Everything works in cycle. There is nothing that works in straight line. Stock market is no different either. If you buy something at the wrong time then despite business being good and management being good you may end up with losses. Now value investors will tell you hold it for long term if everything is great. That is wrong because there is opportunity cost too. While your stock is in red other stocks are making more and more green. You have to cope with that too.
Ultimately there are no prizes for holding great business but only your profits can help you in paying the bills or buying something that you desire. All other things in market howsoever great must result into better returns. The only thing that should matter to you is your CAGR.
Should we share a fresh idea or you already have great ideas?
If you want then RT and Like! Spreading to others is paropkar here!!
See that above tweet? Clearly says RT and Like. Many people won’t be doing even that and some would do just like and come in DM asking for stocks. We are not asking for your kidney. If you can not RT and Like then do you really deserve the ideas and will not that be unfair to those who actually RT and Like?
Company is into business of manufacturing electrical installation products and components. You can click on the name above to see the product range in detail.
Let’s look at the price action of the stock which is non negotiable for us –
Every chart on website is clickable and you can then see it in large view.
This is weekly chart. As you can see stock is forming a reverse head and shoulders pattern. For quite some time even before corona crash came it was under pressure and trading below 140 level. Corona crash led to stock crashing from 130s to 50s. After that stock has been undoing all that damage and recently in Dec 2020 stock was able to made highs of 153 which is highest since Oct 2018. Clearly market participants are not averse to this stock anymore. But there is no clear likability for the same either as of now. In early March 2021 stock again attempted to break out of that consolidation but it failed but you can see the large volume.
It looks like bullish sentiments are subdued due to selling by Sundaram MF which had during March 2020 5.62% stake which has been consistently reducing and currently is near 2.67%. This selling may keep stock under pressure for sometime or if buyers prevail then seeing the run MF house may exit quickly. Not much downside visible from here thus.
Even though it is barely 200 Cr MCap company the float is large in terms of percentage. That means significant desirability to own the stock must be there for it to move big. If there was same money chasing few shares then move it will likely be bigger.
On normalized basis you can expect it to post the EPS of ₹16-20. Even from valuations perspective there is no outrageous situation.
It is looking good in the range of 120-130 although momentum will come only once stock is able to sustain above 145. It may happen after few weeks to 2-3 months and that is hard to say.
Clear red line below which more pain may ensue is 116 on daily closing basis.
Do your DD and run it through your checklist. Let us know what you think about this idea.
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.
Neither every great company is great stock nor every bad company is bad stock. There is time for everything and one has to be able to discern one from another. PSU Banks are in interesting phase and you can gauge that by first SBI having multi year break out and later we also talked about Bank of Baroda which is part of Tracker too.
PSU Banks are story of under ownership. Thing about under ownership is slight change in perception can result into big moves and that is exactly what happened right after budget.
First let’s talk about why we are talking about PSU Bank ETF.
What is ETF?
ETF stands for exchange traded fund. Which means you start a fund (have a pool of money) and tell the investors broad rules what you are going to do with capital and then a unit of that fund is traded on exchange like NSE/BSE. That is why they are called ETF.
Now as the name suggests PSU Bank Bees ETF means an exchange traded fund which puts money in PSU Banks.
We are talking about this ETF because PSUs are hard to differentiate barring the bigger ones. Smaller ones give big moves but are hard to figure out to raise the comfort level. That is why this ETF can help us if we are taking a big picture move call.
Company
Asset %
State Bank of India
31.67
Bank of Baroda
15.30
Punjab National Bank
14.68
Canara Bank
14.20
Bank of India
5.64
Union Bank of India
5.43
Indian Bank
3.50
Indian Overseas Bank
2.23
Central Bank of India
2.13
Bank of Maharashtra
2.10
UCO Bank
1.57
J&K Bank
1.26
Data as on closing of market on 28th Feb 2021
How to read that table?
Say you are putting ₹100 in this ETF then ₹31.67 of that will go to SBI, ₹15.30 in Bank of Baroda, ₹14.68 and so on.
Basically you will be saved from going through the haystack to find the gold pin and you are just buying the whole haystack because you know it is highly likely pin is in this pile.
That is about ETF and why we are approaching it this way. If you have more questions you can ask in comment section.
Let’s get back to price action again. There was a good resistance around 22 that has now turned into support according to law of polarity.
Hope you are liking these new charts that we are putting out. As always you can click on them to zoom in.
Why do we like PSU Banks –
Structural shift in government thinking about economy and business ownership.
Privatization of few PSUs can be trigger.
ETF is at support .
50 SMA is just touching it .
Valuations are low and there is under ownership in this segment.
Institutional investors have started looking at PSUs positively and in our understanding this can not be some few days event which gets over soon as many value investors with 12% CAGR aim are portraying it as. Granted it won’t be straight line move either but when was the last time it happened in any stock either?
If you are in SBI/BOB and are happy then fine. Otherwise for easier management one could just get out of those two and get in here or even otherwise if you find the story behind the PSU Bank move compelling then you can have a look at it.
Looking good in the zone of 22.5 – 24.5 with SL of 21.99 on closing basis. Do not hurry here and this trade by definition can not be rockets. But over the period without you realizing it can give significant returns.
Let us know your thoughts in comment section.
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.
Every trade, you take or decide to give a pass, is an experiment. After every experiment you gather some data points and make observations based on that. Over the period these observations make you better in finding right and highly rewarding trades at low risk entry point. Today we will be talking about three textile plays and what lessons we can learn from them.
It was Dec 08, 2020 and market was not giving any clean signal but there were certain emerging trends. One of these trend was textile stocks doing good.
We posted this chart for Arvind Fashion back then at 150
Along with below comment –
Look at how it has panned out and correlate it with what we said above –
Next we discussed Indo Count trading at 160 and below chart was posted –
It had stop loss of 147.5
Here is how it looks now –
After hitting stop loss if you did not exit stock gave good feeling for few days since it rallied towards 160 but only to disappoint later and now trading as low as 120s.
Third stock that we discussed has textile in its name although it is more of other business than textile – Century Textile at 390
This was the analysis posted for Century back then –
How are things now for Century Textile –
Stock went very close to our SL and reversed. If you are day trading then you can not have that deep stop loss and as a result you will hit stops very frequently which may even demoralize you to accept the long term value investing dropping your returns from 30% CAGR to 15% CAGR if all goes right with possibility of worse can always happen.
Century Textile is example illustrating what we tweeted today –
We are not day trader. We do not do Intraday, BTST or F&O kind of stuff. For us timing matters but we are not paying any price for that and just need to be vaguely right.
That is the edge and superpower we have got. Know the game you are playing. And play it well.
This is why we do not have to know exact bottom or top or exact price movement at any specific point in time. All we need is broad direction with ups and downs and we will make good money.
Notice that ICIL hitting our Stop and then exit was best strategy because now stock is well below that level. While other two ideas are doing fine and still developing on upside.
We did not post the analysis of ICIL because it was a simple snake pattern which members are familiar with.
Lesson – Follow the process you have. If it says you are wrong then exit. Do not argue and try to find justification. Before trade starts accept the risk and imagine you are going to lose in this trade and now take the trade. Market is probabilistic game and nobody knows what might happen in next trade but over all if you have got good process with edge and executed well then you will come out as winner. It is not about individual trades as much as about over all how you have done over 3 months or 6 months. Hard for most people to get this mental framework specially those who believe they know better than most and based on their understanding of business of the company they also know what stock price must do. Accept your ignorance. To save you from catastrophe you have the red line of stop loss in every trade that you take. But if you believe you are some superior human who knows what is going on then why would you need that red line of stop loss. Because you already know everything about stock and there is no risk. Result will be enormous pain and big drawdowns in portfolio while delivering sub par returns.
Impressive thesis, high conviction, deep analysis, scuttlebutt, High IQ tweets may sound great but if they are not able to translate into returns at portfolio level then they are clearly of no use.
The only way to judge the performance of any market participant is Portfolio CAGR.
Given a choice what would you like to be – Investor 1 or Investor 2? Tell us in comment section.
Is anybody immune to mistakes? No. Everybody makes the mistake.
Why are we then talking about mistakes if everybody has fair share of them and it is really normal?
Because, we are not everybody. Analysing the mistakes is important to get the things right in future. To make things better.
We are the aggregate of our mistakes – for good or bad. Then why not analyze and make the mistakes count for something.
Mistake 1 – Balaji Amines
Click on chart to open it in new tab and see the details in bigger view.
We could not have shared this trade when stock first broke out of pre corona level on 25 June or right after that because this platform was non existent back then. We could have certainly shared this in early August when stock crossed the just made high of around 600 or right before that when stock came out of flat horizontal line on Aug 3.
Finally that big green bullish candle made on 17 Aug woke us from slumber and we shared it first on 795 on 18 Aug. Stock after that ran to 990+. That was clean 25% move in no time. After that stock corrected big to 800 levels again and started forming that bullish base highlighted in black horizontal line. Again we shared the idea, with pro only though, at 795 in early Oct. It was shared because stock was trading near 20 SMA, 50 SMA and also formed a bullish base as support and likelihood of making quick up move from here was more than going down. With stop loss of 726 it was a risk of 9% with upside of 40%+. So you can say low risk high reward chance and we took that trade.
Stock made new highs of 1050+ this time within 40 days. Good move and after that correction came. As highlighted in that circle stock was again trading close to 20 SMA, 50 SMA offering low risk high reward trade. But we failed to take benefit this time. Another mistake was while we did post that it is likely to run from here having crossed 955 we did not put specific details for trade either in public or pro.
Both Amine players firing big. #AlkylAmine to consider stock split in next meeting. #BalajiAmines may start firing soon. Duopoly market of Amines. For medium term Balaji Amines looking even better than Alkyl Amine.
This mistake has cost us anywhere from 40-50% within a week. A costly mistake by all accounts and specially if you understand everything about idea and know that it is going to fire. Balaji Amines was up by 65% from 795 where we shared it twice if you take highs and currently is up 40%+.
Mistake 2Dixon Technology
It is atmanirbhar bharat poster boy stock. First shared on 14 July which is when this platform came to public so you can say it is better than Balaji Amines in that sense. Shared at 6366 and since then stock did not look back and with some corrections here and there stock continued the upward journey.
First major correction came in late Sep along with market and it was a steal at around 8000 as highlighted by circle around point 1. Main reason was stock trading near 50 SMA. Next chance was at point 2, when stock again touched 20 SMA/50 SMA both, affording another low risk high reward trade. Finally which is actually a no brainer trade is point 3, here stock crossed previous high flat line and pulled back near 10000. Since we are not value investor we can not take refuge saying it was overvalued. Value for us is in terms of price action which clearly was there.
How costly these mistakes were? From 8000, we missed 100% run. From 9000 we missed 85% run. From 10000 level, we missed mere 68% run.
A good 65%-110% move missed. 3 months and 110% move missed. Stock is up by 150% from 6366 where we shared it first.
Mistake 3 IndiaMART Intermesh
IndiaMART has been one hell of a trade so far giving blockbuster returns second to none. Not even Laurus Lab could beat it.
We shared it first on 22-23 July around 2244. You can see the big volume bars and not so big candle moves. Moves were actually good enough but since then stock has made even bigger points move so it is looking smaller on chart. Stock has done exceedingly well since then.
For a long time almost a month since Nov stock was trading near 50 SMA and should have been added. If not then as highlighted by first up arrow it was a clean buy as volume shot up and stock made big candle upmove coming out of flatline. If even this was missed second chance was to add on second arrow when stock broke out and made new all time high.
Both chances missed. Stock has made 40-55% move since those two misses. Quite costly looking at it now.
Stock if taken from highs is up by some 240% and currently up by 232% from 2244 where we shared it first. People may spread the canard that those looking at screen can not find opportunities early and value investors would have it first but that is a lie. They are talking about their limitations when they say such stuff. These three mistakes are notable because all three are from structural themes which we identified early on and have been aware about them all along. If something new pops up and you miss it then that could be forgivable but such trades should not have been missed which are part of already identified big themes. That is why we discussed these three only.
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 is wisdom in the crowd. Sum of the parts becomes better in such case and beat any individual brilliance. That is the idea behind market. Batters of free market idea, including us, rely on this fundamental concept. If you see the crowd there is everything – utter madness, stupidity, mediocrity, brilliance, godly wisdom. But if you aggregate these vectors then most of the things cancel out leaving the wisdom of the crowd which does not suffer from individual issues. That is why most of the time you are better off trusting market – the price action that you see on screen.
Let’s look at this chart of Dr Reddy – CMP 5229. MCap 87,000 Cr.
For better visibility you can click on the chart and it will open up in new tab. Applies to all the charts that we share on website.
7 Point Price Action Story –
1. Stock made top alongside all big pharma names in Indian market .
2. Stock declined and tried to take support and looked like it can bounce from here and many Individual investors make this mistake and get stuck for years, become long term investor. Do not do that. We will take a zoom at this point later.
3. This is where actual bottom was made and bad news is it would be hard for anyone to get this right. But good news you do not have to know the exact top and bottom to make returns which will be great.
4. This is where stock attempted to make the upward move but failed just touching the previous base.
5. Stock went into mode which could benefit. Once stock crossed that Pink line on chart it was well above MAs and 50 SMA above 200 SMA signifying return of momentum. But soon corona came and stock went to as low as 2500 from 3300 – a 25% drop from the peak which is much less than the wider market. This is a sign of what lies ahead. As and when market bounces you can expect this will be one of the first few big liquid name to do good. And this exactly what happened. In April starting stock was trading above 3300 which was pre corona highs. Soon stock started challenging the previous high made in 2016.
6. Stock did eventually crossed the previous pharma bull high to make new high and then at point 6 it retested as highlighted in the chart. This is where the news of Sputnik V vaccine and DRL’s role was published.
7. At this point around 5000+ stock is a buy for core portfolio as it has made new highs and is a pharma name. On top of all that it is vaccine play so even if market breaks down it will have much less impact on this stock. Also, in previous corona fall while market fell much more this stock fell only 25% signalling the relative strength. This can be a great stock for next 1 year or so to have in portfolio. You can avoid putting SL too and exit whenever you like based on other considerations as opposed to SL.
Let’s zoom in at point 3 –
When you see left hand side is half mountain followed by a big red candle(a big drop) consider it as game over of this run. Do not attempt to buy such fallen stars thinking that you are getting same stuff cheaper now. You will be repenting the decision of buying here for years and in many cases price may not recover ever. You can find many such examples for this pattern. In such cases just sell and forget about the idea for few years.
Let’s get back to Dr Reddy and how things are. Question is how would any individual know that there will be any vaccine talks after first half of 2020, how would anybody know that Dr Reddy will have role in that? If nobody could have known this then how such a big liquid name fell only 25% while market fell as much as 50%? And then within some 10-20 days stock made new high while market was still languishing? If this is not the perfect example of wisdom of the crowd that market is, no idea what else could be.
If we go global and try to see this concept and how market is able to price in information much ahead of any official inkling of what is going on then there are several examples. Let’s look at few of those here.
Moderna was one of the few stock which ran as much as 60%+ back in Feb 2020 signalling what we would come to know much later. Bill Gates had guessed that possibly 2 out of seven would be good enough candidate for vaccine and market has priced in very early who these two will be in Moderna and BioNTech. That is what market does. In Oct 2020 much before any efficacy data for vaccines was released Pfizer and Moderna ran hard. No way anybody could have known that 95% efficacy is going to come out in early November. But market did price in even this information. Hard to make the case that anybody could have known if President of USA did not know it while all of this was being done in USA only.
If you look at 6 Nov when efficacy data came out, Pfizer is up by 9% and at one time as much as 23%. On the other hand Moderna still up by 93% since that day and at one time up by 130%+. What explains this difference in rise? Another perfection from market.
The difference was in case of Moderna vaccine people who were found with severe symptoms after taking vaccines have not really taken the vaccines but placebo(no chemical impact but told to person taking that it is vaccine to compare this with person who actually took vaccine). But in case of Pfizer, total 10 people reported severe covid – 19 and one of those has got the actual vaccine while 9 were under placebo. So not 100% protection in case of Pfizer. That is why Moderna ran so much more than Pfizer. And market did all this and priced it before any of this information came into public domain. There were many big Pharma such as GSK, Novartis, Astra Zeneca, Sanofi, Merck and of course Pfizer among many who were trying to develop the vaccine. But market was backing (by rallying stocks) only Pfizer, Astra Zeneca and Sanofi. Now we know the actual status and how it all turned out. Market had given its verdict much before experts could gather information, analyse and announce officially.
If you keep track of so called experts and their predictions you would see how wrong they are. But then who is doing that. Wisdom of the crowd is a process by which democracy functions, market works and many other smaller example. Market is not some Newtonian mechanics instrument where you can change one variable and controlling for others you can figure out the impact. Neither economy works that way nor market. And that is why most economists have horrible track record of predicting things and so is the case with market experts. These are multi variate systems which are called complex adaptive systems(CAS) which follows chaos theory. In this whole lens of CAS, central idea is you can not predict anything in advance but be nimble to change your response as reality unfolds. So you have to accept your ignorance and stop making any prediction and then you stand much better chance to succeed both while managing economy and as market participant.
Price is the reality and everything else is the opinion. Nothing matters if you are consistently wrong about the prices. You can be logical, analytical intellectual but it does not count for anything because participants are human with emotions. So forget everything focus on what market is doing and see how that can translate into reality. Market discounts the future not the past or present. It could be wrong but mostly it will be right about how future can unfold. Whenever it is wrong market is fast in making amends and does not take much time to correct things to reflect the alternate future.
Let’s take another example and ultimate one which is much researched to understand wisdom of crowd concept.
January 28, 1986 at 11:38 AM Space Shuttle Challenger took off and only 73 seconds in flight it exploded killing all seven members of its crew and fell into Atlantic ocean. A major embarrassment for space program of NASA and USA.
Then US President Reagan appointed a commission known as Rogers commission. This commission had members such as Neil Armstrong (first human to walk on Moon), Richard Feynman a Nobel laureate in Physics (not some political Nobel in Peace, Literature or Economics), Sally Ride first American women in space, Charles Yeager who was a legendary pilot and first ever to cross the sound barrier in level flight. Charles Yeager was the first pilot to cross the sound speed of 1 KM in 2.9 s while flying. He flew so fast that it took less than 3 seconds to cover 1 KM or more. This commission worked over five months and finally submitted the report. It found that O – rings were at fault in this disaster and there were four contractors who supplied O – rings that were used in shuttle.
Feynman demonstrated that O- rings were at fault by putting them in ice water. It also revealed that NASA manager did not understand the basic concepts such as Safety Factor and this got revealed due to Prof Feynman’s investigation which was becoming pain for Commission and Chairman Roger mentioned this in public too. You make a bridge on which 1000 KG weight can be carried but in reality you estimate that only 250 KG at maximum will ever be taken on this bridge. So Safety Factor here will be 4 (1000/250). But say you took 250 KG weight on it and it cracked. There is no collapse yet but crack. This will mean the Safety Factor is zero here. It was not supposed to crack till 1000 KG but it did at 250 itself. This is what NASA managers got wrong. Feynman during this episode remarked,” For successful technology, reality must take precedence over public relations, for nature cannot be fooled.”
Let’s get back from fascinating subjects of space travel and shuttles etc. So it was 1986 without internet and certainly no social media, no WhatsApp, no Telegram. Event was televised but nobody had any idea what has gone wrong and why.
How long do you think market took to price in this disaster? Think before reading further.
Market did not wait for report to become public. It did not require submission of report. Forget submission it did not require the demonstration done by Prof Feynman either. All of these things took months.
Market actually priced in this disaster by 11:52 AM on the same day event took place barely after 13 minutes. That’s right. Market did not take even 15 minutes to price in this event. One of the four contractors of those O – rings was Morton Thiokol – a public listed company on New York Stock Exchange.
After 13 minute of that disaster NYSE had to halt the trading in Morton Thiokol as stock had hit the circuit and once opened it was down by 6% and by closing of the day it was 12% down.
If you take 3 month average volume that day it was 17 times more traded. In other three contractors – Lockheed, Rockwell and Martin Marietta fall was much lower and volume too was much lower. You may want to argue that NASA and people working in Morton Thiokol knew about this but then you can not explain away the 17x large volume and no insider trading issue was found either. All of these findings were published in a paper by Michael T. Maloney and J. Harold Mulherin in 2003.
Your head will start spinning if you know that market cap of Morton Thiokol reduced by around $200M on that day by closing and this is what they had to pay in terms of settlements, damages and lost future cash flows in reality later. How’s that for market pricing in the events in real time?
This example demonstrates that what took months for some of the brilliant minds of that time as part of Roger Commission to investigate and establish the cause of disaster, stock market which works on principle of wisdom of crowd did it in matters of few hours. And that too without any Scientists, Pilots, Astronauts, Physicists, Nobel laureate, Air Force Generals etc.
If you are interested you can research more and share with us what you find.
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.
This is archived post of Quess Corp which we did for BNP Pro members at October end. This is just to share how we thought about the idea and how it is working out. This is not a call on stock at current prices. Stock is already up by 18% from below 400 to 470+.
Update – Stock made highs of 725. Up from 400 to 725 in last 3 months. 80%+. If you want to learn and earn – Join here.
Here is a nice looking chart of Quess. A company owned by Billionaire Prem Watsa of Fairfax (same guy who has big stake in 5Paisa and other IIFL group companies, FairChem Specialty, CSB Bank etc).
Fundamentally very sound company. Today results came out which are more than decent. Quess also owns another listed company Allsec which by the way has interesting shareholder C Mackertich in public shareholders list. C Mackertich is same company operated by Ajay Kayan (Ajay Kedia shown in Scam 1992 Web Series) and had many cases against him and recently he got acquitted. A member of bear cartel from kolkata.
Anyway, as you can see in the chart stock is just trading above dead cat bounce level of 398 made on 29 June. Trading above 50 SMA and 50 SMA is well above 200 SMA.
As you can see by two pink lines the pattern closely follows the Binet’s formula. Do not get bogged down by the fancy name of Binet, it is just old pattern we refer as snake pattern.
You can see the range of stock price getting squeezed for a month now. Last time it happened for 2.5 months and stock did 380 to 450 in no time.
Then what is the catch here?
Catch is yesterday stock broke down badly. Opened at 403.30, made high of 407.95 but low of 364. But good thing is it closed at 403.85.
So broke down but recovered by end of the day. If it did not break down yesterday it would be much better.
Very low risk entry it is offering. SL can be 390 on closing basis which does not mean wait for next day to exit. On same day if around 03:25 stock is trading at 390 or below then watch it and exit in last 2 min if it stays below 390. Because next day it might open -5% or -10% who knows given the volatility.
It can work or fail in short time. It is unlikely to test the patience.
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.
In markets, nothing is guaranteed but over the period you can find some patterns and based on your experience you can see if that is repeated somewhere else. This is what price action about. Finding some patterns and watch them working, pick the abstract idea from there and apply elsewhere and expect it to work in similar fashion.
Today, we are going to talk about two stocks which have some electrical connection.
Stock 1 : Polycab CMP 942 MCap 14000 Cr
Company has been into business of wires and cables traditionally and promoters have a inspiring story of starting with a shop selling cables to have an empire manufacturing and selling it in many countries. But we do not get excited about the wires and cables as such. The story here is company is foraying into fast moving electrical goods (FMEG) which is sticky, high margin, low ticket, essential item, brand pull like fans, switches, lightings, water heaters, coolers, irons etc.
Very minimal debt, growing fast in FMEG space but currently not very high margin but margins are improving. Company is having good ROCE and already business is doing better than pre covid era. So yes things are getting better and now much better.
Let’s see the chart –
Company got listed in Apr 2019 and things were not really great for it technically as you can see in the chart but in Sep 2019 stock gapped up and did some pull back. This gap up took the stock above listing price and it just changed the things for it. Suddenly all those people who have been in loss who bought when it was listed are now in profits and with such a steep jump people do not like to get out early. Result? reduced selling pressure and stock crossing its previous high will invite the traders to build long positions increasing the buying pressure.
What happens when selling pressure reduces and buying pressure increases? That’s right. Stock jumps and start running. You can see from Oct 2019 at 660, stock did 1160 in Feb 2020 and corona sell off took it down. Post corona stock recovered quickly to 780 level but then sold off again to 640 levels from where earlier in Sep 2019 it took off. Once it crossed 780 again since then stock has respected that level and but did not do much either. Sell off in late Sep 2020 and Oct 2020 meant beating down for stock but it has respected 780 level well in both occasions.
Now earnings came out good and stock gapped up, stock well above 200 SMA and 50 SMA is above 200 SMA. As you can see by sky blue horizontal line stock broke out and then took support near 900 area.
And one of our BNP Pro members signaled towards it earlier few days ago –
Stock 2 : Elantas Beck CMP 2438 MCap 1900 Cr
We posted this chart earlier in telegram today to make a case for this –
Stock is doing classic 45° move since 2013 which is a long time although not as much as Asian Paints.
Now let’s zoom in the chart –
As you can see after the corona crash stock has been trading in a tight band of 2090 – 2450. Company came out with great earnings and that is why you see a big green candle a day ago. Problem is that came with not so much volume so stock may end up testing the patience. Also, stock is thinly traded very low volume. In such stocks once things get going there is good run. 50 SMA is above 200 SMA and stock is right on 50 SMA.
Company posted EPS of ₹26.69 vs ₹17.96
Expect the EPS to cross 100 within a year. Specialty chemical company, an MNC.
Focused on electrical insulation and construction industry. A beneficiary of of Atmanirbhar bharat theme if things in electrical appliances/electronic devices will be made more and more in India. No debt. 75% promoters holding. Historically avg PE of 27 in last 10 years.
Stock is making all the right moves technically(there is scope for improvement though) and fundamentally. Stock can be looked at with SL of 2102. Both these stocks have all the traits to be part of core portfolio but that does not stop us from trading into them for quick returns.
Please do your due diligence before acting on anything shared here and consult your financial adviser. Let us know your thoughts on these two ideas in the comment section.
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 has been rising for last 6-7 months relentlessly. Everybody is looking at next break out. People have almost forgotten about the sector, industry dynamics, business, how it is positioned in real life. But as we all know things rarely remain as they are. It was true in March 2020 when market was falling like it will go below zero. At least that is what people believed back then. Now people have forgotten that market falls too. But they can not continue to rise just like they could not continue to fall in March 2020.
At the outset let us make it clear that we are not really competent in commenting about the Index direction and so on. Few weeks back we were expecting more than 500 points fall in Nifty which did not materialize. One of the BNP Pro member in fact asked if he should sell all the stocks and buy them later when market falls but we clarified that nobody knows beyond a point what may happen in market. So do not sell but buying you can postpone and start getting out of weak hands and raise it as cash or put in strong hands. That fall never came. So if he had sold it would have been bad decision.
Anyway, let’s look at the chart of Nifty now.
In 2019 things were initially very optimistic and people were expecting upheaval due to impending election in April – May. What they were missing was just two months back in Oct 2018 market had corrected sharply to 10000 from 11700+ level and now it was time to rebound. And that is what market did. But right after results came in May 2019 and they were very clear who India wanted to lead the country people started building stories of various kind for bullish case. But market did opposite. It sold off from 12100+ level starting at July 2019. And went as low as 10600+ around Sep 2019.
After that market started rising again and as you can see market made high of 12300+ and that was Jan 2020.
Corona news started coming in and market became nervous and for a while people were taking it lightly like we earlier had SARS and how it did not matter back then and corona will be similar and what not. But come Feb 2020 and things started looking pretty grim. And market started falling like world is ending and there was mayhem in March 2020.
But guess what world can end only once and if that happens it won’t matter where market is so when market is acting like that we may nibble in because world is not actually going to end. Problem with this is you will never know if market is done with acting like world is ending or if there is more to it. So this nibbling in is easier said than done.
There were numerous comments by various market participants. Fundamental investors and value investors started by calling for ban on short selling and then went as far as asking to shut down the market and started taking support for this from some countries actually doing that. And then there were TAs saying Nifty will be soon at 4500, Bajaj Finance at 500 and so on. There was more realistic level for Nifty which as you can see on chart is third horizontal line around 8000 and once that broke TAs were looking at 6800+ which was Feb 2016 low. Of course it never came to that. And market on 23 March made bottom at 7500+ right when worst possible news came – nation wide lockdown and economy came to a grinding halt all of a sudden. Technically if you see 6800 was logical level for Nifty to find support because this is where Bull Run started in 2014 and this is where market found support last time in Feb 2016. But it did not happen. Which teaches us another lesson.
Market acts to put maximum number of people at maximum unease most of the time.
So if you see everybody is relaxed and market direction is taken for granted like it will continue to fall or continue to rise kind then you should take that as red flag. Market often changes the course at these points.
Fast forward and we reach to end of Oct 2020. Nifty has recently made high of 12000+.
Question: What is most likely? Nifty crossing its pre corona high and touching 13000 or going back to 9000?
To us it looks like it will be later – 9000 is coming before we ready for 13000.
Last 6-7 months have been very good for all and people have started taking it for granted. Looks like we are heading towards 9000 in near term. Markets are priced to perfection at this point. One bad news but nobody knows what it could be but even small bad news will mean too much for market and it will start correcting. Almost similar movie played out in 2019 for India around election result. If something similar plays out in US market due to election then likely it will have wider impact and Indian market will fall too. But this is just conjecture and does not mean much.
Why 9000? Not very scientific reason as such but this is high of Feb 2015 and Sep 2016. Looks solid to act as support. But as we earlier said once market start falling everybody will quickly realize 9000 is support which will likely negate this so we may see some correction beyond 9000 too. May be it could be as much as 8000? May be but can not say anything now. But certainly we are unlikely to breach 23 March 2020 level on downside simply because we are not going to see such a strong and compacted news flow which is so negative as was the case in March 2020 due to corona. Ask yourself if market corrects big time then will it matter whether it went to as low as 9000 or 8000? To us it looks like direction is materially more important and rest we can take it as it comes.
In Summary, we are likely to see Nifty at 9000 before 13000 comes. Even 9000 may not be respected and it may go down further to 8000 but we are unlikely to breach 7500. That is the thesis.
Now let’s assume all of that is divinely perfect and we know beforehand this is what will happen then what should we do sitting here at this point in time?
Here is 5 point action plan for this –
Stop buying anything new.
Be very selective in adding anything more.
Start getting out of weak positions and they could be weak for whatever reason. You decide. Raise cash or go in safe heavens at very attractive price. Prefer raising cash.
Keep raising cash and soon others will come to realization that market has changed the direction. We will by that time be out of almost all the positions barring something like Reliance may be.
We will wait for 9000 or so and then start looking very closely at individual stocks and build it back from there.
We are not going to wait for SLs to be hit to exit because that would mean giving up gains and some of our own money. Trail even the positions where you made big money and have some rule like 10% fall and you will exit or 15% or whatever you feel is suitable.
Together we can possibly come up with much better way to handle this and we can learn from each other’s experience.
Let us know what you think about it and how do you plan to manage things going ahead.
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.
Pharma has been the flavour of the market moves right after the last week of March 2020. There were talks of global supply chain derisking itself from enormous risk due to unsustainable dependence on China. Indian Pharma listed space started buzzing after 5 years of clear downtrend. There were businesses which doubled the topline and PE shrink to great extent and all of these stocks started firing.
One of the stock that caught our eyes early on was Alembic Pharma.
In last 5 years Alembic Pharma has: – 3X profits – PE drops from 50 in 2015 to 17 at CMP of 760. This is after sharp run in last 2 days resulting in 20%+ upmove.
That was on 25th April.
Now let’s look at the chart –
On Apr 23, it crossed the Corona Top and within a month went as high as 900. A sharp move. After that stock consolidated and in July upmove resumed and stock crossed 1100 but could not sustain.
Since then stock has been in two minds and it could not rally and what is even more astonishing is that company is posting blockbuster results and PE is near 18 only.
Then question is if everything is right then why stock is not making move? Why market is not enthused about it anymore? Granted not all pharma stocks running but this has corrected and has been in range for quite sometime even with great growth in the business.
For FY21 company has guided for 60 Rs EPS and on lower side with 20 PE that translates to 1200 for a share. But there is but management has said that even with massive capex they will be doing 50 Rs EPS in FY22. Net Profits degrowing by 17-18% that is what management has guided for FY22 as compared to FY21. That is why market was not really enthused about it in short term. Another thing is promoters selling it to buy more of Alembic Ltd. That has created massive selling pressure which buying is not able to handle and move the prices up.
Alembic Pharmaceuticals Limited, Q2 2021 Earnings Call, Oct 22, 2020 from TIKR.com
Does that change anything for the stock in medium term or more? No. Does that change anything for other group companies? No, but evaluate them on individual basis.
We conducted a poll to see what BNP members think is source of inequality. Whether it is wisdom that is leading to inequality or it is simply wealth. This question of inequality is a flash point for most where some see inequality as the result of oppression, evil intent of elite while others see simply it as the consequences of choices made by individuals.
Results were surprising and it was a tie –
What is the bigger issue of inequality –
— à¤à¤¾à¤°à¤¤à¥€à¤¯ निवेशक || Upgrade Your Life || (@BhartiyNiveshak) September 25, 2020
May be that was because the question was not really clear so we put out another poll and this time since question was more clear not surprising that largely people went with option of wisdom leading to wealth.
What do you think is more correct?
— à¤à¤¾à¤°à¤¤à¥€à¤¯ निवेशक || Upgrade Your Life || (@BhartiyNiveshak) September 25, 2020
Now let us see – can someone believe that wealth leads to wisdom in general or there is more evidence to say that it is generally the wisdom that leads to wealth.
Wisdom is the source of wealth not the other way around. You can lose your wealth in some accident or something that you do not control like an act of god but if you have wisdom you can regain it by working hard and upskilling yourself. For those without wisdom even if you get wealthy you will lose it. You can see that into lottery winners and even winners in shows like KBC, So if you are very benevolent and hurt by poverty and inequality in society and decide to drop money via helicopter it is going to solve nothing. People will spend it like the world is going to end tomorrow and even get some vices with new money. There is no way to be wealthy other than hard work, perseverance, upskilling and integrity.
Take the example of Mukesh Ambani and Anil Ambani. Both are the son of same father, raised in same house and if anything Anil being younger might have got better facilities because by then Dhirubhai Ambani was getting wealthier.
Anil Ambani was the face of the business while Mukesh Ambani was working behind the scenes managing the organization and even built RCom. After the feud, Mukesh Ambani got oil and gas, petrochem, refiniery – all old economy businesses. Anil Ambani got new age businesses of Financial Services, Telecom, Electricity. Anil got into entertainment industry by buying Adlabs in 2005. By 2008 Anil Ambani was 6th richest person in the world with $43B net worth.
Come 2020, Anil Ambani has net worth of zero and is saddled with enormous debt while his crown jewel businesses generating cash are sold already. On the other hand, Mukesh Ambani is 6th richest person in the world with net worth of $84.2B.
Where did things went wrong for Anil Ambani and right for Mukesh Ambani?
This could start with understanding, vision, discipline and values of the two brother. While Anil Ambani went for quick money which meant debt, Mukesh Ambani resisted this urge and focused on long term value creation. Mukesh Ambani decided to get into telecom business after non compete agreement with Anil Ambani ended. This only made the matter worse for Anil Ambani further.
Mukesh Ambani bought $52M jet for his wife Anil Ambani bought $80M yacht for his wife. They both shared same house amidst these disputes till 2012 when Mukesh Ambani shifted to $1B worth Antilla, Anil Ambani was building the house for himself of same value.
If you do not have adequate income sources and you still compete on lifestyle like this where will this end? Yes, you guessed it right. In bankruptcy court.
That is what went wrong with Anil Ambani.
Anil Ambani almost went to jail for failing to pay 550 Cr dues to Ericsson and then elder brother Mukesh Ambani came to his rescue and paid dues on his behalf. Anil Ambani thanked his elder brother for this.
The point of this story is it is not the wealth that can give you wisdom but wisdom has much higher chances to give you wealth.
Law of the nature is inequality; not equality. It punishes the fools and even obliterate their next generation altogether while reward the better evolved adaptable. That has been always the case and will remain so. With advent of technology, inequality in wealth is going to rise more. That is the law of nature, better will come up eventually.
Leverage is at the heart of inequality. In early centuries only leverage was labour and managing that was difficult because you are very close to mutiny, mob eating you alive if they get angry at you. Making other people follow you is a difficult job to handle. So there were not many who could use that leverage and get rich. Thus inequality in wealth was low in that era.
Then 17th Century onward, more and more people were able to use money as leverage because here scalability is high, you do not have to manage a lot of people. If you learn to manage capital you can do it with more and more capital. With this inequality in wealth increased. Thus you will see bankers getting ultra rich and in corrupt places politicians too. Do you wonder where does this leaves India given how rich politicians and bankers are in India? Work that involved handling of money ensured that people doing such work at the top got enormously rich. But even in this you need money to begin with. So there are some limitation to this leverage.
And now we are in the age of infinite leverage – technology as leverage. You can sit far away from big cities and people with a computer and you can code, you can write, you can record. There is no marginal cost of production for extra copy of it. So new age rich will be tech billionaires mostly right from Steve Jobs, Bill Gates to currently Elon Musk, Mark Zuckerberg, Jeff Bezos. Inequality will be maximum in this new era. Ironically this new form of leverage is most democratic and egalitarian. Nobody requires anybody’s permission to use them and succeed. For labour, others had to follow you. For capital, others had to give you the capital. In technology, nobody has stopped you from coding, writing and recording. It is only you and your skills that are on your way as obstacle. In that regard, technology as a leverage is a greatest equalizer which will also result in greatest contrast between the people and in wealth inequality.
Few centuries ago, everybody had to work on farms and there was not much difference in productivity levels between the people and result was there was not much inequality in wealth to speak of. Then we moved to money as leverage which meant some became more productive than others and result was inequality rose sharply. With technology as leverage, there is possibility of most inequality because now the productivity difference between the people is too high. There are 100x engineers but they are getting paid 10x only because society sees such high pays negatively. That results in dissatisfaction and these 100x engineers leave the employment and do something on their own and it makes them even richer. Much more than 100x that they initially were worth of. The great thing about this is nobody is stopping others from doing 100x work in the same 24Hrs that others have and succeed.
Achievement of others should be inspiring you but if you feel slighted by them and resent there is something wrong. Do not resent and envy seeing what all people have got. Work hard, persevere. upskill and see yourself becoming massively successful.
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.
