Category: BN Musings

Asking the right questions is the single most important ability the high achievers have. They have this, almost, magical ability to quickly figure out what matters and focus just on that. Let’s start 2024 with some questions.

• Say you are at ground zero in your life and can build from here the way you want, what will you stop first (Shiv ji)? What are the things that you will continue (Vishnu ji)? What are the things that you will start (Brahma ji)?
  
• Things that you decided to continue need increased focus and more energy. Let’s think of reasons why you started something? What was the drive behind it? What changed later on that you lost focus and energy for it?
  
• Do you focus enough on the things you have control over? Do you waste too much time and energy on things over which you have little to no control?
  
• Do you think enough about tomorrow to do something good today? Think how to spend less time next month on things that take an hour today? What if done this week can make your year better?
  
• If you were watched by ten other people, will you still be spending your twenty-four hours the way you do currently?
  
• What are your broad aims for this year? Do you have any understanding about how to get there? What are the systems and processes you will need for them to become reality?
  
• Are you spending the most time with best people even if virtually? You eventually become more like who you spend your most time with. Do you spend more of your time with those who dare to dream beyond what most other people consider possible? Do you spend more time with those who give you bigger challenges to solve and ideas if you are already dealing with challenges?

Hope these questions and their answers will prepare you better for 2024 and beyond!!

Happy New Year 2024!! Waiting for your comments below.

Disclaimer: Posts on the platforms of BN are our perspective on the market. These are purely meant for learning purposes. The perspective provided should not be construed as investment advice or solicitation to trade. We may have positions in the stock mentioned. You agree to make no trade relying on the above contained information fully or partly. By using the content, you agree to these T&Cs.

There are many ways to do the same thing, but you want to optimize for the output controlling the efforts that go in. There Market Pulse scores well and is something worth putting the effort into.

As you can see it has daily data for certain types of points such as number of stocks up more than 4.5%, similarly down more than 4.5% for the day, 20% or more mover in last five days and then comes data revolving around MAs. Stocks trading above 20 DMA, 50 DMA and 200 DMA and similarly for other side of these MAs.

Market Pulse: Market averages like Nifty 50 and others do not tell you much about how the market is doing. In all likelihood you have stocks that are not part of Nifty 50. Even if they were you may see red in portfolio while Nifty 50 is green due to weight issues.

That is where Market Pulse enters the fray.

Data Points for Bullish Swing:

?4.5%+: You want this column to have increasing values.

?-4.5%+: You want this column to have decreasing values.

?20%+ in 5D: You want this column to have increasing values.

?-20%+ in 5D: You want this column to have decreasing values.

?20 DMA: You want more stocks crossing DMA 20 than going below it.

?50 DMA: You want more stocks crossing DMA 50 than going below it.

?200 DMA: You want more stocks crossing DMA 200 than going below it.

For someone trying to figure out the local tops and bottoms in the market, 4.5% mover columns are important as they change first and fast leading to change in 20% in 5D data point.

For short term swing players, 20 DMA columns are most important.
Positional players should focus more on 50 DMA and for bull run 200 DMA, plays the major role.

Every spike in 20 DMA will lead to some run-in market but that may not be a good space for positional pickings or bull run.

Every bull run that starts and makes great money will start with spike in 4.5%+ column leading to ripple effects in 20% in 5 days and stocks above 20 DMA number increasing sustainably over the days. But not every spike 4.5%+ column spike will lead to bull run. The relation between 4.5%+ column and bull is many to one.

This tool is accessible to all of you which we hope to update weekly and if important enough then during the week as well. Bookmark the link and start using it to better the deployment of capital. Happy Investing.

Disclaimer: Posts on the platforms of BN are our perspective on the market. These are purely meant for learning purposes. The perspective provided should not be construed as investment advice or solicitation to trade. We may have positions in the stock mentioned. You agree to make no trade relying on the above contained information fully or partly. By using the content, you agree to these T&Cs.

Cash is king in the world of business. And one of the keys to a company’s financial success is the management of its working capital. The length of time it takes to turn inventory into cash and collect on accounts receivable can have a significant impact on a company’s cash flow and profitability. That’s why reducing working capital days is such an important goal for many businesses.

Working capital refers to the amount of money that a company has available to fund its day-to-day operations. It is calculated as the difference between a company’s current assets (such as cash, inventory, and accounts receivable) and its current liabilities (such as accounts payable and short-term debt).

Working capital is a measure of a company’s liquidity, or its ability to meet its short-term financial obligations. A company with strong working capital can easily pay its bills and invest in growth opportunities, while a company with weak working capital may struggle to keep up with its financial obligations and may need to resort to borrowing to fund its operations.

Effective management of working capital is crucial for a company’s financial health and can have a significant impact on its profitability and growth prospects.

Let’s say that Company ABC has ₹1,00,000 in current assets, including ₹40,000 in cash, ₹50,000 in inventory, and ₹10,000 in accounts receivable. Company ABC also has ₹60,000 in current liabilities, including ₹20,000 in accounts payable and ₹40,000 in short-term debt.

To calculate Company ABC’s working capital, we would subtract its current liabilities from its current assets:

Working capital = Current assets – Current liabilities Working capital = ₹1,00,000 – ₹60,000 Working capital = ₹40,000

On the face of it, it looks like higher the working capital better it will be because you will have more current assets than current liabilities hence more cash to pay the bills or invest in running operations or for growth. But that is not true.

Negative working capital is better than positive working capital. Negative working capital signals the power of the business to defer the payment of its suppliers and vendors while it collects the money from its consumers early and does not hold the inventory for long. Such businesses produce more cash than their profits often because of this characteristic.

Say you are running a retail business where you collect the payment as soon as you sell things, but you pay to your supplier 30 days later and on an average, you sell your stuff in a week then that will lead to negative working capital. Your customers pay you instantly showing your power while you pay a month later again shows your power.

This is Jagsonpal pharma. This was bought out by Infinity Group and announcement to that effect came on February 21, 2022.
Look at how debtor days (number of days they receive money) has reduced from 100 to 25 in last decade. Inventory used to be held up from 100 days to even 300 days in 2018 but now again back to 113 days. That has also improved. Days payable (number of days they take to pay their suppliers) used to be 20 which increased to 80 days and currently at 60 days.

We can say they pay their suppliers later, hold their products in their warehouses for smaller time and receive money much faster from customers. This has happened in last 12 years. This has led to ROCE jumping from 10% to 20%+ while for a year it was negative near -10%.

Look how stock has done and working capital days that affect ROCE has impacted the market perception.

Look how market has rerated the market cap to sales (a measure of valuation) from 0.2 times to 2.5 times. That is 10x returns came just from this rerating. Sales has barely gone up 50% in last 10-12 years, but this rerating has led to big gains as stock moved from 8 per share to 418 in 10 years 2012-2022.

This is Sanjay Gupta run APL Apollo Tubes. Debtor days have been reduced to 10 from 40 while inventory crushed to 30 days from 70 days and days payable from 13 days has increased to 34 days. All of this has led to working capital going from 100 days to 7 days. ROCE jumped from 20% to 35%.

Market rerated it from 0.2 sales to 2 while PE jumped from 5 to 50. That is 10x move due to rerating which came from improving business and perception of market. During this period sales have grown 10-12x. This 10x sales and 10x rerating has led to 100 bagger in 10 years.

Krishna Electrical Industries became KEI Industries later on and you can see in last 5 years working capital days have become half but still ROCE is at similar level. Can you think why and despite no jump in ROCE stock did great. What could explain this.

Stock defied the small cap and mid cap crash that started in 2017 and stock kept making new highs but in Covid fall stock became one third. Since then, stock is close to doing 10x again. In last 7-8 years stock has gone from 100 to 2000. PE went from 10 to 40, market cap to sales during same period went from 0.4 to 2.5. Thus, you can say 4-6x returns came simply due to rerating because of improved perception. Profits became 4x during this period while sales barely trebled.

Lesson: Focus on businesses where working capital management is getting better and that will generally not happen in isolation but will come with good growth in sales and even better profit growth. Such stocks get rerated big time. The twin engine of profit growth and rerating in multiple leads to mega gains.

Disclaimer: Posts on the platforms of BN are our perspective on the market. These are purely meant for learning purposes. The perspective provided should not be construed as investment advice or solicitation to trade. We may have positions in the stock mentioned. You agree to make no trade relying on the above contained information fully or partly. By using the content, you agree to these T&Cs.

A lot of stuff people pick from somewhere which are not clearly thought through and then they keep promoting it. In the era of social media, bad news is anyone can propagate anything, but good news is anyone can come and correct it. This increased information flow to discerning mind is a good thing but for mediocre, it is a kiss of death. The era of only limited stuff with stamp of “expert” is gone where you had only selected things to look at.

Often people say a particular stock has low volume hence it can be operated (manipulated) so one should stay away. First of all, what is manipulation? Nobody seems to be able to define it but everybody seems to be talking about. Every other day you will find someone saying this is a operator driven stock and so on.

One alleged expert has been commenting against a stock called Wendt India.

Wendt India is JV between Wendt Gmbh (A 3M group company) and Carborundum Universal (A Murugappa group company which has Chola Fin, Tube Invest, CG Power, Coromandel etc).

Argument is about low volume.

Well, MRF may also have low volume. Does that mean MRF can be operated?

That is why considering the traded value which is price multiplied by volume is key; not only volume. Can you compare a stock that trades at 10 and a stock that trades at 10000 by just looking at volume? It will be fair if you add the price also in the mix.
If that part of considering the Traded Value makes sense then think about market cap. Company with 35000 cr market cap will not have same traded value as 1500 cr market cap. Should you expect same traded value despite having vastly different market cap? No.

Ideally, you should look at Tradable free float market cap. Two companies may have similar market cap but vastly different total traded value because free float is different. What is free float? Free float is calculated as stake left after removing the promoter and institutional stake. We like to look at tradable free float which is 100 – (promoter stake + DII + FII + Public with 1%+ stake). This is to remove all the holding that is in tight hand and arrive at more realistic picture. 12000 cr free float market cap will have much bigger traded value compared to 300 cr free float market cap even if market cap is similar.

Now let’s come back to our example of Wendt India. Market cap of 1806 cr. 75% stake with promoters and 6.79% with FIIs while DIIs are zero and no one has more than 1% in public shareholders. That means you have 18.2% as tradable free float. This is just 330 cr. Even if the stock trades just 1000 shares a day since price is at 9000 it is worth 90 lakhs which is close to 0.3% of Tradable Free Float. This is how you are supposed to look at liquidity and whether stock is just behaving as it should or something abnormal is going on.

Never fall for any authority but always try to understand why something is happening from first principles. You should always consider liquidity before taking the trade otherwise slippages will add up fast but do not start adding operator and all in your thinking.

Wendt India. MCap ₹1806Cr. CMP ₹9032 Tradable Float MCap ₹330 Cr 

Wendt India is a leading manufacturer of Super Abrasives, Machining Tools, and Precision Components. It is a preferred supplier for many of the automobile, auto component, engineering, aerospace, defense ceramics customers for their Super Abrasive Tooling solutions, Grinding & Honing Machines, and Precision components.

They have declared blockbuster earnings with highest quarterly numbers and stock in turn has reacted with huge volume big up move on dailies which led to SVD on the daily candle.

Such stocks are not generally meant for some 5-10% gains but they are good to add on dips and hold for 6-12 months to see the substantial gains. Since stock is from capital goods, a sector that we have been bullish since middle of 2021, it can do really well.

Do let us know what you think about total traded value vs volume and Wendt India in comment section. Which other sector from capital goods sector you like? Happy Investing.

Disclaimer: Posts on the platforms of BN are our perspective on the market. These are purely meant for learning purposes. The perspective provided should not be construed as investment advice or solicitation to trade. We may have positions in the stock mentioned. You agree to make no trade relying on the above contained information fully or partly. By using the content, you agree to these T&Cs.

Asking the right questions is the single most important ability the high achievers have. They have this, almost, magical ability to quickly figure out what matters and focus just on that. Let’s start 2023 with some questions.

• Say you are at ground zero in your life and can build from here the way you want, what will you stop first (Shiv ji)? What are the things that you will continue (Vishnu ji)? What are the things that you will start (Brahma ji)?
  
• Things that you decided to continue need increased focus and more energy. Let’s think of reasons why you started something? What was the drive behind it? What changed later on that you lost focus and energy for it?
  
• Do you focus enough on the things you have control over? Do you waste too much time and energy on things over which you have little to no control?
  
• Do you think enough about tomorrow to do something good today? Think how to spend less time next month on things that take an hour today? What if done this week can make your year better?
  
• If you were watched by ten other people will you still be spending your twenty four hours the way you do currently?
  
• What are your broad aims for this year? Do you have any understanding about how to get there? What are the systems and processes you will need for them to become reality?
  
• re you spending the most time with best people even if virtually? You eventually become more like who you spend your most time with. Do you spend more of your time with those who dare to dream beyond what most other people consider possible? Do you spend more time with those who give you bigger challenges to solve and ideas if you are already dealing with challenges?

Hope these questions and their answers will prepare you better for 2023 and beyond!!

Happy New Year 2023!! Waiting for your comments below.

Disclaimer: Posts on the platforms of BN are our perspective on the market. These are purely meant for learning purposes. The perspective provided should not be construed as investment advice or solicitation to trade. We may have positions in the stock mentioned. You agree to make no trade relying on the above contained information fully or partly. By using the content, you agree to these T&Cs.

Market is more like a forest. Everything is there. Some have seasonal impacts when they flower and give fruits and others take few years to come into that cycle.

You want to create your own garden picking seeds and plants from that forest. That garden is your portfolio.

You will plant some varieties 8-10 of them at least even if you just like one particular kind of rose. That’s because some diversity helps. And some or the other will make you happy with fruits, flowers or even shiny green big leaves at one time or another.

Whatever you have planted some of those plants will die and some seedlings will never turn to proper plant. That’s just nature.

The bad part about this whole exercise is whatever has to die will likely die first giving you heart wrenching agony.

The good part about this whole exercise of gardening was you knew some of those plants will die but those which survive if not cut by you pre-maturely will likely compensate for all that agony. In fact they will give you the reward of peace, satisfaction and happiness as they grow bigger with a lot of flower and fruits in times to come.

Question is will you be there with patience when it all will be happening? Or will you rather cut the growing trees in the fear that they might die as well in a while giving you more pain as young plants dying is not that abnormal but grown ones? That certainly is.

Waiting for your answer!

Disclaimer: Posts on the platforms of BN are our perspective on the market. These are purely meant for learning purposes. The perspective provided should not be construed as investment advice or solicitation to trade. We may have positions in the stock mentioned. You agree to make no trade relying on the above contained information fully or partly. By using the content, you agree to these T&Cs.

Stock market is game of probabilities. Just because something has higher probability to happen that does not guarantee the success still. For any guarantee you either need probability of 1 which is certainty of event happening or 0 which is certainty of event not happening. Our job as stock market participant is to add dimension, nuance, edge to increase the probability of stock going in our favour. Never take anything for granted and specially not in the stock market.

We have converted last year’s specific tracker for Deepawali picks to general purpose Deepawali Picks tracker.

You can access it here and it is publicly available.

As you can see if last year’s Deepawali Stocks were held till today you would be up by 140%+ on average and if you were little smart like did not wait for HIL, Vaibhav Global, GPIL to break down and managed to get out of laggards like Bharat Parenterals, Shree Digvijay and SHK you would end up with massive gains. Probably tripling the money in one year.

That of course was mind boggling and nobody knows what next year might do.

Okay. that was little bit of a lie. We did know what is coming for the year that has just gone by and some of you with us since then would recall it. In fact we said something to that effect in public too. You can leave your comment and feedback on below tweet. Thank you.

Disclaimer: Posts on the platforms of BN are our perspective on the market. These are purely meant for learning purposes. The perspective provided should not be construed as investment advice or solicitation to trade. We may have positions in the stock mentioned. You agree to make no trade relying on the above contained information fully or partly. By using the content, you agree to these T&Cs.