Revisiting Corona Picks [India Version]

A look back on my coronavirus stock picks

On April 5th, I wrote a post where I put together a shortlist of companies that, in my opinion, were a great buy after the crisis.

I divided the companies into four categories-

  • Bargain Basement

  • Safety at Reasonable Price

  • Change Agents

  • Gurus

These were the companies-

Bargain Basement:
Aurobindo Pharma
Bharti Infra.
Sun TV
Ashok Leyland

Safety at Reasonable Price:
Godrej Consumer
Britannia Industries
Asian Paints
Tata Elxsi
Eicher Motors Ltd

Change Agents:
Kaveri Seeds
Reliance Industries

Kaveri Seeds
Edelweiss Financial Services Ltd.
Piramal Enterprises

Its been almost two months and what two months they have been!

US markets are an arms reach from an all-time high. Indian markets have forgotten that we are months away from any type of vaccine.

Amidst all this optimism I want to revisit the post from April 5th. I shortlisted some 22 companies. Let’s take a look at how we did? Are the companies in green, and if so, did we beat the market?

Well, let’s see how the market or the index did from April 7th to June 4th. The index, which in this case, is the SENSEX was at 30,066 points, and it closed yesterday at 33,980. That is a return of 13%. Not bad for two months.

Now let’s look at our picks.

If we were to invest equally in the 22 shortlisted companies, we would have a return of 27%! In other words, we beat the market comfortably :-)

None of the companies have a negative return. The best performing is Aurobindo Pharma, with a return of 70.6%, while the worst performing is Asian Paints with a return of 0.55%.

How did the four categories perform?

Bargain basement returned 34%
Safety at Reasonable Price returned 18%
Change Agents return 49%
Gurus returned 32%

Each category beat the market’s 13%.

So what does all this mean? Should I quit my day job and just pick stocks?

I think there are two key takeaways here-

Selection bias- Two months is a very small period to access any value investing strategy. My selection of these two months is biased because the last two months are probably an outlier and unlikely to repeat in the coming years. See also: Resulting.

Buy great companies at good prices- All the 22 companies I shortlisted have a great business model with a beautiful moat. I would have bought them even if there was no crisis. A big part of making money by investing is how much you’re paying for the given asset. Your returns are dictated by how much you’re paying. Because the market overreacted, these companies were trading at a much higher discount than their intrinsic value and provided a great buying opportunity.

Let’s invert, would I be saying the same things if things went south?
I would like to think so. Unless the underlying business has changed fundamentally, I might even put in some more money to work.

You can find more details on this spreadsheet.