Techno funda includes technicals as well as fundamentals. Usually in bull runs in fancied sectors (ones which last a few quarters to 2-3 years) valuations often take a backseat. The run up atleast in the early stage happens only on a narrative. At these times, its difficult to take a call based purely on TTM earnings. There has to be some extrapolation/projections.
An example where I was able to board the bus was stocks like HBL, Usha etc. But in stocks like railway stocks, most defence stocks, the technical picture was quite encouraging, but fundamental picture was not clear and hence I was not able to participate in the upmoves.
I try to take big bets where I can visualise the business growth in good technical set ups. Sometimes it works the other way round too…
My portfolio has not changed much with respect to current market scenario. Mostly consists of small and midcaps. You can start learning techno funda by reading books like How to make money in stocks by William O Neil, The Next Apple by Ivayly Ivanov and momentum investing books written by Mark Minervini. Once you have got a grasp on the subject, you can start picking up your own picks.
There is no one size fits all kind of answer to portfolio allocation strategies. First you have to understand what kind of investor you are and then go ahead. For concentrated investors, anywhere between 5-15 is a good number of stocks to have.
Next is if you are a good stock picker ready to do a lot of research and scuttlebutt, you can allocate higher amounts to small caps and micro caps, provided conviction and valuation parameters converge. At a very young age, if your capital is small, then you can take a little bit of higher risk with these names with an aim to the take portfolio to a decent size. This kind of logic worked for me in my early investing days.
I was wondering if you still track Techno Electric, and what your thoughts are on it at the moment. I saw rhat you started the VP thread on it many years back, but haven’t seen you active on it for a while now.
I did a short thesis post on X and on Techno’s VP thread recently, focusing on the disproportionate opportunity in the data center business that I feel the market has not appreciated yet. Posting it here for your reference and keen on getting your thoughts on the fundamental story and charts (that look weak at the moment).
Thank you for your sane thoughts for overall stock markets, individual stocks, to to take different situations in its stride.
How do you view the recent developments, impact of regulator oversigght in banks and other NBFCs? Also small and midcap universe is getting corrected/ swings widely these days? Your thoughts on current situation and view of market regulator that there is froth in small/midcap space. Also election can create hightened volatility. Also how are you dealing with your picks, especially if you hold any with more as a technical bet? Thank you.
I think the actions of the regulator are good considering the excessive froth that was building up in micro, small and midcaps space. Each rally in a stock/sector needs some correction off and on so that excesses built up are shed. That is a part and parcel of rallies in stocks. Reason can vary from one company/sector to other.
I don’t try to read too much into reasons for corrections, because I feel if it was not reason X, then it would have been reason Y. If the stock has to correct, it will correct. In some of my own picks, I have seen decent corrections of nearly 30% from their recent tops. The run ups prior to these cuts were very sharp, and hence simply put, they needed for earnings to catch up.
Election has been a monkey on the back of markets. I think till that time we can keep seeing yo-yo kind of markets. A lot of the (up) trending small and midcaps have corrected and some of them are re testing breakout zones. This kind of consolidation can go on for some more time. It’s anyone’s guess.
Wycoff pattern is not too clear in Usha Martin. But for me, its a fundamental based buy. And with company doing regular concalls, there is a regular update on the progress of the company.
The bigger problem with Usha martin is the constant selling by Prashant Jhawar group companies. When this is overcome is anybody’s guess. My guess is once th company starts reporting blowout numbers ( ? Possible after the full impact of capex comes onstream? ) there can be some big ticket buying which can overcome this kind of selling.
@hitesh97 In case of extremely high PE stocks, if earnings delivers robust growth, its possible to make money. I don’t have the bandwidth to answer or think about too many hypothetical questions and situations.
Hi Hitesh bhai couple of question . I was reading your interview in money9
1)At what asset size / portfolio level to yearly expense did you decide to call it a day at work to pursure investing. What was the financial freedom calculation which u followed.
2) Read about your passion for farming and having a farmhouse , when do you decide to invest a large sum in that ( wanting to go for one ) moving a large part to it will slow.down compounding multiply happiness ( then i think about pushing it few years ) so corpus becomes larger. How one should look at it
3) you being from Dr fraternity how do you look at wockhardt story. Any way you are playing it
Thank you your perspective helps to think better and gives a different perspective to way one thinks
The conventional formula to calculate retirement corpus is 20 times your annual expense. But this annual expense should include everything from your daily expenses, to medical insurance, to vacations etc everything. In a hypothetical situation, if someone has calculated around 2 lacs per month ( 1 lac per month regular expenses plus 1 lac per month others like insurance, vacation etc) then annual expense is 24 lacs per year. 20 times that is 4.8 crores.
For me the case was slightly different because I had a pensionable job, after 20 years of continuous service. Plus my dermatology practice can support me in case of need of additional buffers.
After achieving a certain portfolio size, things like building a farmhouse do not entail too much of a dent on overall portfolio. Besides land itself usually appreciates if selected in proper location. Me and a couple of friends bought a farmhouse in 2013, which is more of an orchard. The price of that property has not gone up too much in monetary terms, but I consider it one of my biggest multibaggers. Its a place which has given me and my friends immense joy and happiness and there is no price that can be attributed to it in terms of X amount of rupees. Besides at some point of time, you have to think about fulfilling your dreams because number of years in life are limited and thinking constantly about financial milestones takes you nowhere. As I said before in a post, "After the first few crores, rest is just a number. "
Wockhardt is a bet on the turnaround of the company’s performance and the optionality of WCK 5222 and other molecules. It’s been too well discussed on VP thread. Nothing much to add from my side.
Hitesh Sir, your views on HCC? Is the breakout intact or the price action seems like a breakdown? Also, Company has come up rights issue and every few years it’s raising equity capital to support its growth? Any views on the same?
HCC faced resistance at its multi year resistance at 47-48 and is now in a corrective phase. Rally from 30-47 was very sharp in sync with the madness in small and midcap space. Rights issue has been talked about in the latest concall. Business wise they are doing most of the things they have been promising, but these kind of stocks will need strong market tailwinds to move up significantly, till the time the actual business transformation happens and growth returns.
@hitesh2710 sir
In your experience can you share me name of few companies who did phenomenally good with their business, extremely strong with fundamentals and assuming 80% to 95% of their numbers where true but had lot of corporate governance issues. Like maybe like caplin , if you can share few more examples like this, I just wanted to see what happened with them, I am sure you must have come across lot of examples like this.
You can look at companies like Vakrangee, Infibeam, Arshiya, Lakshmi energy and Parekh aluminex (both not listed as of now), Som distilleries, Lux inds which are recent examples. In bull markets all the sins are forgotten and stock prices often mount rallies, but once shit hits the fan, these kind of companies crumble. All of them cannot be painted with the same brush, but when we have so many good companies to choose from, why bother with the poor quality companies.
For minority shareholders who kept an eye on the business, ignoring promoter actions, still ended up making a 40+ bagger in between because the co kept delivering outstanding results YoY.
This example is hindsight biased and to be construed as an exception rather than a rule because there are far more examples out there wherein investors lost money by ignoring promoter issues. That being said, there were people out there who actually made good money from this stock. Here’s an example.
Perhaps when to focus more on the management and when to focus more on fundamentals is what makes this game interesting
Vijay Mallick also has a thread on Som.
Also if you see their promoter constant buying, it’s just a name change - there are a large number of weird investor names in the screener list and you can see their names in screener. The promoter holding is concurrently increasing proportionately to these shareholding decreasing. Seems like black ka white game to me.
It isn’t necessary that dishonest managements will not make money for us - it maybe that if you keep hanging by their coattails, they will reward. Like we’ve seen in Vedanta - dividends given from debt which are actually going to the promoter, multiple times company merges and demerges subsidiaries with no accountability but it’s stock price occasionally doubles or becomes 4 times in line with the sector. But as one of buffet or munger said, there’s never just one cockroach in the kitchen. How do we know that these managements are not diverting money to their unlisted businesses, are not doing cash sales, and so on.
But then fundamentals are based on the numbers that company posts and underlying assumption in analyzing fundamentals is that those numbers can be trusted.
If promoters lack integrity in one area, how can they be trusted in the other areas of their businesses? It’s like trusting a student to have worked hard to score A+ in one subject when you have known them to have cheated in the other subjects.
There are so many stocks where operator action, financial engineering and low float work together like a magic to sustain multi-year bull rally.
I find it surprising as to why in India so many small caps companies get away with their dishonest practices. I often get a sense that all these tax raids or audits or regulatory rap on the knuckled are only reserved for big companies.
Another news of a small cap company taking investors for a ride.
