Thanks Hiteshji for your thoughts. Good to know your picks are doing good in recent corrections.
I agree with you on M&M showing relative strength and seems better pick compared to Tata Motors - which does have significant traction in EV and new models but its end result is more complex because of the large non-domestic piece involved…
Apart from M&M, another company in similar league showing relative strength after a long consolidation is ITC…do you have any thoughts on ITC as well? Over next year, could it be coming out of a decade long consolidation when it hit around 200 in Nov 2012 (like how HUL came out of a decade long range in 2010…although HUL is a much simple business as compared to conglomerate structure of ITC)
@hitesh2710 Hi Sir,
My question is: In this bear market, which sectors do you feel would not fall much?
Hello Hitesh Sir.
I joined markets last year in June and have been learning a lot since then, but i haven’t faced a situation like this till date, obviously. There are a lot of people like me who joined late in the recent bull run and are stuck now with losses.
A lot of people here too might need wise advice from senior investors like you to boost their confidence and stay hanging meanwhile. What would be your advice for retail investors in this market assuming negative returns in their portfolios?
Would be a great help.
First and foremost thing to start journey as a successful investor is to educate oneself. Be it fundamental research, technical analysis or preferably a combination of the two. And observe and learn from markets and their history. All this takes time, passion and efforts.
Corrections and meltdowns in markets are a part and parcel of investing. Market sentiments are like pendulums. They swing from over optimism to over pessimism. Currently we are at the latter end.
The idea should be to wait for a few fat pitches and be ready to swing hard when the opportunity comes around.
Another aspect is to rejig portfolio during meltdowns to replace non performing companies with those that have good prospects, even though it means incurring losses in existing positions.
@Sumit_Das During the advanced stages of a bear market, almost everything falls to varying extents. It’s the ones that bounce back the fastest and the most, that are likely to be future winners.
@hitesh2710 hello, I read your comment about “rejigging the portfolio during meltdowns to replace the non performing companies with good ones.” How about averaging? Is this a good time to average in good companies?
Thanks a lot for your continuous guidance to the investing community of valuepickr. I must say that reading through your thoughts really helped me and many investors like me in making informed decisions about investment.
I wanted to know about your view on Surya roshni. You started the thread during peak of Pandemic and after that there was sharp really in the stock price. I also did detailed analysis and based on the trailwinds in the sector and also from valuation perspective, I invessted in the stock. However, during ongoing carnage in the market its has also corrected a lot.
Still if we see the business fundamentals, there is no change. Pipe business is doing well and expected to grow with leadership in API pipe division and infrastructure growth push by govt. Even in the lighting business, they may do well with PLI scheme and in general real-estate cycle and benefit from capex cycle revival. I would like to know your kind view on following
- How do you see Surya roshni from 3-5-7 years perspective at current valuation
- Do you see rerating in PE multiple. Historically, APL multiple was 2x of Surya but currently it’s like 4x. Although, i know APL has completely changed the rules of game but Surya may also do some catchup with their own share of strength
- Do you see any other issue with the company like Management credibility etc
Thanks again for your continued guidance.
How do you see mastek from here on. The company has been growing at 20% plus and has fallen now by 45%.
Averaging during bear markets is okay as long as you are quite sure what you are doing. There are two elements at consideration here. First is stock corrects due to problems in the company. Second is stock correcting due to general market conditions. And what is often confusing is the third element which is a combination of the two.
Wherever we have a clear conviction that the stock price has corrected due to general market conditions and the fundamental prospects remain unchanged, it makes sense to average. Next question comes is how to have that kind of conviction? The most easy way to do research is the time tested method of reading past few years annual report, listen to concalls and figure out whether management in the past has walked the talk or not. And whether in view of current scenario, they can deliver. If company does not do concall, then more legwork will be needed in terms of talking to employees, suppliers, customers, direct call to someone at the company if they are ready to talk etc.
Another important aspect to look at is allocation. It should not exceed a level too high while averaging.
@tarun2586 I do not track Surya roshni since a long time now.
@ram1984 I don’t track Mastek.
Hitesh Bhai, an observation in this market-
Many stocks have corrected brutally by 45-50% whereas a few have only by 20-25% from it’s 52weeks highs (Schaeffler, syngene etc).
So broadly can we assume that if the XYZ stock has not fallen and shown resilience/strength in this market, then it is inherently a strong one, which can do well when the tide turns?
Are you still tracking Bhageria Industries. It has corrected in this market and also overall sentiment towards chemical Industry as a whole.
They have rising sales although as you mentioned margin is not improving. And also recently they have got Environment Clearance for setting up Manufacturing Plant of “Synthetic Organic Chemicals”.
Please share your view if you are still tracking this company.
Most technical experts (esp Mike Minervini ) advocate buying stocks that have shown relative reslience during market meltdowns. So ideally stocks which have not fallen more than 20% (or at most 30%) from their peaks qualify to be in this list. These often find it easy to reverse direction and start uptrends much faster than the rest of the lot. One example I shared somewhere was of Mahindra and Mahindra. It has managed to hold on above its all time high breakout level and would bear watching once markets turn. Fundamentally its easy to do research on the company by compiling monthly sales figures for past few months and seeing the trajectory. Another additional thing that can be done is to make a visit to nearest M&M dealer and ask about waiting periods/availability of various models. and other pertinent questions.
Another group of stocks that bears watching is those stocks that bounce back very quickly from deep cuts. Say a stock has corrected from 150 and found support at around 100 multiple times. It then breaches that support and goes down to around 85-90 for a couple of days but within another couple of days it shows strong upward price action and goes above 100-105 in a convincing manner and consolidates between say 100-110 levels for a few trading sessions… Now once it goes above 110 with volumes , its a strong buy signal. The whole idea here is that panicky guys who exited below 100 have been left high and dry and there are no more weak hands left and hence line of least resistance in on the way up.
Yet another group of stocks are the ones which bottom out before the market bottoms out. In the present context, stocks that have formed strong bottoms in May June when Nifty used to trade around 15800 to 17000 band. And have even with Nifty currently at say 15300 not breached previous bottoms and are forming consolidation ranges currently. Once these stocks break out of these consolidation ranges, once markets improve, these could be big winners going ahead.
And finally some recent IPO listings of good quality companies which have established good trading ranges and refuse to go down too much along with markets. Once these break out of their ranges, these too can provide good returns.
We can prepare a list of stocks with above characteristics and try to do some fundamental research on these names and if all boxes are ticked, positions can be taken.
Most of the above stuff is advocated by Mark Minervini, and William O Neil. (besides other traders and investors like Ivayly Ivanov in his book The Next Apple. )
@Kamat7 Bhageria continues to report good topline growth but margin pressure remains. The good thing about the company is that capex seems done looking at nil work in progress figure in balance sheet, and inspite of that, balance sheet remains debt free. I was stopped out long back in my position.
Hitesh bhai does this qualify bullish RSI divergence?? @hitesh2710
The chart you put up does qualify as positive divergence. But many a times its not too reliable a signal. Instead I would prefer to see it consolidate in a tight range for a few trading sessions or few weeks and then break out with volumes. That kind of pattern gives me more confidence.
Putting up an interesting chart of SJS as an example of what I mean by consolidation within a range.
Marked on the chart is the broad consolidation between 350 to 465 since Nov 21 till June 22. In June 22, an attempt was made to go above the resistance zone of 465 and a swing high of 510 was made, but in line with markets, stock price corrected to post a swing low of 425 and seems to have reversed from short term correction. It closed today above the resistance zone of 465. Now we need to see some strength/consolidation above 465 for a few days and then the probability of an upmove is high. If double bottom/range breakout pattern plays out, target can be 580. disc: took a testing position for trading. Fundamentals seem okay and are discussed on VP thread of the company.
@hitesh2710 What are your views on Tata Power and Usha Martin?
Although both companies have shown good growth in the recent quarters, their stock prices are down by 30% plus in the current drawdown.
Am I correct in thinking that there is a lot of risk involved from the current price point because Tata Power has gone down below it’s 200 DMA?
Usha Martin has managed to stay above 200 DMA and looks like it will recover unlike Tata Power.
Thank you again for helping a lot of newbies like me.
Tata Power seems to have weakened after having broken down below its 200 dema at around 212. We need to see if it goes above that level and shows some consolidation or strength above that once it goes above 212.
Usha Martin seems to have taken good support at its 200 dema around 101 and looks to be bouncing from there. Retracement levels to the fall from 162 to 100 come at 115 (23.6%), 125 (38.2%), 132 (50%) and 140 (61.8%)… These are the levels I would watch on the way up in terms or potential resistance.
Note that in both Usha Martin and Tata Power the last major leg of rally involved upmoves of the magnitude of nearly 50% or more and after such upmoves and subsequent falls, a lot of consolidation is needed before any major upmove begins again. There will be the odd exceptions where blowout quarterly numbers or some extremely encouraging newsflow can cause big upmoves but these are exceptions and not the rule.
Bharat Electronics seems to be another stocks holding on well to its levels. It is a consistent performer and generally seen as one of the better PSUs.
@hitesh2710 Sir, Any insight on Acrysil?
They have been doing a lot of things correctly with quartz sinks and market for quartz sinks has been growing and adoption is visible too. Acrysil might be doing something right on the sales front. But still would like to know from you experience if the management can be trusted? As capex has been announced. Capex numbers Vs older Capex numbers warrant attention. Can you throw some light as a special request please
Acrysil had a decent run up from May 21 to Dec 21, wherein stock price nearly tripled from levels of around 330 to 920 and then the stock price has corrected. Last week there was some excitement because of announcement of Ikea order news. However it needs to be seen how much of an impact it can make in overall scheme of things for the company.
Technically, the breakdown level was 650 and since then the stock price had severe correction in line with the general markets. On charts, it seems to be a company that has lost market favour and hence might take time to consolidate before attempting another big upmove.
Hitesh Bhai, your views pls on the Bajaj twins going forward?
I feel they made money making look super easy upto 2019, and were massive winners in the covid bull market. Always sold to me as a blind buy or BAAP investments. Personally, would like to sit out for the next 2 years but would appreciate your views. thankyou.
Once a lot of investors consider a company as a BAAP (buy at any price), a top is usually not far away for that company. Because in that belief everyone and their mother have bought the shares of the company and there are no new buyers left.
On the charts, Bajaj Fin formed a double top at around 8000 and it got confirmed on a breakdown below 6500. This provided target of around 5000. Current levels are close to that expected target. On the daily charts, BF continues to make lower top and lower bottoms ever since it broke down below 6500. I think its better to wait for some bullish formation in the chart before going all out to buy. If one is holding, it seems there can be support around 5000.
So if I were interested in the company I would be a silent spectator.