Hello sir, I would like to ask one thing that is every stock in the market always set ATH and correct itself and it breaks its previous ATH and set a new one right. So is it good to enter a stock when it is near to its ATH and exit when it sets a new ATH so that we can get minimal gains considering the good fundamentals and background of the stock, also does this work in small-cap stocks also? What’s your take on this? Coz recently deployed few capital in INDHotel when it was near to its ATH and now it is setting new ATH, same applies for SBI.
Hitesh Bhai, in the rally from June to September fiis have bought only for 25k crores where as they have sold more than 2.56 lakhs crores worth of shares this year. They haven’t even bought 10% of what they have sold and the indicies are near all time high.
Is the present rally is a bull trap by fiis so that they can offload again at higher prices?
How long the Indian markets will stay decoupled from the rest of the world?
Would be glad if you give your insights. Thanks
First a slight clarification about this whole fresh ATH theory…
By fresh ATH, we mean a stock clearing previous all time high posted in past few years. Here we don’t mean all time high posted last week or last month. For fresh ATH to be meaningful it has to be a few years ATH.
Now usually we have three kinds of outcomes once a stock clears its multiyear ATH.
It either blasts off and registers gains of varying proportions, say 30-50-100% once it clears ATH.
Other is that it goes slightly above ATH, then comes down to retest the zone in and around ATH and then resumes uptrend to post decent gains.
Third is it clears ATH by varying degree and comes down and starts a major correction.
We are interested in stocks which give good returns post clearance of ATH. The most important parameter to look out for to figure of these kind of breakouts is to lookout for strong consolidation either slightly below ATH, or in and around ATH and then a breakout. These are the kinds of situations which give the perfect launching pads for strong upmoves post clearing ATHs.
I assume we are discussing above type of scenarios.
The other scenario is that once a stock clears ATH, it establishes a firm strong uptrend and keeps posting fresh swing highs (technically its an ATH, but I prefer to name it swing high just to differentiate it from multiyear ATH breakouts. Here there is a breakout, then stock posts swing highs, then consolidates for some time sideways and then starts a fresh upmove. Guys like Minervini use these kinds of consolidations and fresh breakouts to move in and out of the stocks, besides riding the multiyear ATH breakouts.
I prefer to look out for bigger movers post ATH or 52 week high breakouts. These often take time in the form of long sideways movements, or slight corrections, but when the call goes right, returns are also big. And once I start enjoying the upmove I usually don’t give up my positions quickly to get in and get out and aim for the intraswing moves. But if someone has such skill and mindset, it can be attempted. Not my cup of tea.
A question on allocation to each stocks. What is the maximum that you ever gone by averaging up in high conviction bets and what percentage you normally allocate beyond which it is matter of concern to you.
Allocation (and concentration vs diversification) will be a never ending debate. Everyone has to find their own peace with respect to these topics.
In my case, I usually hold 10 or less stocks most of the times. And these days, I tend to go up to maximum 20-25% allocation in my top bet if I have absolute clarity about the business and clear indications on charts. Other times I restrict myself to positions of 10-15%.
In the past I have gone up to almost 65% in Kaveri, and 50% in Laurus in the past. But I don’t know if I will have such high allocations in the future. I won’t advise anyone to go with such high allocations because one has to make allowances for the proverb “Shit happens” and it happens even in best of companies and scenarios.
Dear @hitesh2710 Hiteshji,
Thank you for sharing your knowledge and views regularly.
I like to get your current views on Techno Electric.
Techno electric never went past 320 levels and for the last 3+ months hovering around 280-310 range. How do you see this when you look at technically.
Are you still tracking it or continuing to be invested in it ?
Hello Hitesh sir, I would like to ask what’s your view on Wipro, it is fundamentally a good company until the last quarter but in June 2022 results the company took a hit, the OPM% decreased and net profit also took a hit moreover FIIs ratio down from 8.12 to 6.95. And recently it formed a bearish head and shoulder pattern in the day chart and today Wipro laid off 300 employees who were moonlighting (not sure it is a big news or not). Would like to get your view on this both fundamentally and technically. Or this have anything to deal with US recession coz major IT is based on US. Need some clear info on this. Thanks in adavance sir.
Would like to know your views about Consumer Durables (Appliances specific) sector (eg. companies like Voltas, Whirlpool, Hitachi AC etc.) in current context as well as in context of long term core portfolio picks.
I have observed that Consumer discretionary as a sector has created immense wealth because of factors such as growing per capita income, premiumization, niches etc. However same is not true for Consumer durables (appliances) over last decade or so…I see that in case of Consumer Discretionary, even though there maybe competition but still clear leaders with pricing powers emerge - such as Page or Titan for eg. However in case of appliances, the intense competition leads to price erosion with no clear leaders visible (Voltas has a leading market share by volume in retail AC segment but still with negligible pricing power) and neither ability/multiple levers to manage input costs (as evident in current context of high inflation)…
In this context, are such appliances companies good core portfolio bets? Are times like current (perfect inflation, input cost & parts availability storm) a great time to add these? Have appliances companies created wealth globally? - Whirlpool is a US mammoth but was in trouble inspite of the brand history etc. in US. Does it make sense to completely ignore this sector because of poor economics and concentrate on other consumer focus sectors (if one wants to be in Consumer facing sectors) which have better levers to make use of their market leadership…or this sector also has merit and deserves a place in core portfolio?
Hello hitesh Bhai , when a stock is falling with low volumes and moving up with big volumes is it a sign of accumulation? I’m attaching a chart for this. Would be very helpful for my learnings if you give your opinion.
When can we make an entry in the above chart?
Thanks in advance.
Techno electric has been a relative laggard in the recent run up in markets. Fundamentally things seem to be gradually falling in place for the company. Buyback from market is going on currently, which usually is a good sign going ahead, as equity gets reduced. Company has decent cash in balance sheet, and order book remains strong. Management is confident about doubling revenues in next 3 years.
On the stock price front, its quite static being range bound between 270-300. One needs to be patient here, or else buy on breakout past resistance.
@Paxrxxthi The whole IT pack had a strong run up in the past few quarters and its time as of now seems over. Since it was in fancy valuations had reached much beyond normalised and the whole sector was overowned. And there are still a lot of guys who are looking at it for buying. So to me it seems as a sector to avoid. Same applies to wipro .
If you look at the valuations history of these consumer durables companies, they have historically been expensive. So chances of re rating are not there. Whatever investors make in these kind of companies comes through earnings. And that’s where the main problem lies with these companies.
Besides in case of AC, regrigerators etc, the market leaders are not the listed players. If I have to choose an AC for my home it would have to be Mitsubishi, or Daikin, or something similar. And the economy market has been captured by Samsung and LG. Even refrigerators are dominated by a lot of non listed players. And listed players like Blue star, and Voltas are also saddled by other businesses like the projects business.
And looking at the margins being allover the place over the years in these kind of names, I doubt if they really have significant pricing power. In such a scenario, I feel there are other better businesses to look at rather than get stuck in these names.
A lot of these names show charts that seem to be indicating poor structures. Johnson Hitachi corrected from highs of around 3500 to 1400 currently. Voltas also looks to have broken down below 1150. While these stocks may at some point of time make a comeback, now does not seem to be the time to be parked here.
These V shaped structures are not very good structures to be investing in. In any structure, you want the foundations to be strong. With these V shaped structures, it resembles a building built only on a single pillar, and hence inherently unstable.
The best structures are the rounding, or broad based consolidation patterns. Breakout from these lead to sustainable rallies.
To get a better idea about these stuff, I suggest you go through a few books on technicals, like William O Neil’s How to make money in stocks, Edward and Macgee’s book and some others once these are read.
Long term investors are rare these days…even the research house raises sell report for a small qtr specific issue… this leads so called investor confusing and takes short or medium term investment. Investor gets confused while batting, whether the match he is playing is Test cricket or One day (leave 20/20 apart ).
So being a test crickter (LT investor), one need to have enough determination and ignore unnecessary noises - which happens if conviction is built on the investment, and conviction comes only after self analysis and self study. No shortcut way to this.
Only conviction made me hold stocks like Deepak Nitrite (from Rs 26 adjusted), garware tech fibre(rs 58), tube investment(rs 67), ace (rs 18 adjusted), elecon engg (rs55), atul from 60, chola dbs from 30, nelco from 50 etc.
When you take a high conviction bet on a sector, in that case how do you then usually exit the sector as things are playing out as anticipated?
If I take the example of pharma in the past or auto currently - is your exit always clearly dictated by adjust trailing stop losses or you take counter sectoral view to book profits in peak optimism as well?
How do you think in that context the story looks like for the auto sector currently?
Exits in case of sectoral bets usually involve two types of scenarios.
First is where the sector which is usually a commodity (or a glorified commodity) sector starts being touted as a structural story, more so after sharp run up. There is a lot of fanfare related to the sector, a lot of research reports with super bullish targets start coming out even after wild run ups , and anywhere you go, its that particular sector making the headlines. In short, typical signs of froth. Key here is to look at the kind of historical valuations the sector has commanded during previous bull runs and take some hints from it. This usually provides exit when stock price is still climbing up and sometimes our exits seem or are premature.
Second typically is when the sectoral tailwinds start turning, or stock prices give early warnings of things going sour. Usually this is indicated by some kind of technical topping out pattern , say double top, or some kind of weekly or monthly candlestick bearish pattern, or simply a breakdown below 30 WMA, or breach of some key support region which used to give support. Here the selling is done when the stock price is on its way down. If the fall is too precipitous, then selling is often difficult execution wise, or psychologically where we have seen far higher prices and keep hoping that stock price will recover at some point of time, but actually it rarely does.
Sectoral rallies and crashes in different sectors follow nearly similar pathways and psychology and one needs to observe these things closely in markets to figure out certain things, rather than get carried away by price moves. ( And inspite of all these observations I still get carried away, or often exit too early ) There is no holy grail, except to learn from past mistakes, often to make a different set of unexpected mistakes, not always, but sometimes.
I am late to this thread & Enjoying all the discussion happening among other investors and your patient reply to each and every one ! The beauty of Networking!
Hitesh Bhai - Thanks for helping everyone. It really takes a lot of time, energy, and effort to explain everything.
One question: What is the % ge cash in your portfolio now?
Your take on Laurus labs?They are growing at good speed.Do you still own it?Do you think they will hit their 7500 crore target this year?
GTPL hathway seems interesting to me.Huge runway ahead in the internet business with most people not having access to broadband and cost of internet being quite cheap in india .Any input?
Please try to put the efforts to read his previous posts about laurus labs. He already clarified many times that he exited the stock last year and has not so great expectations from the stock as it may move in a range untill and unless something extraordinary happens.
In early part of my investing career I used to frequently time the market, and was partly successful. Got it right sometimes, wrong sometimes. But over a long period of time, I have realised that its often difficult to time the markets. Inspite of being a student of technicals, maybe I am a bit too reluctant to time the markets, especially now that I probably can do a better job of it. But things have worked fine even without resorting to timing the markets. Every sharp correction awakens the need to be be good at timing the markets.
In past few days, I have been asked this question by some investors about how much cash I have in my portfolio and whether I time the markets or not. Fact is I usually am fully invested most of the times. On rare ocassions, I am partly in cash, particularly when I have sold off one/trimmed one or two or more of my major positions.
What I have usually done during past corrections is to try and strenghthen the portfolio by weeding out the mistakes (even if it means booking losses of varying degrees) which have led to inclusion of stocks which do not outperform significantly. This often happens when I have invested in breakouts that look good, and once markets correct significantly, these very stocks correct and hit stop losses in trading positions. But at the same time, I keep a track of stocks where major breakouts have happened on a longer term time frame, and where stock prices had run up, but now with overall weak markets, these too have corrected and have come to significant support/entry points. I use these opportunities to buy into these stronger techno funda opportunities, and it has often worked very well for me. So that is the kind of exercise I am currently considering.
Regarding overall markets, we have had many such sharp corrections and rallies ever since we went into the correction post Oct 2021, from the top of 18600.
Just to keep track of these things, we went down from
18600 in Oct 21 to a low of 16966 in Dec 21 (a fall of 1600 points) , and rallied to a high of 18350 in Jan 22 (a rally of 1350 points),
then went down to a low of 15671 in March 22 ( a fall of 2679 points), again rallied to a high of 18114 in April 22 (a rally of 2443 points) ,
then fell to a low of 15183 in June 2022 ( a fall of 2913 points), again rallied to a high of 18082 in Sep 2022 ( a rally of 2899 points)
And now the fall from the recent high of 18082 to today’s low of 16978. ( a fall of 1104 points till now)
The level of 16947 to 17018 was a gap up area ( marked in dotted blue lines) in the Nifty between 28 and 29 July 2022. 16975 is the 38.2% retracement (marked in dotted fluorescent green ) of last leg of rally from 15183 to 18082. And finally the 200 dema ( marked in solid fluorescent green ) which is rising is at 16879. Today’s low was right in the middle of all these important areas. If the markets stabilise above around 16800-900 and rallies, we can have a tradeable bounce, if not, more pain. So at current juncture I am not too keen to take a cash call. If a cash call had to be taken, it had to be taken closer to 17800-18000, but at that time there was a lot of momentum in markets and hence a cash call was difficult to take.
In the past nearly 11 months beginning Oct 21, we have had three major falls and three major rallies, which took investor sentiments in entirely different directions at bottoms and peaks. Each time during the fall it looked as if things are going to get ugly near the bottom and that was exact time of reversal. And vice versa near tops.
We had an expanded triangle like formation ever since Oct 21, and recent swing highs were the first time markets were able to trade a few days above the falling trendline before correcting. So we need to see how things pan out going ahead. (hypothesis: We could have completed the first half of a pattern called a diamond pattern, where the first half assumes the expanding triangle and second half assumes contracting triangular pattern and since this is a pattern whose each leg runs for few weeks on either side, we might see more rallies and falls going ahead, but in a more contracting nature. I do not have any conviction in this hypothesis, but this is a wild guess to see if things can happen in expected manner. )