Bull therapy 101-thread for technical analysis with the fundamentals

[phreakv6]

Please take the following with a pinch of salt. Its probably not suitable for most people and I highly recommend not following any of this without consulting with some professional. The following could be a product of a lot of luck than skill

I look for everything - strong chart, turnaround and change in nature of business - either new products/geographies, new capex, sectoral tailwinds, and more than anything mispricing - this doesn’t just show in charts and there’s no way to figure it out unless you understand the nature of business really well. That’s why most of the businesses I pick are simple - only these I can understand intuitively. So it involves turning a lot of stones and doing a lot of work and has a very, very high rejection rate.

Most of these invariably are classic value buys, with growth triggers that can lead to momentum. So in a way you get value + growth + momentum. Its like potential energy with triggers that can convert it into kinetic energy (momentum). Sell strategy is hard. I try not to sell for the sake of selling, unless there’s a fundamental trigger. I don’t preempt but there are exceptions when there’s a better bet coming along, I switch.

I dont have a separate long-term portfolio, there’s only one portfolio (there are multiple family accounts but I have a unified view and single strategy across them) and 80-90% of it is churned (avg. holding period is ~6 months), as in any rebalancing strategy. I somehow relate a lot to this short poem by Tagore from “stray birds” and this is sort of the philosophy behind the strategy.

do not linger to gather flowers to keep them, but walk on,
for flowers will keep themselves blooming all your way

The 10-20% of the portfolio which isn’t churned are either long-term positions (mostly past winners as trophies of the trade which will probably never be sold) and tracking positions - these are small and if they don’t get scaled within 3 months, they are ejected unceremoniously.

This requires a lot of work on personal front more than any stock picking skills. It requires execution skills, position sizing and risk management. You have to be very patient but also nimble. It requires being on top of most biases - anchoring, endowment, recency, confirmation, euphoria/hubris, self-serving biases (“resulting” as annie duke calls it). It also requires a lot of tools to stay on top of things so you spend minimal effort. More than anything it requires you to not have a large ego and to be honest with yourself.

[Pheonix]

Sorry for being naive,But what is the range of stocks do u manage on an average at any point of time,combining all portfolios.

[phreakv6]

Continuing…

A portfolio should be treated like a sports team. Only the best get to play. I found this concept drilled into my head while reading Netflix’ Reed Hastings’ “No Rules, Rules” on how they fire people because they want only the best. They mean no ill will and these employees who get fired are still the crème de la crème of talent and they wish them well with a great severance package and industry loves these ex-Netflix employees as well (As an aside, I would have killed to hire a few last year but all I got were ex-gaana and ex-viacom - good guys but not the 10x guys I sought)

I felt that’s how the portfolio pipeline (or dugout) should be. The only businesses that get entry should be ones you will be willing to hold for much longer (If its broke, you get to keep both the pieces). The ones sold are also perpetually on the cards for a comeback if something will take time to play out or if valuation is back in favor. Only the best get to play on any given day and today’s best may not be the best few months down the line.

We tend to naturally glorify and sing paens of winners and resort to idolatory and hero worship. This leads to our heroes overstaying their use-by date. Also what helps teams win is not heroes but good players - I always liked Ponting’s team and how they took the '03 and '07 WC though on paper we had our heroes. I also liked the timing of Gilchrist’s retirement to Sachin’s. On the topic of timing, we must strive to time entries and exits like VVS, requiring least effort, almost zen-like. Only by trying we can at least get lucky

Any good thing when stretched to its extreme becomes an anti-pattern (tech guys will know). Buy-and-hold and Buy-at-any-price used to be good advice but have become anti-patterns. This approach of churning is what evolved naturally for me from poker and sports and quantitative momentum strategies. However, I noticed a bit of discretion and avoiding mindless timed rebalancing could do so much better, if ego is checked out

So managing a portfolio is like managing a team and who gets to be part of the team and playing 11 should depend not on how good the business is but on how good a return the stock can make for you and how certain you are about the return. You should have a sorted-list, like a leaderboard in your head on what those are, for any given month/quarter/year. Like playing the players best suited for the pitch and conditions, you must have the best present in the portfolio. There is a cost for switching stocks just like there is for switching players or for firing an employee - the switch should justify the price

It is also good not having any “notional” cagr or index-to-beat returns in mind as it limits how you approach the game. It is what Jayasuriya and Kaluwitharana did in the 90s for ODIs, and Bazball in tests of-late. When you don’t limit yourself to a "good score’ and do the best possible you can do, the results will take care of themselves. The only risk there is, is the risk of ruin - i.e going bust (strong selection process, adequate diversification and zero leverage helps)

Some of these are applicable even for long-term portfolio construction, its just the timeframes or the sport, is different. Apologies for the long-winded response as my thought-process in this is not linear and draws from several ideas and is still constantly evolving. In short, we should avoid the dogma that comes from different schools of investing and find what works for us and that requires constantly thinking and tinkering.

I am just a novice sharing what I do without filters. I do not advocate this approach and even I am not sure how long I might stick to it in its present form

[saurabh09]

Dr Agarwal’s Eye seems to be doing good lately. The sock is at its ATH with high volumes.

Mainly based in TN, the hospital chain has added 30 new centres in the last two years, poised for a good growth in FY 24 and beyond. this could be a good bet going forward. Comments welcome. Disc: not invested as of now.

[saurabh09]

KPI Green, fresh BO with high vol.

[saurabh09]

Disc: biased as I am invested. Not a recommendation for buy or sell.

[ishikaghose]

Thank you for sharing your approach. I was reading through an earlier post of yours where you mentioned that you exit at 10% loss. I hope I have understood that correctly.
A well researched stock, for reasons unknown, may show a ten percent loss within a very short time of buying it. How long would you wait for it to correct or would you sell as soon as it shows the specified loss.
I know exit strategies are difficult and I am trying to learn. Thank you

[ishikaghose]

Deepak Nitrite chart shows a rounding bottom. Am I interpreting this correctly?

[Maheshcm]

Do you know whats the scheme of arrangement between Parent company and listed? the parent company seems to have raised capital in parallel and is expanding.
what portion of revenue, and hospitals does listed part of business operate? It looks like a strange arrangement, what’s the best source to find?

[Worldlywiseinvestors]

Volumes are further increasing in the direction of the Breakout:- EQUITAS Sfb. Seems smart money is taking notice of the business.

Disc: invested.

[Mandar_Chatufale]

@Worldlywiseinvestors sir, did you check promoter holding for equitas? It shows 0 for now where as it was close to 75% in the prev quarter.

[Worldlywiseinvestors]

Hi

Due to reverse merger, as equitas hold co has been merged into EQUITAS SFB. Check shareholding pattern of EQUITAS Hold co.

Thus, it’s a non event as Banks are mostly institutionally owned entities where MD has ESOPS and small% stake. Similar to IDFC

[dj123]

Attaching weekly chart of prince pipe. The stock price has withsttod considerably well all the negative downcycle which started around early 2022. then from dismal results which included both margin as well as sales growth hit, the price has only taken 30 % hit. Now this quarter results hint at things going back to normalcy and future growth might only add to the bullish price action.
Disc: invested from lower levels
made a premptive entry so lost out on other oppurtunities
this might touch 4 figures if business remains good from here on.
@phreakv6 does it fit in your scan of technofunda ( trendline break+change in business output + low investor attention)
Best
Divyansh

[ishikaghose]

Everest Kanto Cylinders #EKC has been in a downtrend for many months now. Invested from much higher levels and looking for a silver lining somewhere. Does this chart show an inverted head and shoulders pattern between Jan 2023 and mid April 2023. Levels between 107.33 and 67.27

[ishikaghose]

On further reflection this is not an IHS pattern!

[cathene]

@phreakv6 Now what is your take on the declared results ? How do you read the segmental results declared by the company and technically how does the stock stand ?

[phreakv6]

@ishikaghose - I don’t have technical stops like those anymore. At least i cant remember the last one (maybe time technoplast was the last that triggered technically that i remember). It could just be that i have been lucky that most have performed but i have had a few fundamental stops that got triggered (HOEC for eg. twice last year) and KPT now.

@cathene - KPT my thesis appears to have been flawed. It might still do well subsequently but numbers don’t indicate what I had assumed. I still hold some shares to scale up in the future in case my thesis is still right (like in HOEC when it went wrong twice but is now eventually right)

Welspun corp, Monthly - 13 year rounding bottom. I believe this time it has enough to break the 300 barrier and reach beyond.

The company is guiding for a 15000 Cr topline and 1500 Cr EBITDA and 10% EBITDA margins and good uptick in RoCE to 16% for FY24. The order book suggests that guidance may infact be slightly conservative.

Line pipes business is doing very well having delivered > 1 million MT in FY23. The current order book is at 1.1 million MT in line pipes (14,600 Cr) and bid book at 2.5 million MT (ATH). So line pipes alone may meet the FY24 guidance if they execute this order book.

The installed capacity is 2.2 million MT, so there’s good chance that they could deliver higher volumes in FY24.

The rest of the businesses in Pig Iron/DI pipes used to transport water are also doing quite well as is the TMT bars and stainless steel pipes. (Source). They had acquired Sintex plastics business and ABG Shipyard as well at good valuations. Sintex market share has declined to 9% from 25% and the target seems to be to restore this business to past glory. ABG shipyard business is more an optionality at this point and I haven’t considered it in valuation.

I believe the stock is trading quite cheap at current valuations and a 8-10x EV/EBITDA multiple will mean there’s a chance to make a 2x here. Also the debt repayment from the 1500 Cr EBITDA should help reduce the interest burden and deliveraging will further improve the bottomline.

Disc: I have positions in the stock at 260 levels. I am not SEBI registered and could be wrong with my thesis. Please do your own due diligence.

[dinngap]

Thanks for the detailed note…but I do see the borrowing has doubled in the last year…

[r8b8]

@phreakv6

I believe the stock is trading quite cheap at current valuations

Hey, Current PE is 35.8 and if we remove the other income then it is trading at 47.8 times earnings. When you say trading cheap, are you referring to forward earnings?

[novice2014]

Why not it’s subsidiary —- WSSL ?

Might be a better bet with low float and no institutions….

Disc - holding from 17 odd levels.