Hitesh Bhai. Can you explain a little about how you time further allocation in already invested stocks. Suppose the identified business have been delivering results above expectation and the management’s tone is bullish and its already occupied a substantial part of your portfolio, how do you invest incremental money over it. Do you sit over the funds and wait for the company to come out with another set of good results or invest as and when you have cash, without being concerned about the timing.
I am not asking with reference to 6-8 months trading kind of bets, but serious long term ones.
It’s very rare to find businesses that keep delivering above expectations. So if we are smart or lucky enough to buy such a business, it makes sense to remain invested. Or if allocation has not already gone out of whack inspite of the run up, add more.
A recent example for me was laurus. Things started looking up for the company after q2 fy 20 results. This had happened after a few disappointing quarters. Q3 too was good. And q4 was when company crossed 100 crores (110 cr I think was actual figure) … And management comments continued to remain very strong. Market cap post q4 results was close to 4000-4500 crores… I had bought some shares post q2 and q3 fy 20 results. But as results continued to surprise, I pressed the load button post q4 results, because even annualising q4 numbers we got around 450 crores net profit figures for fy 21. (Hypothetical back of envelope calculations)… At that time I had put up a note on why I had bought laurus with 10-12 points on my portfolio thread.
In predictable business with strong tailwinds, we sometimes get such opportunities and at such times, it does not make sense to hold back.
I had allocated heavily to laurus, and that was a bet that was one of the bets that paid handsomely. I had similar experiences with companies like ajanta, kaveri, avanti feeds in the past, and that provided confidence to play such situations again to my advantage.
I am not tracking frontier springs any more. At first glance it did look interesting and I had bought a starter position but did not gain too much confidence about the business or the variables affecting it as well as promoters/management.
Results too have been erratic in past few quarters
Hitesh Bhai. what are your views on Rallis India. The recent March 2021 quarter has been decent and the year posted highest sales till date. Their 800 cr capex also seems to be on track. Considering the market cap to sales of 2, do you feel this one is worth studying closely? or its better to wait till good performance is continued for another 1-2 quarter. .
Namaskar Hitesh sir, u have been a guiding light for all the individual investors on VP, Thank you and i am grateful to have such a genuine mentor.
Just wanted to know your thoughts on metal sector specifically steel and aluminium whether it is a noise or a strong upward beginning of bull run cycle? Thank you in advance.
Rallis results have been difficult to predict. But last 4-5 quarters have been quite decent. I do not track it too closely but if they do concall, you can listen in and take a call.
The chart of rallis looks interesting. It broke out of its long term resistance of 290 in July 2020 and posted an all time high of 339 and then started retracing. It then seems to have formed a higher bottom at 244 and looks to be moving up. If one wants to consider investing for long term, one can keep stop loss of 240 or so. Currently it seems to be range bound. If and when breakout happens, it can provide good returns.
Steel and other metals sector has had a spectacular rally in past few months. Some of the stocks have gone up multifold. After such a sharp run up, I am not too sure about the merits of fresh investment in the sector. If at all one wants to invest, one has to study the individual company properly and then take a call. If the investment is based on technicals, appropriate stop losses should be followed.
Immediate concern is problems that could arise in production due to diversion of oxygen to medical sector for treating covid patients.
When the promoters artificially created a value it is hard to differentiate they are seamlessly making the efforts in showing up in the concalls or in balance sheet as well so how to differentiate between value hunting and value trapes .
Value investing most of the times works but sometimes takes lots of time , Hunting good candidates in 52 week high list works very well ( thanks for sharing your strategy ) however the runway of these are short and random . so how to change mental setup and watch different business attributes from moving to value buys to 100x or 50x or 20x ?
Every one has different strategy of selecting or zeroing in to the stock to whom he want a portion of the business . what i learn from my short span of experience only FEAR and GREED take the front seat to over the prices of the equities i may be wrong in my perception . Could you please share your method or procedure that How you gauge to which stock should take disproportionate bet or allocate more ? is it opportunity size , management , business dynamics or competitive landscape ?
regards
@hitesh2710 Hi Hitesh Sir. Thanks a lot for all your guidance on this thread as well as on VP, in general. You have been responding to many queries of the members which is always a great help.
I would like to understand your thoughts on Chambal Fertlisers. The company has received a huge pending subsidy from government which has helped them make their balance sheet very light. Their revenue has been growing steadily at more than 15% CAGR in last 3 years. In the same period, profit has grown at 49% CAGR. This expansion was mainly due to their newly installed urea plant at Gadepan. Considering all these positives, Mr. Market, so far, has rewarded the company well.
I understand that Direct Benefit Transfer (DBT) scheme would be a major trigger for the whole sector itself. But there has been no concrete plan of action from government since long and it still remains a mirage. Considering all of these factors, what are the next triggers for the company?
Please share your views on India Grid Trust NCD offering up to 8.2% per annum
The credit rating of the NCDs is ‘CRISIL AAA/Stable ’ by CRISIL Ratings and ‘IND AAA/Stable ’ by India Ratings.
@hitesh2710 Hello Hitesh sir, according to TATA Steel’s CEO T.V Narendran’s interview on CNBC TV18, there is only a fraction of the industrial oxygen i.e the liquid oxygen that can be used for medical purposes. This liquid oxygen is just an emergency backup in case of power failures or any mishappening. Hence, the diversion of this small fraction would not affect their production at all. Instead, they are more than happy to diver this oxygen, however, the major issue is the transport of it.
My question is, knowing this factor and that the steel stocks have moved after a decade, can I still ride this rally by entering the private and govt steel companies or should I wait for a correction?
I cannot understand the exact nature of queries. I wish there was more clarity in questions.
Differentiating between value traps and value buys. Its often very difficult. Most often one has to look at track record of these type of companies over the years. e.g Nucleus software, JB Chem etc type of companies at one point of time were cash bargains. At that time if you had looked at them they used to carry and augment cash on balance sheet continuously. No reduction/siphoning of cash. Only business was not firing. After a few years of this type of being a value buy both companies started delivering on business front too and that has led to multibagger returns who took the leap of faith early in both companies. It requires a typical mindset to be this kind of investor. Stock price often does not move for years while you see the whole market and most stocks move up a lot. You need the patience and courage to hold on. Its a difficult thing to do and needs special temperament.
Regarding stock prices of companies clearing 52 week high having short and random runway for growth … I dont agree with this statement. In fact its exactly the opposite. IF you have not read the book The Next Apple, do read it. You will get the answers and a lot of other useful knowledge. You will have fewer questions then.
For me to take an unusually high bet on a company/sector I should have clear visibility of triggers and clarity of my investment thesis. I some times take disproportionatly large bets on cyclicals too. The techno funda picture helps. Charts often tell a story. The way to go about this thing is to look at hundreds or thousands of charts and try to correlate the fundamentals of the company. Once we master the art of looking at charts and deciphering what charts are trying to say in terms of fundamental story or triggers lined up going ahead, we get enough confidence to allocate decent amount of money to that particular stock or sector. Recent example for me was a company called Triveni engg. Stock price was in a tight consolidation range between 64 to 82 between august 2020 and feb 2021. One could have looked at the sugar sector and try to find out the triggers, looked at the company and studied it in details. I had a look at it. Management indicated good times ahead due to ethanol blending push by govt, high international sugar prices, spilling of orders for engg division to q4 as indicated in presentation/concall etc. Company had done a successful buyback at 105. There were lot of triggers lined up for anyone willing to dig deep. And once stock price successfully broke out past 82, it remained within a range of 80-88 for time long enough to load up. Once sugar sector started moving as it was bound to as indicated by charts of all sugar stocks (all of them were breaking out led by balrampur chini first, or were in tight consolidation zones) triveni went up from 80-85 to 120 plus within 4-6 weeks. That’s a return of close to 50% and if one had allocated decently, returns even at portfolio levels can be huge.
I think one needs a rudimentary knowledge of technicals like following 52 week/2,3,4 or more year highs/all time highs etc. Basic patterns like cup and handle, double bottom, inverted head and shoulders , flag etc. This is no rocket science. These are very easy to spot patterns visible to the naked eye.
Chambal fertilisers was a techno funda bet for me. Exited once targets were reached. Post that have stopped following it too closely. On my cyclical, short term opportunistic, technical bets, I dont work too hard or in too much details. And once I exit my position I do not follow it too closely, as I tend to focus on the next idea.
I keep tabs on my long term bets by listening to concalls, keeping tabs on newsflows, quarterly results, and other fundamental developments.
@Kuldeepjadeja I dont follow these SFB too closely now. Had worked on AU bank but had exited once trailing stop had been hit.
@Siddharth_Jain I myself invested in sail and tata steel based on chart patterns. But exited early after decent returns. Could have had multibaggers in both had I held on. But investing in cyclicals has not been an area of strength for me and I have been trying hard in last few months to get better at it… Finally sugar cycle right this time and trying to ride it. Have booked partial profits here too but still riding bulk of the positions. For these cyclicals, I find it difficult to follow the fundamental factors too closely and hence try to have a look at techno funda picture and take a call. But there too, fear often gets the better of me. So now the idea is to try to ride as much of the rally as is possible in cyclicals. Still trying to develop a mental framework to implement in these cyclicals and turnarounds.
What are the chart pattern of Canara Bank telling you. I think market cap of 22000 cr for a company producing operating profits of 20000 cr is very cheap. There is a cyclical bet here. If they report profit during March qtr then sky is the limit for the stock. Please help technically how it looks.
Hitesh Bhai, when a bull run in a sector comes to an end and stocks start correcting. How does individual stocks which are leaders and still putting up good results behave? Bull run with sector tailwind or not, isn’t it the earnings ultimately drive the prices?
Hitesh Ji, @Hitesh
Whenever a company announce quarterly result, how do you decide result is good or bad. Result is to hold the company stock. or exit. Sometime result is good but market doesnt like it and vice versa. What do you see in quarterly result.
@hitesh2710, Two stocks (Laurus labs and Tata Elxsi). I find that if some one read the next apple, he would prefer the first stock (Laurus labs as it is giving quarterly good results, while annual earnings results are yet to be consistent) on the otherhand, if some one is reading the book how to make money in stocks A winning System will select the second stock, Tata Elxsi (as it has consistent 5 years earnings plus good quarterly earnings). What according to you is a better bet and your views on it.
Can Bank and for that matter most other PSU banks charts do not seem to offer any concrete trend indications. Most of them barring a few are trying to consolidate above 200 dema. How it goes going ahead needs to be seen.
Personally I like to be in spaces where the action is. I had earlier mentioned the sugar space where I had made a basket of sugar stocks and that seems to be playing out well. Next in line could be cement where a lot of small and midcaps are forming or breaking out of tight consolidation ranges.
I also have invested in jindal poly, a BOPP films player and market leader. With rise in product prices, the company looks set to report very good numbers. And based on expected numbers seems attractive. More important thing for me besides the above logic is the chart pattern. Change of polarity principle clearly demonstrated in the chart. Levels of 700 (696 to be precise) which were close to earlier top, are now offering strong support on retracement from new high posted recently.
