How DSIJ has been Creating Wealth for Investors since 1986

Sometime in December 2007, the legendary investor Warren Buffet bet a million dollars against a hedge fund manager arguing that a fund holding the same stocks comprising the S&P 500 index (index fund) could beat the combined performance of a group of hedge funds over the following ten years. In a letter sent to shareholders of Berkshire Hathaway in 2018, Buffet revealed the result. He placed the bet with Protégé Partners, which picked five hedge “funds of funds” that aimed to outperform the broad market, as represented by a simple S&P 500 index mutual fund. Those five funds of funds together owned stakes in more than 200 hedge funds, providing a broad sample of money managers with different investment strategies. The final result of the bet, according to Buffett, was heavily tilted towards the index fund. The returns over the 10-year period for the five hedge funds of funds ranged from a mere 0.3 per cent to 6.5 per cent annually and the basket only returned an average of 2.2 per cent. Compare this with the compounded annual return of 7.1 per cent given by the index fund during the same period. 

Most of you might be wondering why we are narrating this story after four years. The reason is that in our special edition, we also thought of doing a similar analysis of our recommendations given ten years back in the year 2012. This will give us and our readers an idea of our performance. We present to you the results of our performance. Our portfolio recommended in the year 2012 has generated a whopping return of 22.67 per cent annually, whereas Sensex during the same period has generated a CAGR of 13.0 per cent. So, every ₹ 1 lakh invested in our portfolio would have grown to ₹ 8.41 lakh by the end of November 2022. A similar amount invested in Sensex would have increased to ₹ 3.00 lakh. 

We can clearly see that the returns generated by individual recommendations are far superior to the returns generated by the benchmark Sensex. Only one company (GIC Housing Finance) has underperformed, while all other stocks have given returns higher than the Sensex. These outstanding returns speak a lot about DSIJ’s research capabilities and its ability to provide profitable recommendations to its readers. 

There are a few aspects of research process adopted by DSIJ which explains the high level of performance. Better Corporate Governance — Out of nine companies we had recommended in our portfolio, not a single company has gone through any major corporate governance issue over the last ten years. The importance of this can be understood against the background of a clear long-term trend of declining corporate longevity with regards to listed companies or companies that are part of any stock indices. Since 2012, Nifty 50 has seen 72 per cent of its constituent companies changing. Only 14 companies out of the original 50 companies that comprised Nifty 50 in 2012 are part of the current Nifty 50. It speaks a lot about our emphasis on selecting stocks of companies having clean and strong managements with higher bandwidth. 

Well-Diversified Portfolio — Our portfolio clearly indicates that we have tried to abide by the adage, ‘Do not put all your eggs in one basket’. All our recommendations are from different sectors serving different parts of the economy. This has helped us to provide smoother and consistent returns to our reader-investors. The annualized volatility of the DSIJ portfolio was 15.7 per cent, compared to 17.1 per cent of the Sensex during the same period. 

Optimum Weightage — Though the difference between the weightage assigned to different stocks comprising the portfolio appears to be negligible, the little difference has however made a huge difference in the final outcome. If we had given equal weightage to all the stocks in the above portfolio, it would have lowered the return by 300 per cent over the last ten years. Therefore we, as a research media house, not only recommend the right stocks, but we also give appropriate weightages to the stocks to help our readers generate higher alpha. 

Going Beyond Portfolio — But it is not just the portfolio we have excelled in. We have been unearthing hidden gems through our out-of-the-box thinking. A case in point is Info Edge India that we had recommended in our cover story entitled ‘Concept Stocks’ dated July 6, 2008. It was recommended at ₹ 238.329 (adjusted for corporate action). In the last 14 years, it has given annualized return in double digits. Even more recently in the year 2014, we recommended Avanti Feeds, one of the best wealth creating companies in recent years. Since our recommendation, the share price of Avanti Feeds has appreciated by a whopping 37.6 per cent CAGR. So, ₹ 1 lakh invested in this company in the year 2014 would have become ₹ 24.33 lakh today! Before recommending this scrip, we met the company’s reticent management team after several attempts to understand the business, its worth and its potential. 

All these years, we have remained ever vigilant about any corporate event that may throw up opportunities for our reader-investors. We were probably the first media house that interviewed CP Gurnani, CEO, Mahindra Satyam, to understand if the marriage between Tech Mahindra and Mahindra Satyam is going to create synergies and help investors. We did our own analysis and recommended buy, when the share price of Tech Mahindra was trading around ₹ 250. 

Throughout our eventful journey since inception, we have taken pride in claiming that we remain the most honest and unbiased investment magazine in the country as our recommendations are always made keeping the interests of our readers uppermost in our mind. Hence, we have never been, nor will ever be, afraid of calling a spade a spade. 

It is with this conviction we came out with a detailed analysis on ITC during 2011 and explained why one should stay away from the company. It was argued that ITC was still a cigarette company which draws major revenue from its cigarette business, despite diversifying its business into other FMCG products. For many years thereafter, ITC grossly underperformed the market and has gained momentum only in the last couple of years. 

We have dared to swim against the tide many times in our illustrious history with a fair degree of success. Among many companies we analysed between 2009 and 2010, we had also analysed two companies that were then the darling of the investors. First, we did a deep dive on Suzlon Energy. The article’s headline ‘Gone With The Wind’ proved to be bang on the target! Suzlon was one of the largest wind energy companies in the world with presence in various geographies and was trading around ₹ 150 after falling almost 60 per cent from its top. Again, in our November 7, 2010 issue, we analyzed SKS Microfinance, which later on changed its name and has been now merged with IndusInd Bank. It was one of the biggest microfinance companies at that time, but we advised our readers to exit the counter, which was then trading at four-digit price. Thereafter, the share price of the company tumbled down to double digits. 

What has helped us to produce such track record is DSIJ’s single-minded focus on helping the common man to create wealth from the capital market. When DSIJ started in 1986, there was very little understanding of the equity market among retail investors. It was only in metros that there was a little bit of awareness about the equity market and how it can help create wealth for the common people. What was more obvious was the dearth of information available to the investors about the equity market even if someone knew that the capital market can help create wealth. Dalal Street Investment Journal tried to fill this gap by providing all the information needed by the investors. We fully understood that small investors were putting their hard-earned money into the markets and we need to put even more efforts to maintain their trust and live up to their expectations. As times changed, we did not rest on our past laurels and introduced new products to keep pace with the evolving market and meet the changing needs of the investors. 

Market Prediction

Our initial success did not come from stock recommendations—it came from accurately predicting the direction of the market! Our first issue on January 11, 1986, which was a weekly publication rolled out from a photocopy machine and staple-bound, had 1,200 subscribers. The issue that brought us into the reckoning among the fraternity of investors was the February 23, 1986 issue which predicted a market crash! This bold prediction was against street expectations prevailing during that time. In the next one month, Sensex dropped from 632.9 to 525.02, a drop of 17 per cent. Just to give you a perspective of this fall, Nifty 50 fell by similar percentage between the high of October 2021 and the low of June 2022. 

After this prediction, every market participant, including institutions and investors, started taking us seriously and the magazine became a vibrant and popular brand. It rose in circulation to become the first among the business magazines to cross ABC certified circulation of 1,00,000! 

TESTIMONIALS 

"Being a stock market trainer and trader, I have followed DSIJ for many years. I recommend DSIJ to my students also because I feel they do extensive research on Indian companies and they explain that to the readers in the simplest of language" 

- Suman Kuma Datta 

"DSIJ magazine has helped me a lot in understanding the movement of the stock market and the economy. I have clarified my analysis with the recommendations and analysis from DSIJ, and received great insights" 

-Anindya Ghoshal 

Proof Of The Pudding! 

In the last 37 years of our journey, we have seen many ups and downs in the market and we too had our roller-coaster rides along with them. There were some infamous scams that triggered major market falls which drove away investors out of the market and put a question mark on our own survival. Nevertheless, we survived the odds and managed to grow under the most adverse conditions. This was due to the fact that we have striven to give investors timely advice on their investments as and when they needed it. Even during the recent Covid-19 pandemic, when most of the publications had virtually shut shop, we kept printing our magazine, barring a few issues, and continued to serve our subscribers with profitable recommendations. 

When we made our modest beginning in year 1986, the market cap of listed companies was ₹ 28,000 crore. Now, it stands around ₹ 2,83,70,057 crore, which is a growth of almost 1,000 times since our inception. This shows the stupendous growth of the Indian equity market. It will not be an exaggeration to say that DSIJ has played a role in the exponential growth of the equity market in India. In fact, DSIJ has played a key role in fostering and shaping the equity culture in India. With your trust and love, we will continue to do so for many years to come.