@newrb I havent tracked PI Inds for a while now. But according to information provided by agrochem companies in their concalls, the global inventory for agrochem seems to be coming down and most of the company managements seem to be bullish in the next few quarters.
Hi Hitesh, Thank you for taking the time to answer queries. I wanted to pick your brains on purely the technical aspects of Avanti.
I was going through the weekly charts and noticed that It has fallen from highs of 3000 on low (ish) volume but the pull back from 1250 levels have been on HUGE volumes (highest in the last 3 years). What do you make of it?
Also, if possible, would love to see your EW chart count of Avanti. Thanks!
I had a look at the chart of avanti feeds. On the weekly charts it seems that the stock after having rallied from 440 in Dec 2016 to 3000 in Nov 2017 is now undergoing a probable a-b-c correction and it might have completed a 5 wave decline at 1232 and now might be going up to form the b of the zig zag correction. This may be followed by a c wave though I am not too sure about it. The 61.8% retracement to the whole above upmove comes to around 1400 levels which was breached briefly and stock went up quickly. If I were looking for a long term investment entry point I think i would be watchful and see how the stock price behaves in next few weeks.
Elliot Wave interpretation is a very subjective science and hence prone to inaccuracies. Hence it has to be taken with a pinch of salt.
Hi Hitesh / Ayush
Your views are invited…!!
I came across a company named Cerebra Integrated Technologies, which have major business in e-waste management. India being largest IT market, in-turns generate huge amount of E-Waste.
Keeping consideration of initiative taken by government about solid waste management. This company look to have promising future.
Some key point that support this business:
1>Business have good scope in India as Municipal Corporations and MNC’s have big challenge to deal with E-Waste due nature of waste and huge cost involved in process to decomposition.
2> Company also offer Refurbishment of E-Waste, which have good chance to make profit.
3> Business is not a cyclical play.
Few point balance on sheet
Sale is increasing
Profit is increasing
Improvement in OPM
Tax payment is increasing
Don’t have insight on Corporate Governance
Vivek Vikram Singh
@vivekvikramsingh Sorry to peep in but I had a brief look and would raise additional key risks:
- Cash flows are completely missing despite of high profit growth
- Dividends missing
- Tax payments are very low
- Promoter stake is very low
- Negligible fixed asset and hence negligible depreciation (why - does it fit with business model?)
Lots of red flags and hence caution advised. The above points have been high probability common characteristics of financial jugglery
There is already a thread on the company. I think we can move this discussion to that thread
Generally what is considered a good delivery % ?. I was looking at avanti feeds delivery for the last 5/6 days. (No holding and not planning to buy it either). It was very low around 15%.
Also looked at some of the pharma stocks. ( Fundamentally speaking people are talking about “worst is over” for price erosion etc. May not be true) . Not a very high delivery percentage. So it must be a hope rally or its just that other sectors are expensive and people buying it.
Whats your view on Deepak Fertilizers? They have a big capex going on which will boost their #s starting next few quarters.
@gautham1 Delivery percentage vary from scrip to scrip. Some scrips have traditionally had very high percentage delivery percentage as the intraday traders dont indulge too much into such scrips. In others which are heavily traded and in f&o delivery percentage would be much lower.
I dont personally attach too much significance to delivery percentage as for me its too complicated to monitor. I look at overall volumes traded and that often helps. e.g in case of a flag formation the volumes tend to dry up drastically and then pick up once breakout happens.
Regarding the pharma sector after a long long time it seems the sector seems to be coming out of the woods. Sun Pharma receiving the EIR is a big positive esp since it comes after such a long time. Once a sector goes through pain the business dynamics within the sector tend to get into an equilibrium mode and a new normal is established. I think pharma sector may be heading towards having some kind of business dynamics equilibrium. How far the rally lasts etc is anybody’s guess. But some of the stocks in the sector like Sun, Lupin (the ones that I often follow) do seem to have formed good consolidation indicating a short to medium term bottom. No positions yet except JB Chem bought some time back based on fundamental developments. (For a management which is exceedingly conservative they had according to FY 17 annual report done a big capex and this has been followed by more than doubling of MR strength. It might indicate management bullishness in domestic business of the company. Plus they also completed a buyback at 400 per share some time back.)
JB Chemicals has Revenue/Asset ratio <1 (Revenue ~ 14B INR and Assets ~17B INR). This is impacting RoE (Currently ~13%). It appears that the current capacity isn’t able to generate enough sales and hence creating additional capacity wont brighten company’s future.
JB_Chemicals.xlsx (282.8 KB)
Hi Hitesh ,
would like to understand how did you calculated the 61.8% retracement to 1400 levels. Did you multiply the high of 3000 to 61.8% ? But it comes around 1150. Would appreciate if you can confirm on this.
I have used the rise from 415 to 2940 and retracement comes to around 1380. The software calculates the exact retracement levels and I get to see the levels.
For calculation u calculate difference of 2940-415=2525. 61.8% of 2525 (magnitude of whole rise) is 1560. U subtract it from 2940 and u get 1380.
Ok , but I mean by any chance if you know the logic or formula for calculating the retracement level. How the value of 1380 got calculated from lows and highs value. Is their any algorithm or formula for it,
Sorry for the unsoliciated advice. Hiteshbhai has already provided calcuation of how to find the 61.8% retracement value. It is actually calculated for the entire up/down move of a stock and not from any particular top/bottom.
Request you to Google “Fibonacci retracement” to understand its importance pls. Below link also could be useful.
Nevertheless, would love to here it from @hitesh2710, whenever he has got time.
Hiteshbhai, which software do you use? Pls do let us know if it free or paid.
oh sorry , I don’t know how but I missed reading the calculation part in the post
I had a look at your excel sheet on JB chem. Thanks for that. I am not too much of a numbers guy and dont go into too much of excel forecasting.
I look more at the bigger picture and try to figure out triggers due to changes in the company.
These changes are often seen as softer signs where management personnel change , or a previously lethargic company suddenly goes for capex, or there is an effort at enhancing shareholder value by buybacks/dividends etc.
In case of JB chem, the older generation is now practically in retirement mode because of advanced age. Younger generation has come to the fore and first thing I find is some sort of aggression in terms of capex, followed by increasing MR strength aggressively and buyback etc.
I dont know when these efforts are going to bear fruit. It might take a few quarters or can happen earlier too. In that situation I have to define my holding period and my downside potential. I remain comfortable on both counts in case of JB Chem.
Regarding management honesty, I have tracked this company for years now and have seen them handling cash on the balance sheet without any signs of pilferage.
In the past too they had built a very successful Russian business which they eventually sold out to Johnson people and even then they rewarded shareholders promptly.
All in all I find the whole picture encouraging and hence the investment. I would give it some time to see how my thesis plays out and then take a call.
Dear Hitesh Ji,
Would it be OK to add a lump sum amount into selected stocks at this elevated value of Nifty PE or should I be waiting for a lower PE on the Nifty. Have been waiting for a long time
Regarding investing a lumpsum or waiting for a correction, the usual standard answer would be to avoid timing the markets. Atleast thats what most gurus including Peter Lynch have advocated. Lynch has said that More money has been lost in waiting for corrections rather than correction itself.
Practically also many a times it happens that even if markets correct some stocks and sectors dont correct too much because of strong fundamentals or tailwinds for the stock/sector.
In the current market scenario with some macro headwinds lined up I think one can take time to study the company in depth and have enough conviction to keep buying in small lots over a period of few days/weeks. We seem to be in a market which is apathetic to small/midcaps and that often provides opportunity to load up on worthy candidates for next 2-3 years provided one has done due diligence and has become convinced about the investment merits.
Most investors have the lurking feeling that once the large cap rally fizzles out there could be carnage in the small mid cap space similar to what happened in January 2018. Personally I feel if a company has done well in the near future with some positive developments/good results etc and future prospects appear bright and we are getting a chance because of market apathy to buy the stocks at decent prices then it makes sense to buy maybe in a staggered manner. Even after that the market tanks and stock prices correct then so be it. One cant be too bothered about market direction all the time.
Torrent pharma seems to be stand-out in pharma pack. It is now at new 52 week high whereas most of others are just recovering from the bottom. Even during this severe correction of pharma stocks, it did not correct as much as others. So, price performance of Torrent pharma is impressive relative to other pharma stocks. May be this is a sign of breakout and move higher or may be this variance in performance does not mean much. I am confused due to such price behavior. Your views please.
Your observations regarding Torrent pharma are spot on. In all the mayhem in the pharma space, Torrent pharma has stood firm and hasnt corrected too much. It has corrected around 35% from its all time high of 1770 to 1150 odd levels. Another one with good relative strength has been Ipca which has of late been making 52 week highs.
A lot of pharma stocks are showing some strength after a long time. Lupin, sun pharma, DRL, Auro just to name a few. I think it might be a good sector to play the bounce once the current rally subsides and stocks go into consolidation mode for some time.