Infrastructure stocks: do you really need them?

I hope there is nobody out there with a gun to lynch me. Let me tell you about 2 contrarian calls that I had over the last 15-20 months, and which made me money. One was gambling that the dollar will strengthen – the world was willing to write it off. Moneycontrol carried the story saying IT stocks could be hot – well there is a lot of juice still left in mid-cap IT. One share that I bought at Rs. 60 is R Systems – which is now at Rs. 103 and there is still enough juice.

This was in the first week of Jan 2010 and IT was not yet expensive – see it here

The second one was Cholamandalam Investment and Finance – a couple of people told me that Reliance Capital was a better bet (do not remember the price of Rel Cap) but Chola has moved from 64 to Rs. 130 in less than 4 months. I had expected this price in say 4 years (I remember asking my uncle to invest in Chola instead of putting money in an income fund – telling him double in 4 years + 4% dividend yield is about 22%p.a. return over a 5 year period).

However, being a true contrarian means consistently and regularly taking unpopular positions. Frankly I do not like Infrastructure stocks. Too much capital is required and you have to constantly look for capital – borrowings or equity dilutions. To me these are NOT things I like. Rather would prefer to buy cement stocks in south (struggling with poor realisation), buy sugar stocks after the next quarter results when it reports a loss, a steel company when steel prices are low, …and anyway my mutual fund portfolio will have enough of L&T, Infra companies Power….so not too supportive of the ‘capital intensive infra theme’ except in a wild correction of say 25%. Will I be third time LUCKY? or rather sill will my ‘gut’ make money for me? Not sure.

Of course when you are a little contrarian (and blunt) not too many people like it…because not many folks have the stomach for it. Alas, you don’t exactly endear yourself at parties by going against the ‘aam’ aadmi.

But I have never been interested in following the crowd. My broker knows that we are just interested in profits. And strategically buying out-of-favor companies can earn you sizeable gains when the pendulum swings back and selling some ‘overvalued’ shares puts money in your savings bank account. Sit on cash till you find a good buy or like I do get all your dividends into funding SIPs.

ps: bailed out of RSystems…got into Mahindra Satyam. Thought R Sys was going nowhere, trust Anand Mahindra more ….not sure whether it is a good move.

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One Response to “Infrastructure stocks: do you really need them?”

  1. I did that for Moserbaer. but it kept going down and i kept puting in more and it still went down and i put in more, i am still at 36% loss after 2 years in all.

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