Five years seems like a good amount of investment duration in a stock. But considering more than three-quarters of that investment came in last two fiscal years, my investment in Supreme Industries is still very young. Here are my key takeaways.
I have invested 11 times in Supreme Industries across these fives years.
The company regularly pays dividends for the fiscal year 2022-23 by dividend yield at cost was 1.13%.
With the current XIRR of 19% I am conformably beating Nifty 50 index whose return would have been a measly 7%. Yay!
The Russian invasion of Ukraine, sent the stock in a downward trajectory and I saw it go in negative for the first time since the Covid-19 market crash. But I was able to accumulate some more of it during this time.
Investment through the years
Returns
The dividend yield at cost mentioned in the graph above, is yield at the date at which I received the dividends. Another way to look at dividend yield is to calculate it for the fiscal year.
Fiscal year
Dividend yield at cost
2018-19
0.75%
2019-20
2.14%
2020-21
0.42%
2021-22
0.65%
2022-23
1.13%
To calculate the dividend yield at cost in the above table I use the below formula.
(Total amount of dividends received in a fiscal year ÷ Total amount invested at the end of fiscal year) × 100
Color surrounds us in nature, and we re-create it with pigments. You can think of pigments as pulverized minerals, heavy metals, or chemicals that we swish into oil and spread over a canvas or car: Cobalt becomes blue; ochre red; cadmium yellow. “But nature has a very different way of creating color than we do,” Chanda says. Some of nature’s most vivid looks—the kind worn by peacocks, beetles, and butterflies—do their thing without pigment.
Those colors come from topography. Submicroscopic landscapes on the outer surfaces of peacock feathers, beetle shells, and butterfly wings diffract light to produce what’s known as structural color. It’s longer-lasting and pigment-free. And to scientists, it’s the key to creating paint that is not only better for the planet but might also help us live in a hotter world.
After realising that I was missing IT sector in my portfolio, I started with LTIMindtree and then added Tata Consultancy Services (TCS) portfolio. There was really no research involved in selecting TCS. Not even eeny, meeny, miny, moe. Below are my key takeaways.
I have invested 13 times in TCS in last three years, and more than 50% of that has come in last fiscal year i.e. 2022-23. So my investment is very young and I will have to wait a couple of years to see how it really performs.
Since Apr-22, my investment in TCS has been underperforming the Nifty 50 Index. Considering the recessionary fears and layoffs in the IT sector I expect the underperformance to continue for sometime.
TCS has paid dividends 14 times in these three years. Apparently, TCS pays dividends four times in a fiscal year. At least this has been the case since last three years. And the last dividend included a special dividend of ₹67. Yay!
Investment through the years
Returns
While I have mentioned the dividend yield at cost at each date when I received the dividends, another way to look at it is to calculate dividend yield at cost for the fiscal year against total amount invested till that fiscal year.
Fiscal year
Dividend yield at cost
2019-20
0.61%
2020-21
0.93%
2021-22
1.07%
2022-23
2.91%
To calculate the dividend yield at cost in the above table I use the below formula.
(Total amount of dividends received in a fiscal year ÷ Total amount invested at the end of fiscal year) × 100
Considering more than 90% of my investment in Hatsun has come in last two fiscal years, I think the title “Five years as shareholder of Hatsun” is a bit misleading. Leaving that aside, it has been a roller coaster ride since last one year. I am underperforming Nifty 50 Index and the recent bank collapses are pushing the overall market in downward trajectory. I see a lot of pain for the next year at least.
SVB: Hey, I just lost a ton of money selling government guaranteed bonds, so please invest in us
Others: Wait, why?
SVB: Haha, these startups, they seem to actually not be able to raise money, so we’re bleeding deposits, but it’s all fine, just give us some more capital and we’re fine
The VCs: Excuse me. You don’t have money to pay depositors?
SVB: No, what we’re saying is, we do. It was locked in with MBS earlier, and we sold it now and have $20 billion, which is like gazomba huge types. So yeah, relax, don’t panic.
The wild ride with IDFC First Bank continues. July 2022 I was at -30% XIRR; seven months later it is at 10%, slightly above the Nifty 50 Index. There is nothing really interesting for me to write here so go ahead check the graphs below.
Mi_NNF10 smallcase had invested in couple of Adani Group companies from Nifty Next 50 index. Once the Hindenburg report was released there was a massive sell off in Adani Group companies. In a single day, two years worth of my (unrealised) profits were wiped clean and I was in red. I initially thought of exiting only Adani stocks, but decided against it and went with fund manager’s monthly rebalance.
The lower circuit
When it was time to do monthly rebalance, I could see that all the Adani stocks were being sold off. I hit the Confirm Update button on the smallcase portal but one of Adani Group company stock hit the lower circuit and I could not sell it. I had to repair my smallcase; a first for me in 2 years. But it kept hitting lower circuit I lost 70%. Ouch!
My learnings
While smallcase simplifies direct equity investment with a fund manager’s guidance there are certain caveats that I learned along the way.
1. Taxes
With every rebalance you will be selling some or the other stock. And with that you will be hopefully making some long or short term capital gain; mostly it will be short term capital gain. And that is taxed at 10% or 15%. But you won’t pay that right away. It will magically show up while filing your tax returns. When I was filling my tax return I could see a bunch of capital gains that were getting taxed but it was really difficult for me to analyse if they were from the smallcase or my own trades. And if you have more than one smallcase then… well you get the idea. In essence, calculating impact of taxes on your smallcase is very difficult, if not impossible.
In contrast, calculating impact of taxes on your mutual fund redemptions is fairly straightforward.
2. Lower circuit
If any of your stock in smallcase hits lower circuit when it’s time for rebalance and you need to sell, then you are f…, I mean you are at gods mercy. This is what happened to me and I had thought it will never happen to me. You see, I chose Mi_NNF10 for a reason; it only invests in Nifty Next 50 companies. What could go wrong, right? Wrong! One of the Adani Group companies went into lower circuit and by the time I was able to sell it, I lost 70% on that investment. Ouch!
3. Comparison to benchmark
Since there is no NAV for the smallcase you cannot compare it to any benchmark. There is chart on the smallcase homepage that shows its performance against equity large cap, but that does not consider impact of fund manager’s fees, LTCG, STCG, and events like lower circuit hampering your rebalances. I can be making 20% XIRR but I cannot compare it to any index say Nifty 50 Index. Had I invested the same money in Nifty 50 Index would I have made better returns? I can never answer this question.
Unsolicited tip for smallcase folks: Show historical performance of smallcase for each individual.
4. Expense ratio
If you want to get full benefit of your smallcase then you need to look into expense ratio. If your expense ratio is more than 5% then its not worth it. IMHO, it should be in the range of 1-2%; similar to that of mutual funds. And this expense ratio has to be managed by you. Unlike mutual funds, where it does not matter how much you invest—five hundred or five lakhs—the expense ratio remains the same.
One good side effect of managing the expense ratio was that, with dividends earned I was able to recoup my subscription fees in its entirety for both years.
And yes, the fund manager started a scheme offering discounts to subscribers who had been with smallcase for more than two years reducing my expense ratio for this year. Yay!
Return
Calculation of Amount Invested
Subscription fee for smallcase
Being fee for smallcase
Amount paid while rebalancing
DP charges that I incur while selling stocks due to rebalancing
Amount received while rebalancing (deducted from Amount Invested)
Profit Percent
Future
I am planning to continue in the smallcase for one more year.
Powerful words. Unfortunately can’t find this book on Amazon India.
One can fight evil but against stupidity one is helpless. … I have accepted the fact, hard as it may be, that human beings are inclined to behave in ways that would make animals blush. The ironic, the tragic thing is that we often behave in ignoble fashion from what we consider the highest motives. The animal makes no excuse for killing his prey; the human animal, on the other hand, can invoke God’s blessing when massacring his fellow men. He forgets that God is not on his side but at his side.
When D Mart announced its IPO, I decided to skip it because I rarely went to D Mart; opting to go to Big Bazaar instead which had lesser crowd (in the hindsight, this should have been warning sign) and cleaner aisles. That was the only research that I did for deciding whether I should apply for the IPO or not. When the IPO had a bumper listing I was left scratching my head. How can this overcrowded store get a bumper listing in front of the swanky store of Big Bazaar? But reading through a couple of articles I realised what D Mart was doing better than it competitors. For e.g., being profitable. Duh! So, three years back I decided to start investing in D Mart. Here are my key takeaways.
I have invested 12 times across these three years.
I unfortunately invested in D Mart at its peak of 5000+ levels. This severely impacted my XIRR. And the recent correction in the share price has meant that I have underperformed Nifty 50 Index by a huge margin.
The company has not paid any dividends. This was something I found out after investing in it.
