I have been doing an analysis of my past stock picks and comparing my notes with how the stock picks have turned out over time.
I have been able to divide my picks into broadly three groups
Group A – The multibaggers. These were picks like concor, marico , asian paints, blue star etc. I had no inkling that these companies would do so well and the stock price would appreciate multiple times over the last few years when I first analysed and purchased the stocks. However on deeper analysis I found that the key reason the pick turned out well was due to a double dip I received. First the gap between the intrinsic value and the stock price closed. At the same time, these companies have been able to increase their intrinsic value through some great perfromance in the last couple of years. As a result of these two happy occurences, I have been able to get good profits
Group B – Good return stocks. These were picks like kothari products, macmillan, KVB bank etc. In case of these picks there was a narrowing of the gap between stock price and intrinsic value. As a result I was able to get decent returns as a whole. However in some cases where I was late in selling the stock, the eventual returns were lower.
Group C – The dogs. These were picks like Larsen and tubro (ouch !! see here), SSI, arvind mills etc. Each pick had its own reason for going wrong from over paying for the stock, poor performance of the business, sloppy analysis etc.
The above analysis is definitely not earth shattering and I have known it vauguely for some time. But after almost 8-9 years of buying, selling and analysing stocks, I thought of doing some analysis so as to improve my future performance.
Ofcourse the logical conclusion would be to always buy stocks in group A. However most of the stocks in that group seem to be fairly or over priced. I am finding more picks in group B. Not too exicted about it, but beats overpaying for quality stocks or picking dogs. Key point for me to remember would be to sell these stocks in time if they do not show promise of improvement in intrinsic value