This doesn’t address my question at all. I am not at all looking at opinions on whether falling stock should be purchased or not.
What I am interested in is this - let me explain with the help of your example stock itself.
Let’s say Divis stock fell from 1300 to 1000. At that time, you though it’s underpriced & good value for money. So now you bought 100 units of Divis Lab at 1000. Now in a couple of days it fell further to 950 - if you thought it’s undervalued at 1000, it’s even more undervalued at 950 - so you should buy more. Let’s say you buy more & it falls now to 800 in a few more days or weeks? You still buy more. I am not asking for opinions of whether to buy more as it keeps falling - that’s not my question at all. I felt at 1000 that this was undervalued & as it kept falling I kept researching it & I felt nothing has changed, so I am sure I want to buy more as it falls. However, I can’t buy 1000, then 990, then 980, then again at 970, 960, 950 … 900… 850 - I can buy at each fall. So I am looking at how to handle this.
What I feel is at every fall I reassess my risk of being wrong as new information comes
How many times I buy is dependent how much %you want to allocate to that business (say 10L you stop at that amount it’s luck only if it goes down more )
As I am long term investor for me 5 or 20% don’t have much meaning as I will be in it for very long time for compounding of intrinsic value
Only important thing is you r right about your decision
Practically in Divis I got second chance to average down but In Hdfc AMC only one chance was offered by market
If someone is sure that the fall is due to temporary reason not due to change in the fundamental of the company and it provides buying opportunity then one approach which can be applied here is use chart, buy at major supports at which there is tendency for the stock to pullback or consolidate. As the stock discuss is Divi’s Lab here is the example red boxes are the support region,also one thing to observe here is share price did not break long term upward trend line:
Thanks for the reply. This can be seen from many years of data on RoE and RoCE. Is it possible to check if company changed something to work with Low Working capital needs?
Also, how do you see Working Capital change (roughly) over long term just by looking at screener.in?
Just if you know then please reply.
https://www.ratestar.in/ shows the Cash Conversion Cycle across years in the ‘Financial Ratios’ section. It also shows RoA/RoE/RoCE for years alongside the CCC.
And about your previous question, yes, the more lower/negative the WC is compared to the industry average, the better the company is supposed to be in handling short term capital.
Yes, this is better. CCC can be viewed there over long term.
Quick ratio and current ratio on screener dashboard can tell us about Working Capital situation currently.
It is suggested to check if current ratio is above one or not. Whereas, in negative working capital situation, when it is working for the company, everything turn upside down. Can’t it be said that Current Ratio and Quick Ratio lower than one is also working for the company or will work for the company going forward???
Why to just discard those companies as a bad companies at risk. (When negative WC can work).
This is how I define Working Capital: Non-cash Current Assets (-) Non-debt Current Liabilities
In even simpler terms, it is the difference between how much the company is owed (Non-cash Current Assets) and how much the company owes suppliers/someone else (Non-debt Current Liabilities).
If the business has bargaining power, it can make it so that they are owed less and they owe more (Therefore a ‘negative’ Working Capital). Effectively, it means that the company is being paid to do business in the short term, which is a wonderful place to be in.
Remember, Current Assets included liquid cash/investments too, which is not a part of Working Capital (AKA regular business activity). Current Ratio measures liquidity i.e. How much the company can soften the blow during difficult times. Holding a lot of liquid cash helps. But of course, all cash has to be invested sometimes. If you think the management is not capable of redeploying the cash at good RoCE levels in the future, then it’s a different question altogether.
AGM is for shareholders of the company. So ideally you need to be a shareholder of the company to attend the AGM. But no document required, usually nobody checks. If the company is a large one, you can even watch it on the net as from this year, webcasting of the AGM is made compulsory for Top 100 companies by Market Capitalization.
I only meant that usually you don’t need to carry any documentary proof that you are a shareholder. But if you are planning to attend one, I would advise buying 1 share at least and being a legitimate attendee at the event, rather than a trespasser.
I have about 5 lakh rupees which is allocated for mobility. However, because of availability of OLA and UBER - I am considering to rather have that 5 lakh invested in such a way that my yearly mobility expenses which are expected to be about Rs. 50,000 are covered. FD would have been simple answer for it, however it would probably fall short on returns to generate Rs. 50,000 per year from 5 lakh. With minimum risk, I am looking for suggestions for investing this 5 lakh rupees as of today to generate approx. 45,000-55,000/year to serve my yearly mobility needs.
You can consider investing your 5L corpus in IndiGrid InvIT. IndiGrid pays out 12 rupees a year in four quarterly installments on every unit (FV 100). The units are trading at ~86 at present giving an yield of close to 14% before taxes.
Obviously InvIT is not as safe as a bank FD, so please do your due diligence before investing.
