Before we close down this year, I list the best performers of 2022 for the record.
The purpose is multifold, foremost is to let us know that there will always be performers better than ours, next is to be humble to accept that we have missed many, and the last one could be to keep track of how the market moves in a year and how perception change around them quickly.
So here we go, the top performer of the year 2022 (till 23rd Dec 2022)
Stocks
Looks great, isn’t it? now let me highlight a few points about the above list.
All of them were < 100 cr companies in 2021.
Only four of them had positive earnings in the said period.
The top gainer have continuous business losses since 2014, and no business this year as well, but the money (~671 cr) came from other income.
In at least three of them, promoters have sold shares in the said period.
All of them have fallen from their 52-week high in the range of 10 - 70%.
And that’s the precise risk in investing in companies based on last year's returns. It would make judgment extremely difficult. You might ask how they ran up so much without positive earnings. Well, no one knows, some of them might be having a futuristic business, or maybe they are rigged by operators, we don’t know. And since these companies are very small, it is extremely hard to get reliable info about them. Streamlining reliable info of micro cap stocks could be next idea to work.
Mutual funds
Impressive isn’t it? now let me highlight a few points about these direct funds.
None of them was on the top gainer list the previous year.
Only four of them have long-term (> 3 yr) return greater than last year's return.
Most hybrid funds (SL. no. 4-7) tends to perform better in a volatile year.
The top fund has the long-term return of < 10%, this year seems exceptional.
Absolute returns vary from SIP returns, these are absolute returns from last year.
You can see these almost unknown names showing up in the top 10 lists because of volatility in the market, clearly, if you have followed last year's top gainer list, they all have less (and some even negative) returns than the bank deposits. Enough warnings!
Index
Some observations about indices.
Three of the top 10 have no meaningful return in the said period.
The top index has a negligible return when extended over two years period (~0%).
The top performer of last year (Nifty IT) is down -24% in the said period.
The NIFTY 50 index has performed better compared to USA and CHINA, down to ~33% and ~15% respectively.
The demonstration is very clear, it is highly unlikely that the area which made money last year, will make money this year as well. Also, the movement of money from one sector to another can be seen (from IT to Bank). This underlines that every year, things will take their own course, with no hard and fast rule that the market will follow. It creates its own path and we just have to follow it.
I hope you have enjoyed the observations, we shall use these while studying the next stocks/funds in the new year.