Indian Net Net Stocks for February 2022
A monthly list of Indian Net Net stocks to help you outperform the market
This is part of the Indian Net Net Stock Portfolio strategy that is discussed in depth here. Please read that first to be armed with the full-context behind the following Indian Net Net stocks for February 2022.
A Performance Review of January 2022
An equally-weighted portfolio of January 2022 Indian Net Net stock picks returned +11.23% in January 2022:
The BSE500 Total Return Index returned -0.3793% in January 2022.
Thus, the Indian Net Net Stock Portfolio for January 2022 outperformed the BSE500 Total Return Index by +11.61%.
Indian Net Net Stocks for February 2022
For February 2022, there are no new net net stocks compared with January 2022.
February 2022’s Net Net stocks include:
Riddhi Siddhi Gluco Biols Ltd
Trejhara Solutions Ltd
There has been turnover of 1 stock that was in the January 2022 Indian Net Net stocks portfolio, which no longer meets the criteria to be in the February 2022 Indian Net Net stocks portfolio.
Sicagen India Ltd is now out of the portfolio and is due for exit.
The Indian Net Net strategy spits out a collection of net net stocks every month to invest in, with equal allocation. One should remain invested in those stocks so long as those stocks are in the monthly lists. If a stock is removed from the monthly list, then it is the signal to sell that stock.
Please the read the following 2 sections about long term expectations and nuances to invest responsibly with good risk management:
A Reminder of the Long Term Expectations of Indian Net Net Investing Strategy
An average annualized return of 48.16% and average annualized outperformance of 27.09% over the BSE500 Total Return Index, at a high IR of 0.78 shows consistent outperformance of the strategy.
A Reminder of the Nuances of Indian Net Net Investing
Net net investing is more of a portfolio strategy, rather than a strategy where you select individual stock winners. It is harder to confidently say that a single net net stock will generate good returns. But it is easier to have confidence that a diversified collection of such net net stocks will do well.
The problem is that in this strategy applied to the Indian market, you only have 6 net net stocks on average that make it into the monthly list. This leads to quite a concentrated portfolio! Hence, I suggest having an upper limit to how much money you are comfortable allocating to Indian Net Nets. It would not be wise for example, to have your entire retirement savings allocated to such a concentrated group of 6 stocks!
Look at this time-series of the Indian Net Net Portfolio’s monthly returns:
This shows that overall, there are periods of big returns, with an average monthly return of 3.4%. However, to really succeed, patience is required to tolerate consecutive months of negative returns, without deviating from the strategy.
Also, when buying or selling these net net stocks, it is critically important to use limit-orders, rather than buy at market prices with market orders! This is because the liquidity on these stocks are usually lower, so buying with market orders will usually increase your purchase cost significantly!
Subscribe and follow for updates!
I also share my thoughts on Financial Markets, Psychology and History on Twitter
Best,
Raj Arishtocrat from SEE ACT WIN