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[vijkris]

Investment ideas..

ST Sir,

Though i have asked this question earlier in this forum, i'm asking again to understand how a seasoned professional like you would handle the case.

When you buy fundamentally strong equity for long term perspective at higher index levels (example bajaj finance at Rs.800 levels) and the index corrects very deeply till what price will you continue to hold it (in other words, what would be the stop loss) given that it is bought for long term perspective.

Thanks

Few scenarios here as under :

1) I buy the stock and the market goes into correction.Here I will keep my stops at 25%.

2) I buy the stock,it appreciates by 50,60 or more % and then the market corrects before I see the stock has run its potential then I keep stops at important pivot levels which is at my buy price + 50 % of accumulated gains.So basically 50 % gains belong to me and I can risk the remaining 50 %.But I am happy to re-enter a good growth stock if warranted.

3) Market has gone up very steeply and I get a Sequential or Combo sell signal,I will sell and look for a better entry points.

The above has helped me over the years in my long term investments....stoploss could be deep but we must have stops to protect our wealth.

Smart_trade

 

[vijkris]

Investment lessons...

We have a family friend who was a very senior executive in TCS and she has 4-5 Cr worth of TCS share received by her as ESOP .Last 3 years I have been telling her that TCS s a great company but it's growth is stagnating so get into HDFC,HDFC bank,,Bajaj Finance,Maruti motors where profits are growing.......she kept saying that let the TCS share come up then she will sell.....she has inertia in her actions.I too had tons of TCS and Infosys in my portfolio but I shifted to better growth companies.


See where is TCS in last 3 years and where are the other companies mentioned by me. The same point was mentioned by Aswath Damodaran in his interview 2 days ago. According to him we have some old companies which are great companies but they are like a 70 years old man......they have accumulate lots of fat,some ailments etc and he cannot grow like a 25 years old strong man.....

Just sharing few thoughts.....always look for growth in profitability ,that alone drives the stock prices.Growth of 10-12 % is not enough, we need growth of 25-30 % and more.

Smart_trade

 

[travi]

TD sequential/combo attempting to to trade the setup itself.

When we get a set up bar 1 in any direction,market generally continues to make 3-4 more set up bars so alert trader can trade it.But after 3-4 bars set up will make 9 bars is not definite as many setups fail after 4-5 bars and setup in reverse direction starts....so while anticipating set up bars ,keep that in mind.

Smart_trade

 

[travi]

This one is buried deep, I just thought its a great one.

Whenever I see traders learning this method I am reminded of the following opening paragraphs in New Market Wizards by Jack Schwager. It is reproduced below :

Prologue
The Jademaster
One cold winter morning a young man walks five miles through the
snow. He knocks on the Jademaster's door.
The Jademaster answers with a broom in his hand.
"Yes?"
"I want to learn about Jade."
"Very well then, come in out of the cold."
They sit by the fire sipping hot green tea. The Jademaster presses a green stone deeply into the young
man's hand and begins to talk about tree frogs. After a few minutes, the young man interrupts.
"Excuse me, I am here to leam about Jade, not tree frogs."
The Jademaster takes the stone and tells the young man to go home and return in a week. The following
week the young man returns. The Jademaster presses another green stone into the young man's hand and
continues the story. Again, the young man interrupts. Again, the Jade-master sends him home. Weeks pass.
The young man interrupts less and less. The young man also learns to brew the hot green tea, clean up the
kitchen and sweep the floors. Spring comes.
One day, the young man observes, "The stone I hold is not genuine Jade."
I lean back in my chair, savoring the story. My student interrupts.
"OK. OK. That's a great story. I don't see what it has to do with making money. I come to you to find out
about the markets. I want to learn about the bulls and the bears, commodities, stocks, bonds, calls and
options. I want to make big money. You tell me a fable about Jade. What is this? You ..."
"That's all for now. Leave those price charts on the table. Come back next week."
Months pass. My student interrupts less and less as I continue the story of The Trader's Window.
-from The Trader's Window,
ED SEYKOTA

 

[vijkris]

Copying some posts:

Yes Sir. The goal is always to learn.

No one can predict in advance how the stock will perform in future. What things should I be looking at before things are going bad for a company. Few things that came to mind is decreasing profits, debt. Could you please add more on that.

Companies RCOM, DLF looked very good at some point but they did not turn out good. Stocks which lost their value over time.
http://www.moneycontrol.com/news/ma...-stockswhich-investors-lost-4-99_1607981.html

Other members are also welcome to answer.

Some advanced warnings and signs are as under :

1) The sector becomes too competitive with increased Govt regulations.

2) It needs large investments to keep the business going...

3) Frequent change in technology needing large investments.

4) The growth in the sales and profits stagnate or starts going down.

5) The borrowings and interest burden increase rapidly without corresponding growth in business.

6) Return on capital employed drops drastically.

Smart_trade

Da, if we are caught in one of those falling stocks, what would be a good point to get out?

A good stock falling in the form of a correction is fine but if one is caught in a bad stock as mentioned in my post, he must get out as quickly as possible, and preserve the remaining capital, as these stocks keep going down further if we wait for the pullback.

Smart_trade

Thanks so much Da. So for these, do we ignore charts completely?

No, dont ignore charts...for bad companies, they will show downtrend on charts also.

ST