by Parul and the Trendlyne team

Forgetfulness is part of the human condition - we rarely remember everything. So we take photographs, keep notes, set alarms. It's a good thing then, that we have other people to help us remember, like friends at school reunions reminding you of that pink pair of jeans you would rather forget, or historians and economists warning us against repeating past mistakes. 

Despite these reminders, investors make the same old errors in the face of a rising stock market. Since March 2020 and after the Covid19 nosedive, investors were rewarded with outsize, rarely seen returns, with the index itself rising 73%. Investors that put their money into stocks hitting lows in March 2020 were richly rewarded in the span of one year. And some got very lucky: mid-tier IT stocks like Tanla Platforms and Intellect Design jumped 1669% and 1247% over this period. See other overachievers here.

It is easy to believe that the good times will continue. However sentiment shifts quickly, and when it comes to the stock market it is wise to remember that old lesson: Here Be Dragons. Some helpful screeners follow to help you avoid burning up your profits.  

Screeners: Stocks firmly in PE sell zones, and finding hidden gems 

Which are the stocks that may turn negative? Let's take a look at stocks that are now in the battle-tested Sell Zone, based on their historical PE. As this screener indicates, as many as 232 Nifty500 stocks are now in their sell zones (and many continue to rise in share price). While some stocks may see their PE levels get healthier as earnings recover, a good number are uncomfortably close to their lifetime highs - 106 stocks across indices are in their sell zone as well as near lifetime highs. 

In an overheated market, are there still bargains? One way to look for mispriced or underpriced stocks is to check for companies whose market capitalization is lower than their total fixed assets with low debt. Companies like Polyplex, HSIL and Deepak Fertiliser turn up in this screener. 

The best performing superstar investors

The largest investors have also seen their portfolios expand this FY, both with more purchases and higher returns. Radhakishan Damani's consolidated public portfolio is up 67.6% in net worth between March 2020 and March 2021 (not accounting for yet unreported buys). Damani's marquee holding DMART is up 32% over the year, and some of his biggest portfolio holdings, including Sundaram Finance and Jubilant Foodworks are up by over 100% since March 2020, aiding his portfolio recovery. 

 Rakesh Jhunjhunwala's consolidated public portfolio was up over 80% in that same period. Since March 2020 multiple companies in his portfolio recovered from the sharp declines post Covid19, and his biggest holdings all gained. These include Titan (+66.6%), Escorts (+112.8%), Lupin (+77.4%), Crisil (+47.9%),  Jubilant Pharmova (+168.5%) and NCC (+333.7%).  

One of the most interesting portfolios in recent months - both in returns of existing holdings and new stock purchases - has to be the Abakkus Fund. Abakkus is helmed by Sunil Singhania, who became famous as the CIO of Reliance's Mutual Fund. His Reliance Growth Fund delivered a 21% return CAGR from 2004 to 2017. Singhania reportedly follows an investment framework he calls MEETS to choose stocks (Management, Earnings, Events, Timing and Structure). 

Since March 2020, Abakkus' public portfolio is a sharp line up, rising 666.1% between March 2020 and March 2021 in its public investment value, up from Rs. 162.5 crore in March 2020 to Rs. 1245.6 crore in March 2021. The fund has grown thanks to gains over the year in longer-term portfolio holdings like Mastek (+590.3%),  Somany Home Innovation (+338.2%), HIL (+362.6%), Lux Industries (+99.1%), Jindal Stainless (Hisar) (+220.8%) and Polyplex (+174.3%), as well as fresh buys in fast-rising stocks like Acrysil and Saregama. 

Abakkus is relatively, the new kid on the block among investor superstars, but the fund's picks already look interesting in its preference for under the radar, underpriced companies with strong fundamentals. When these take off, they deliver outsize returns. 

You can look up all the superstars here.

In other news

• After a dip earlier in the month, FII flows are back in the green.

• (Premium) There's been a lot of buzz around the Jhunjhunwala-backed Barbeque Nation, but high debts and losses left our writer unimpressed.

• Bloomberg's Noah Smith thinks clean energy investments have reached a tipping point and are going big, for real.

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