People who read my blog regularly would have seen me contradict myself many times. That is the bane of fund management. Especially when you are managing somebody else’s money for a fee.

This post is to explain one such contradiction. Most of my regular readers know that I do not like PSU companies. Bad/ poor management, pathetic corporate governance, and sometimes poor execution. However somethings you can NEVER EVER get in the private sector you have to buy in the PSU – for e.g. NTPC is 10x the size of Tata Power. Similarly Coal India, State Bank of India – you just cannot get that kind of reach.

So I have NTPC in my portfolio (bought it sub Rs. 100 per share) and therefore enjoy a very good dividend yield. I surely did sell some at 225 but hurriedly bought it back at 201 – thus dramatically benefiting as a cost reduction technique / trading profit.

Recently I saw the share at Rs. 114 – and loved the yield of about 6% p.a. – expect the cash flow in July, thus improving the yield even further. One more guess was that Na Mo (at that time it was hope, now it is a certainty – his becoming PM) could work wonders. What could he do? Well he could reduce or dramatically remove the political interference in NTPC (like he did in Gujarat). What would this do? It would change the market perception of PsU companies in general, and in the infra space in particular. The risk in NTPC at a sub 120 price (7 year old price!! ) was very very low.

Discussed with my broker and bought this along with a PSU bank – similar kinda argument.

Now you could call this a tactical move (strategically I do not wish to hold a psu in my portfolio but can take a tactical trading position). So I did.

I am happy with the current price of Rs. 132, but will hold on longer – maybe sell it at Rs. 230 in 2018. What is the return on such a stock?

Well, about 18% p.a. in terms of appreciation and about 6% in dividend yield. About 24% p.a. over a 5-6 year period. Not bad, eh?