Dear All,
My query is rather simple. Everywhere i hear that ‘buy on dips’. But how do you define if it is a dip? Is it like drop in share price for one day or two days or 3% (any fixed number) drop in share price or share price reaching your predefined price point
If you believe the market has mispriced a stock, then the ideal option is to buy on the way down. So, if a stock is available at 100 bucks at the moment and it falls down to 90 bucks, buy a little, if it falls to 80 bucks buy more and so on.
This is provided, you have done work on the company’s future prospects and are confident that the stock will rise to 150 bucks or beyond, at some point. Below is a real life example from a blog, wherein an investor was able to successfully average down/buy on dips.
A safer strategy is averaging up, which is to buy when the stock goes from 80 to 90 bucks. Buy a lot more when it goes beyond 120 and so on. Again, this is based on the assumption that future prospects for the business are good, management is savvy and minority shareholder friendly and the valuations are sane.
And this is a real life example of averaging up, by the same person.
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Hi,
If anyone have HDFC securities account, can you please let me know how to apply for the rights issues. Currently L&T Finance holdings rights issue is open and I do have the shares of that company.
Google search didn’t help much.
Thank you!!
@paran_raja
I did via my bank. ICICI Bank has option to invest online, under IPO, right issues - by entering your DP details you can able to see details of L&T finance.
Most corporate banks has the facility to apply via bank…
You can apply for the Rights Issue and make payment from the Registrar site. Please visit https://web.linkintime.co.in/RightIssues/index.html
Hi,
I read this article on Economic Times. https://economictimes.indiatimes.com/markets/stocks/news/valuation-worry-40-nifty-stocks-at-discount-to-historic-averages/articleshow/80874300.cms
I wanted to ask experienced investors, how reliable is this comparison with historic averages and the hope of Mean Reversion?
Hi,
Is anyone facing issue of not receiving mails on your email ID from VP Forum threads when there is an update / comment, when you have chosen to receive respective type of replies (Watching/Tracking etc)?
I am not receiving mails starting last few days ago, from any of VP Forum threads for which I am supposed to receive.
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Helll,
I have 2 questions egarding recently launched nifty 200 momentum 30 index fund by uti.
1.Those who are into quant systems, how do you find the criteria used for creating the nifty momentum index.
- By what percentage approximately would the higher churn reduce returns compared to a more stable index like the nifty.
I am asking since this fund (or others like it in near future) could be a simple way to allocate part of one’s portfolio to momentum theme without buying individual stocks.
Hi, does anyone know the tool which can show EPS growth for last 3-6 quarters? e.g. If I want to screen for companies where EPS growth for last 6 quarter is >15%, where can I do that? I dont think screener has a filter for it.
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Hi,
How do you buy a stock? Would you buy it in one go or buy it regular intervals? Let us say i allocate 100k to particular stock. Should i buy it at 4 intervals(4*20k) and keep 20k aside for buying when major correction occurs.
Let say I want to buy stock A and consider it is trading at 800. But I would like to buy only when it hits 700.I have seen this for 3 times . It is the case. Should I be always looking at the price? I find it more stressful and not worth it watching the stock price in terminal. I would rather spend time on reading about business than looking at the terminal.
I have been watching the stock for 4 months and whenever it comes to 680 to 720 i buy it in little quantities.
I have studied the stock A very well and the reason why i dont want to buy it at 800 is that due to current hype, let us say dividend announcement, some positive news, it is trading at 800. After a while it comes back to 700.
Should i ignore the noise and buy at any price when stock has long term prospects? Or is this the case that one has to wait calm for a correct price?
@Mani_Starter For scalable businesses, it is better to buy in instalments, typically over 4 quarters or more, because convictions are wrong, more often than not.
So if I wanted to invest 100K into a stock, I would buy for 25k in Q1 and wait for a quarter, at least to see if the company is performing as per what I had expected.
If it meets or exceeds my expectations in Q2, I would buy for another 25k, even if it means buying at a higher price.
If it doesn’t meet my expectations in Q2, I would either exit the stock or continue to hold my existing stock but not buy any more, depending upon the kind of conviction I have in the business.
If the company starts performing in Q3, Q4 or beyond, I wouldn’t hesitate buying the stock and deploying the balance 75k as long as valuations are in reasonable limits.
This ensures our losses and our biases are well within control, should our buy call go wrong from day one.
More often than not, it is better to buy a stock at higher prices as long as earnings have improved than to buy a stock in the hope that the business will perform some day, unless there are very very strong reasons to think so.
I strongly believe, hope is never a good strategy in investing 
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thank you for your help.
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@Mani_Starter Being a student of @barathmukhi I take the above point of his very seriously. Taking liberty to add a bit to what he has already explained, read AR’s and most importantly listen to what the mgt has to say in their concalls. If the Mgt says something and does something else or in the next concall, comes out with a completely new story with no link to what it had already said, then it is better to be careful with such companies. Some companies, walk the talk and this is where most of the money is made.
The thing here is how do you know a business well? Now it doesn’t just come by reading ARs and concalls like how we read for exams for the sake of passing. It mainly comes being a part of the company’s journey by following it all along. When you read main parts in the AR, listen to concalls, whenever they are held after each quarter, you see a movie unfolding about the company in your mind. You will understand their financials, their products etc. better this way by being a part of the journey, than by reading all the ARs and listening concalls in one day and deciding to put all money at once. As and when you move along quarter after quarter, your knowledge of the company improves considerably and you start employing more and more money.
The other things to watch out are -
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price anchoring i.e. being fixated to earlier purchase price. The stock will rarely come to buy price and even if it does, it may be with deteriorating fundamentals
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Averaging down than, averaging up - market is not wrong all the time. So if a stock is continuously falling, unless you are very sure about the business better to avoid. Market knows most of things in advance. This doesn’t apply to March 2020 kind of crash. So average up with improved business.
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Avoiding 52 weeks highs, thinking the stock is expensive - Eg: Page industries from 500 to 30000 has hit countless 52 weeks highs
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Stock has already run up enough in such short span, so now its expensive and not worthy of investment. Also it has run up enough, how more it will go?
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Hope investing - again Barath has explained; Let the company deliver first and then decide to invest than putting money with a hope that it will do deliver.
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Avoiding companies that are leveraged - If the return on capital employed is more than cost of capital, then why not borrow. But be wary of companies that keep on borrowing with uncomfortable debt equity ratio. Debt makes companies on most occasion go belly up.
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screening for companies with high ROCE and ROE - Some companies has the cleanest of balance sheets with excellent ROCE and ROE ratios. These may be the best companies but need not be best investments (screen for highest ROCE/ROE, you will find best MNCs). Try looking for companies with improving ROEs and ROCE. This can be seen in companies which are consistently improving their profits by increasing sales and reducing debt. When this happens, earnings improve and so does ROCE/ROE and as a consequence, stock price sometimes goes of the roof with PE re-rating.
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Jump ship, when you sense trouble - I am very bad at this. Sell your stock and move on even if its at a loss, when you find the company has failed to deliver or some unseen events happen.
11 Likes
Query on unlisted share.
Got below email of share of my parent’s account.
Dear Investor,
Hope you are doing well in these tough times (Covid 19).
We are currently offering to buy the shares of Sterlite Power Transmission Limited at the best market price i.e., Rs. 250 per share. This is the time you were waiting for, to liquidate your investments at the right price.
As per SEBI rules, unlisted shares of a company are freely transferable and can be sold by submitting a Delivery Instruction slip. Following are the steps to move forward:
Step 1: To execute the deal, you need to transfer the shares from your Demat account to Our Demat account (Details mentioned below) via filling the delivery instruction slip (DIS) which is provided by your respective DP.
| DP NAME | DP ID | CLIENT ID |
|---|---|---|
| Stock Holding Corporation of India Ltd (NSDL) | ||
| Stock Holding Corporation of India Ltd (CDSL) |
Step 2: After filling the DIS (Delivery Instruction slip), you need to submit it to your respective DP for execution and your DP shall transfer the shares from your account.
Step 3 : After completing this process kindly send the scan copy of Cancelled Cheque and shareholder’s Pan card so that we can transfer respective amount payable to your bank account through NEFT/RTGS.
Stay Safe! Stay Home!
Best Regards,
Oswal Trading Company Private Limited
oswaltrading dot com/ - their website
- Is this legal way to do transaction for unlisted shares?
- If yes, will it be advisable to sale Sterlite Power Transmission Limited @ Rs. 250?
Thanks in advance.
@Deven Ministry of Corporate Affairs in 2018 has made compulsory the transfer of shares in demat mode. Since the mode of transfer is off market mode for unlisted shares, there is no question of any legal issue arising here. It is permissible.
If you want to get multiple quotes for unlisted shares, you may check https://3adeal.com/ before entering into deal.
NB: You have to get your parent’s shares dematted to execute the transfer. You may approach your stock broker with the original share certificates for dematerialisation.
1 Like
Thank for your reply. This is quite interesting to know more insights and lot to learn from you people.
Last 3 months i have been struggling to buy stock. When decide buy and it goes up, say even 2%, i would be relactant to buy because my mind is saying wait and let the price fall 2% or below and then buy.
Fisher explains it beutiflly in “5. Don’t quibble over eighths and quarters”
“For the small investor wanting to buy only a few hundred shares of
a stock, the rule is very simple. If the stock seems the right one and the
price seems reasonably attractive at current levels, buy “at the market.”
The extra eighth, or quarter, or half point that may be paid is insignificant compared to the profit that will be missed if the stock is not
obtained. Should the stock not have this sort of long-range potential, I
believe the investor should not have decided to buy it in the first place”
Of course i will use limit order.
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@Mani_Starter Price anchoring causes investors way more losses than one can imagine.
In businesses that have long runways, it is better to keep buying at higher prices as and when there is evidence that the management is executing on its stated plan and that the business is on track for growth.
On averaging up, I have not seen a better practical example than this one.
Here’s a guy who buys a stock at 350 bucks and keeps buying it all the way until 5600 bucks. Of course this can be considered a one off case, but in my experience the idea of averaging up works phenomenally well in scalable moated businesses. The caveat is that we should be averaging up only when a business that we’ve invested in, keeps delivering as well as, or better than we expected.
Example # 2 Mr. Ramesh Damani said elsewhere “When a stock goes up from Rs.40 to Rs.800, a smart investor will keep adding at various points, while an average investor may not. Here I sometimes give myself poor marks on that particular trade. I think in self-analysis, you want to be comfortable, and the market gives you money when you are uncomfortable. I don’t want to spoil a running position, so will not do anything and just bask in the glory of it going up; whereas the real smart investors will keep averaging up. To be honest, there are two lacunae in my investing. Firstly, my initial position typically should be much bigger than what it normally is, especially because my portfolio allows it. Secondly, instead of basking in the glory of the stock up and doubling multiple times, I should be adding a bit more aggressively. But you live and learn.”
Example # 3 Prof. Bakshi’s teaching note on Symphony which is available here
Hope this helps
11 Likes
Much better. Thanks.
They say “cut your weeds, water your flowers”. So difficult to follow in a bull run because the flowers are trading at high valuations, is it wise to water them? Is it then not right to cut them? Take for eg, Dixon, Alkyl Amines, Deepak nitrite … No doubt they are fast growers but still the valuations are far beyond what the fundamentals can justify.
What approach does one use in such situations?
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