getting bookings. The situation is far worse in cities like Bangalore and Bombay. And these are the same hotels that would have given discounts on the rack rate and been able to pretty much offer confirmed bookings easily just a couple of years back.

Hotel chains are currently investing in getting more rooms onto the market, and there is starting to be a buzz about the hotel sector. The hotel stocks don't yet reflect this buzz, and they did fall in the May crash along with other stocks. They are slowly recovering, but are still pretty much depressed from all their all time highs.
Some of the stocks that I am tracking (and am invested in some of them) are: Kamat Hotels, Leela Hotels, Taj GVK, EIH Associated Hotels, Viceroy Hotels. Right now these stocks are pretty much rangebound, but from what I have read, I believe that there is plenty of scope for upward movement of these stocks in the 1 year range.

I invested in a few mutual funds at NFO, and inspite of the crashes since then, they have given a fairly good return. The ones that I remain invested in are:

1. FRANKLIN INDIA FLEXI CAP FUND

2. KOTAK MID CAP

3. RELIANCE EQUITY OPPORTUNITIES FUND

4. SUNDARAM BNP PARIBAS S.M.I.L.E FUND

Of these, the Flexicap fund has fared the best and the SMILE fund the lowest. When doing these comparisons, I always end up wondering, should I actually go ahead and sell the SMILE fund and invest in some other fund ? It is already past an year, and hence there the profit will be tax free. So far I am holding onto the fund, but who knows ..?

Continuing from my previous post, I am now invested mostly in companies with strong fundamentals, but most of them are not the large cap companies. I really have never had much of a taste for large cap companies, preferring to invest more in mid-cap companies that have more potential to grow. Of course, the caveat in that is mid-cap companies have to be researched more thoroughly and the risk levels is much higher. And even though all the mid-caps have not recovered from the May crash, any similar activity of the sensex is bound to affect them much more thoroughly.

What I will also be doing is to just list a few companies here that I am investing in, or planning to invest in. These are not my tips though, so in the case of anybody following these tips, bouqets / brickbats are not for me. These are based on the various articles that I read along with the various mailing lists and net articles that I browse. Obviously, if I am not enamoured of a recommendation, I will not post that here.

Currently, real estate stock are on a upswing. Some of the stocks that I am invested in and holding to are Ansal Housing, Ashiana Housing and Garnet Construction. These have advanced quite a bit after the crash, so 'buyer beware'. In the stock market, any money you make or lose is your own, hence any opinions you have should be your own as well.  

Last year, when the market was jumping in July and August, I got ambitious and invested in a lot of highly speculative shares, shares that are operator driven and in which a retail investor like me does not have much of a chance. So, for example, I bought shares such as Pentagon Global, Maxima Systems, Vishal Exports, and so on. And kept on waiting and waiting. If I had to give advice to a friend, the above is exactly what I would have told to avoid.

However, the inevitable had to happen. in the crash of last September (2005), all these shares hit low values and with low volumes. After a few days of hardening my heart, I sold all these at a loss. My only consolation was that the short term loss will be set-off against my short term gain in some other stocks for tax purposes, hence helping in reclaiming something from all the loss. So over a period of time, volume in the stock permitting, I disposed off all these stocks.

Maybe the lesson learnt from all this carnage was well worth it; if you have to deal in operator stocks, you have to be monitoring and set stop-loss and profit targets and execute on those without much emotion clouding judgement. Most important, don't let greed get you down. However, if you want to invest fundamentally, select companies who have a good potential and whose shares are not already sky-high. So over a period of time, I have moved my holdings onto such shares, they do not offer 100% return in a week, but give a steady return over a period of time. In addition,  I have also moved onto mutual funds as a proportion of overall investments. So i monitor tips, identify people/magazines who give strong fundamental tips and change the mindset to more of a medium and long term investor. I don't say that this will make everything perfect, but is a good start.

The sensex is touching new highs for the past 2 trading sessions. But when I look at my portfolio, nothing much seems to be happening. It took some time and effort to figure out what is happening. The gain is not broad-based, for example, on Monday where the sensex touched the all time high, the actual losers were more than the gainers by a ratio of 1.3:1. No wonder my portfolio does not seem to be improving as it is dominated by mid-caps.

The worry, and this seems to be a common worry is that if the gains in the sensex can be attributed mainly to mid-caps and the gains are not broad-based, then any crash or fall at this stage will bring down the large caps to a certain degree, but the mid-caps will be affected to a major degree. This is even more of a problem when most of the mid-caps are nowhere close to their previous highs.

Query remains as to what can be done at this point ? Selling in a panic is not so good, however, if thers is a chance at profit booking, one should do that and invest the funds in other activities (mutual funds, post office schemes, etc). That way, if there is a crash, one does feel totally helpless. Right now, I am holding on, but my instincts are telling me to get some cash in hand rather than fully investing in equity.