@hitesh2710 ji , thank you for sharing some wonderful insights on this thread.
I am aware from the above the Laurus Labs is one of your investments and as investors it is a thesis which has played out for all of us in the last year. Further, listening to the con call last week makes one even more convinced about Dr. Chava’s orientation to grow this into a large company and focus on growth and diversification.
I wanted to understand what were your thoughts on:-
Does a potential mRNA HIV vaccine candidate sound like a credible threat to Laurus Labs? From your extensive industry knowledge - does having a vaccine mean that the sales of pharmaceutical products addressing the issue are greatly impacted?
How do you judge the longetivity/investment targets for you for an investment like Laurus? Considering how the company is growing - are there triggers which make you reduce/exit positions?
HIV Vaccine has been talked about since almost a decade now and nothing concrete has come up. So I would not bet on its success. However even if it were to happen it would take a lot more time from hereon too. But knowing Dr Chhava, I think he tends to think of making his company into a big company and hence has been entering newer and more lucrative and futuristic fields. So on that front, the jockey remains very competent.
Triggers to reduce my positions in a company like Laurus are times when there are fund crunch. If I find a bonafide techno funda opportunity which can provide me 30-50% upside potential (we are in such situation in current markets where sectors tend to move fast) then I sometimes reduce my core positions temporarily and invest in these bets, only to get into the core bets once short term bets have paid off or I am stopped out. I do not take leverage on my PF as a matter of principle and hence I follow above strategy.
Business wise, till date I have not found anything to induce me to exit Laurus. So if I were a laid back investor who wants to buy and go to sleep for a few quarters/years, then Laurus is okay.
@NK1 In case of Laurus, some promoter entities declassified themselves from promoter to non promoters and I think there was small selling of around 2 % too. Dr Chhava himself has held on to his own stake all throughout since past 8 quarters (all I can see on screener). There can be 1-2 % change here and there but that is the latitude one allows to such outperformers. You can try to find out what kind of stake Dr Chhava and other guys named Chhava (I assume all of these are his immediate family) have in the company and how much it has changed over the years. I myself don’t want to go into that kind of drudgery as I am not worried on promoter stake front.
Hi Hitesh sir, William O’Neil is his book says to cut the losses at 7-8% below the pivot buy price. Do you follow this stop loss mechanism or do you think it’s a very narrow range and we should give room for stocks to correct to 15% keeping in mind the volatility of Indian stock markets? Thanks
Firstly I really want to thank you for all your comments and your self-less service in educating hundreds of investors like me. Its like having a teacher/guide that we have never met but still helping us avoiding mistakes and guiding us to the right path.
This is my third query to you. I have been tracking Transpek since few months and quite convinced about its future for next couple of years. Although when I check history, it has been looking promising from last 2-3 years but has been really unfortunate with accidents and now lack of demand due to Covid and continuing its average performance.
Currently the price is lingering around its 52 week low. I am really excited to buy and feel there is enough margin of safety here but I have read your comments about how its better to buy stocks which are crossing 52 week highs rather than buying stocks at 52 week low. Should this be followed as a blanket rule to not buy stocks at 52 week low and wait for the business to improve? Do you think its better to look at other opportunities which are already firing on all cylinders?
While playing breakouts, buy price is usually very crucial. Idea should be to buy breakout from tight consolidations. And often we get chance to buy during pullbacks to these breakouts. Sometimes stock just starts flying immediately post breakout and we are left just watching. In such circumstances, I often give the stock a miss.
I usually do follow the stop losses though I do not have any strict criteria of 7% or 10% for all positions. Each chart structure usually is different and hence we have to tailor our stops accordingly. Idea should be to minimise losses while maximising profits.
However if we start becoming lax in putting our stop losses, we often end up with big losses. So at some fixed level, applying stops is necessary. This usually helps in preventing big losses. I often put my stops slightly below breakout levels to avoid getting stopped during whipsaws.
Buying 52 week highs and 52 week lows requires different mindsets. The former usually needs a swing trader’s mentality while the latter needs value investor mentality. We need to identify where we are more comfortable and what suits our temperament and then take a call.
Transpek as I said before has been one of the unfortunate companies which keeps getting besieged by one or other problems. Personally I usually avoid such positions.
@hitesh2710 - Sir, I want to understand the mindset of overcoming the following conflicts
How to get into the mindset of buying a stock which u have been tracking but missed to buy it for what ever reason go high and high, (ex - laurus lab)
How to get into the mindset of pyramiding a stock which u have bought at let say at a decent margin of safety and again trying to buy it a higher level.
I face these issues, your approach, mindset for such situations which I believe u must have had plenty would be helpful.
Reluctance to buy a stock which has gone up from your tracking levels (or buying levels in case of pyramiding up ) is more of a behavioural problem. Once you get over the problem its easy to practice.
For starters, you can start buying small often insignificant quantities even if the stock price has moved up from your tracking levels. This should not be a problem because our mind perceives this as a small positioin and hence its easy to press the trigger. Then the quantities can be gradually increased once the initial reluctance is gone.
Same goes for pyramiding a stock which is bought at a decent margin of safety. Here as long as results continue to be good, there can be justification in buying up provided allocation is not skewed.
I too had similar issues long back but once I got over the initial reluctance it comes more easily to me. Its only a matter of taking the first step.
@hitesh2710 Sir, At the very outset thank you for being tireless in answering our questions. Comming back with a fresh set of questions which are listed below:-
1> In the cash flow statements what are the specific items that you look out for wheather it is quarterly or annual statements.
2> In the Guppy Multiple Moving Average, if I am looking for breakouts to do short term trading which one of the time frame gains significance, 7days, 1 months, 1 year or 10 year.
3> Among my PF, I am currently holding ITC, VST Industries and HCL Technologies for long term holding typically > 10 years. While I have two fast growers like Laurus labs and KPIT Tech in it for a short term duration of around 5 years. Does the PF looks good to you taking timeframes into consideration.
Lastly, from valuation prespective if a company has earning yeild is greater than bond yeild, is it resonable to consider it as an undervalued bet? Thank you!
@hitesh2710 Sir thank you for replying to everyones queries diligently, its a great learning process for novice investors like me. Sir do you track Bandhan Bank. In light of the current result, what are your views on the same .
What is your view on beta drugs both fundamentally and technically. This company can produce around 20 cr profit in 2022. Hence pe is not high. Also into cancer drugs.
Hitesh sir, you have been an excellent guide for all of us.That you guide retail investors with pure conscience is what separates you from the rest and thats why people write to you for guidance.Keep it up.
My question is towards momentum cyclicals currently in play- steel, cement, sugar etc.
While it looks fascinating if someone (who does not know these cycles) was fortunate enough to enter a right time and made a decent 2x,4x is short time, wanted to know your views, what are the high level triggers for sell? Is it some metric, fundamental ratio, anything else that can be considered to exit at a decent profit? So that even if you don’t make a killing out of it, you do not sell it at a loss. Assume that someone does not know much about technicals.
Hiteshji, wanted your suggestion in how to implement price volume analysis in understanding upcoming tailwinds in an industry. Do you use it as an indicator to assess overall industry momentum? As suggested earlier, I have gone through “The next apple” book which did have some interesting insights.
Would also love to get your suggestions on resources (reading material, videos) which might be helpful
I wanted to understand how you handle the case where stocks present in one’s portfolio gives lumpy returns and one has been able to identify potential investment opportunities with high price momentum. Often it looks like an opportunity cost when I decide to stick in favor of stocks present in the portfolio as fundamentals have not changed.
Apologies if you might have answered the query before. Just wanted to understand your thought process.
Regarding cash flow statements and what to read in those, the best resource is Pat Dorsey’s book, The five rules for successful stock investing. I am not a finance guy and hence not qualified to give expert advice on these matters.
GMMA system works on all time frames. Typically if the investment considered is for short term duration of few weeks to few months then I prefer daily avgs and higher time frame then weekly avgs.
The portfolio you mentioned seems okay though you can add some fast growers from fmcg or pharma space rather than holding slow growers like itc and vst inds.
Looking at only the earnings yield in a company to consider undervaluation is like looking at only the nose or the ears or the eyes of a girl for consideration as a spouse. One needs to consider a company from various parameters before deciding if there is undervalaution or not.
A fast growing company can be a steal at 20-25 PE whereas a slow grower might be overvalued at 12-15 PE. Valuation is a very relative concept and there is no one size fits all answer to these questions.
@Lucifer I dont know what coach means in terms of referring to me, but I dont track pix transmissions.
@Ajjugattu First time I heard the name beta drugs, So no views or idea on it.
@ap1990 I have not looked at recent results of bandhan bank or any other financials. I think in current scenario most of them are out of favour and might remain so. However they might at some point of time be a short to medium term trade as a Covid recovery trade, along with all sectors affected by Covid like hotels, casinos, multiplexes etc.
Personally I do not have a great track record for selling cyclicals at the right levels. However part of embarrasment is saved by good entry points and proper allocations. Peter Lynch had a theory of selling cyclicals at low PE and buying at high PE. While on a first look this statement may look surprising, if one digs a little deeper into the meaning of this, Cyclicals are available at high PE when they have been making losses or low profits for a few quarters and then make a turnaround sort of performance for a couple of quarters or more. Conversely, cyclicals are available at low PE because there are a few quarters of peak profits after which these are likely to taper off as the story inevitably is with cyclicals.
The other option is to do staggered selling of say 10-15% of holding at every pre determined rise.
The key remains not to overstay the welcome in cyclicals.
@ganesh_bastwadkar I am afraid you will have to go through a few annual reports of sugar companies to figure out which companies have highest ethanol capacity. Irrespective of that, just like a rising tide lifts all boats, a sugar rally lifts all sugar stocks. So one might as well have a basket approach .
