My attempts to acquire knowledge and understanding on investments from books haven’t been very successful, so I always look forward to learning from people like you and hearing about your experiences and interactions with other investors. I truly appreciate you sharing such insightful content about stocks.
I would be grateful if you could expound on your thoughts on the technical structure of Ugro Capital and maybe share your views (if any) on the aggressiveness of its management’s growth plans. They seem to be well on their way to achieving their stated AUM target of 10k this year and 25k by FY25. Thank you for taking the time to read and consider my message.
Aj
I don’t track Ugro capital fundamentally but its chart is a technical analyst’s delight. Stock price underwent a triangular consolidation (Wolfe Wave with target line marked on chart in dotted line) post listing highs of 230, and currently just hit the target line of Wolfe Wave. On the way up while crossing its previous all time high it formed a flag like consolidation before moving up. Target of this flag like structure if pattern plays out could be 325. Overall chart structure looks strong, but there can be periods of consolidation off and on.
disc: No positions. no recommendation. Only posted as an interesting chart.
Hi Hitesh bhai,
Zomato reported a profit of about 2 crores in recent results against an earlier big loss. There is a view that appears to be one of few aggregator companies that seem to be on profitable model compared to most such companies that keep guzzling capital. Whats your long term view on the same ? Can such companies continue to grow profit exponentially on scale given its digital aggregator model as it doesnt have to manufacture anything or provide service but just aggregate the seller and consumer and just spend on developing and maintaining systems apart from marketing? An observation is they have stopped giving discounts compared to their competitor.
Dear sir, considering your journey, and the increase in your inclination and participation in the market, I would like to know if you hedge your trades. Even if you keep stop losses for short term bets, I am guessing you have some sort of protective mechanism to mitigate the loss from a big fall. Or is it that, since you are updated regularly through various means, and can act fast, you don’t see any need of such protection, even if your overall allocation to equity has grown over the years.
Even if you don’t hedge or implement any sort of protective measures, I would like to know your views about the topic, as I am sure you must have read about it, or you might have thought about it on your own.
Zomato reported good operating numbers and going ahead we need to see whether this kind of improvement in numbers continues.
As a business model, it’s a duopoly market with limited threat to competition as of now. In future, if some deep pocketed group decides to enter the fray, we might have to modify our views.
I had bought Zomato as a techno funda bet, and exited my position as technical target was achieved. Current market correction has offered other lucrative options, which I am evaluating.
I have been almost fully invested in the market most of the times. At times of severe carnage , it has been common for me to see portfolio go down 30-40 percent in last few years. I am often tempted to hedge my position, but the whole process seems too complicated…
And I have seen that post correction, being in the right companies has helped outperform the markets. Plus techno funda approach induced discipline helps.
I have interacted with a lot of investor friends, and most of them don’t bother to hedge and are still doing fine.
Hi Hitesh bhai,
Have a follow up question regarding techno funda approach. If technical target is achieved but fundamental looks strong, do you continue holding the stock or you sell on technical target achievement. Many thanks
Hello @hitesh2710 Sir,
HBL Power is now trading at 60 PE. I have been holding it from lower levels but can’t seem to justify a B2G company trading at 60 times. Looks like market has already priced in the future growth based on Kavach news. How to go about holding such stocks or what should be the selling framework in such cases when possible future growth is already priced in?
Usually I take a call on each of my position on a case by case basis rather than generalised view. If I have a good handle on the business and its predictability, I would continue to hold on inspite of technical targets being achieved. But If I am not too clear about the moving parts of the business concerned, and its difficult to deduce for me how the business is going to pan out going forward, I use technical exits.
HBL is in a sector which is in market fancy. Its business spans sectors like railways, defence, data centres besides the traditional business. Till date only 3 players remain qualified to address the Kavach orders. ( there can be more players going ahead, but as of now there are only 3. ) So HBL can get a decent pie of this lucrative business. And with govt keen on inducting new Vande Bharat trains , the business momentum for the segment should remain strong.
We should get more idea about the company and its prospects once the results are out and especially if company puts out an investor presentation.
For sectors in fancy the usual story is that some of the individual stocks attain stratospheric valuations before the rally halts. Case in point being some chemical stocks like Tattva Chintan, Clean Science and technology, and ancillary plays to chemical sector like GMM Pfaudler and HLE glasscoat. You can check the kind of valuations these kind of companies attained before the rally halted and fizzled out.
Currently riding HBL is like riding a tiger. You are scared of your position atop the tiger and you are scared to get off too.
Having a selling framework in such a scenario is often difficult. I guess it would have to be a combination of price strength and business prospects and q1 results should give some idea about this. ( Getting stuck to the PE is of no use because in these kind of scenarios, markets tend to price in future earnings and not the past ones. )
I have red Books of Stan Weinstein and William o Neil. My confidence improved a lot after reading Stan’s stage analysis method. I want to know following based on your experience of technical analysis:
1)I think Sir William O Neil’s M (of CANSLIM) for Market Direction is very crucial for investors. Do you follow any strategy to time market direction and raise Cash (Partly or Fully) before any correction or crash? Is it practically possible as explained by Sir O Neil?
2)Your Technical exit strategy from a stock for Long Term Investing. Do you exit a stock if it breaks down 30WEMA or 40WEMA with heavy volume?
Regarding timing the markets (using anybody’s theory or teachings) I have found it difficult to get the call consistently right. Sometimes we get certain tell tale chart patterns on Nifty or large caps or such charts and it’s possible to take a sell call. But most of the times, I have seen that it’s difficult to see a major crash coming, atleast for me. Instead, I feel that one has to make the most of bull markets and then if you have to give something back during corrections, it doesn’t feel so bad.
Coming to individual stock exits, waiting for stock to breach 30 WEMA often entails selling at a substantial distance from the top. I sometimes use simple methods of using overbought momentum indicators to plan an exit. Or sometimes a move in a company appears too stretched in response to its underlying fundamentals, or sometimes we see a big stretched move on charts, and that often is an indication to lighten up positions, or plan a major exit.
But all said and done, selling remains a difficult art. The usual mistake with me is selling early in a strongly trending stock. So I have resorted to staggered selling, wherever its possible for me. That too involves discipline and I have to exercise a lot of will power to stick to a selling plan.
I have a strange question about the allocation style - casually answer is also okay.
Imagine invested in a stock name “X” as below
QUANTITY
AVERAGE PRICE
CURRENT PRICE
PROFIT & LOSS
10
100
200
100%
First Method :
Now the stock “X” did phenomenally well giving 100% before the result and ahead of the story.
Now you considered to exit your initial capital (1000 rupees) from “X” - just because there is another story unfolding in another stock “Y” and you let the incremental profit run in “X” till the story unfolds with tailwinds
The capital 1000 rs which you exited from “X” - you are now allocating it to the capital “Y” now for more incremental returns and do that over in the areas of your competence.
OR
Second Method :
Stay invested in “X” for long term even with the invested capital or the incremental profit and not to exit.
Your strange question has a strange answer. It’s not possible to generalise these porttolio allocation issues. Each decision has to be taken individually based on the merits of each company in question.
Just because a stock has gone up two times from your buy price, its not reason enough to sell it. In the first place, stock price moving up in a way has vindicated your thesis. If after the run up, you feel that most of the juice is out of the stock and run up has been beyond fundamental justification, then it makes sense to sell or book partial profits. The company you hold is something you have been with for a longer period of time.
If something else appears, where story is unfolding, and “appears” more glamorous, you have to evaluate it thoroughly from scratch. And do all the hard yards before taking up a position. And inspite of all these measures, there are chances of your call going wrong. Or wait period can be long.
Even simple logic tells you that an object in motion remains in motion, until it meets a force that stops it. It can be gravity, a wall, another object, any sort of hurdle. But as long as the trend remains intact, and there are no hurdles visible going ahead, it makes sense to keep riding it. If I want to ride a multibagger, I have to be able to control these itches to sell from time to time.
But these are hypothetical answers to hypothetical questions. We as investors usually face real life situations . And all said and done, investing is a simple pastime, we tend to complicate it with a lot of complicated equations.
Hi Hitesh, What is happening at Shivalik Bimetals could you please help us understand? Promoters selling in block deal at 541 when it was trading at 660 and some European FIIs taking the share? How should one consider such a activity?
Shivalik Bimetal has two main promoter groups, Ghumman and Sandhu. I think one of the group promoters sold through open market and it was bought by the European FII you mentioned.
These kind of things can happen if one or more of promoter groups want to exit due to whatever reason. We have plenty of examples, e.g Usha Martin where Prashant Jhawar was the seller. Indigo where one of the group promoters is selling/wants to sell.
As investors our main focus has to be on the business of the company, and how it is performing and likely to perform going ahead. And when stock prices run way beyond what is warranted by fundamentals (frothy situations) one or the other reason will crop up to correct stock prices and bring sanity.
Hitesh (@hitesh2710) Bhai -
What’s your thinking to provide an opportunity cost (occasionally short on capital but not the investment ideas) ropeway to ’ Gujarat Fluorochemicals’ when both industry fundamentals and technical picture of the stock price are weak?
@hitesh2710 Sir, would like to have your views on Natco Pharma from technical perspectives. Looks like having formed a solid base but prices too have rose sharply. Have been patiently holding for some time.
GFL currently has corrected in anticipation of poor quarterly numbers and that event now seems out of the way. Going ahead, battery chemicals and new fluoropolymers are likely to be the growth drivers. In the near term there might not be too much excitement, but if one thinks 2-3 quarters down the line, LiPF6 plant is likely to come on stream in a quarter or two and new fluoropolymers also should start contributing.
At the time of buying, we have to be clear which type of position we are taking. Here, in case of GFL its more to do with fundamental improvement likely to play out in the medium term. So if we are buying with that premise, we have to give time for the stock to perform.
Best thing to do in these kind of situations is to build up positions gradually because in near term price action may not be too much.
@Naresh_Bordia In case of Natco in near term, most of the good news is out. For me it was always an opportunistic bet and having got decent returns I have exited. At the time of buying, the technical target was around 900 which has been achieved.
It’s not possible to generalise these porttolio allocation issues. Each decision has to be taken individually based on the merits of each company in question.