Stocks for the long and short term portfolio

[Einstein]

not for next 5 years.

-from steel background.

 

[jamit_05]

Purchased SBIN @ 1800
Will exit when it hits resistance of 2400 Or at break even after it touches 1650.

I don't think one needs to confirm fundamentals of SBIN.

 

[dineshN]

Hi Jamit

Could you please review Emami Ltd for me, at your convenience? Reading your views for other stocks, I would like to know future prospects for this stock.

 

[Mr.G]

How are you using charts and resistances with fundamental? Please explain your approach.

 

[jamit_05]

How are you using charts and resistances with fundamental? Please explain your approach.

F.A. is used as the FIRST screen. A pricing model called Discounted Cash Flow (DCF) is used to get the valuation. And then the Annual Report is referred to to get the basic "health" of the company.

More discretion is used, for ex. the first preference is to not even consider a company whose past is even mildly shady. Some companies are big on acquisition, like Tata Steel, Opto Circuits, Hindalco etc are set for SIP at lowest support.

Once the company is safe, and does not look like one headed for murky waters, then TA comes into picture. The support must be lower than DCF-Margin of Safety. Then a purchasing decision is made.

 

[Mr.G]

Please give a detailed explanation your method is very good. The biggest thing I face as a fundamentalist is that most of the time my return sufferers due to wrong timing in right stock. You seem to have over come that problem.

 

[jamit_05]

Please give a detailed explanation your method is very good. The biggest thing I face as a fundamentalist is that most of the time my return sufferers due to wrong timing in right stock. You seem to have over come that problem.

Bang on! I am glad to read your reply and know that u r interested to learn, just as I am to share.

My overall approach is very simplistic. I want the best bargain for my cash. I do not mind waiting (hence, have looked into bond funds as well).

DCF pricing model is not realistic and not best suited for individuals. To time entries looking at the charts is best. Because the price has to and always respects Strong supports.

Lets look at a live ex.

I always wanted to buy bhel. Cuz its dividend giver and is a good business. DCF showed buy at Rs.330. But I hd my doubts since capital good and psu sectors are suffering and BHEL is BOTH.

So once price reached DCF value, I tracked the chart for momentum, which was madly bearish on the weekly chart!

I realized, I must wait for a strong support which can absorb this bearish momentum.... and that supportive band was

118 to 196 which is 30% lower than DCF value.

I waited. And finally... price touches in May '13. Then came detailed mapping of the chart to finally time the entry where the fun really begins... but it is a long and will be uninteresting to you since you are a FA person and not a chart person... short story... sensible entry price for BHEL is now 162.

I would have zero discomfort if price fell another 50% from here.

Just like that, I have some other stocks lined up... it is very interesting you see.

 

[Mr.G]

Bang on! I am glad to read your reply and know that u r interested to learn, just as I am to share.

My overall approach is very simplistic. I want the best bargain for my cash. I do not mind waiting (hence, have looked into bond funds as well).

DCF pricing model is not realistic and not best suited for individuals. To time entries looking at the charts is best. Because the price has to and always respects Strong supports.

Lets look at a live ex.

I always wanted to buy bhel. Cuz its dividend giver and is a good business. DCF showed buy at Rs.330. But I hd my doubts since capital good and psu sectors are suffering and BHEL is BOTH.

So once price reached DCF value, I tracked the chart for momentum, which was madly bearish on the weekly chart!

I realized, I must wait for a strong support which can absorb this bearish momentum.... and that supportive band was

118 to 196 which is 30% lower than DCF value.

I waited. And finally... price touches in May '13. Then came detailed mapping of the chart to finally time the entry where the fun really begins... but it is a long and will be uninteresting to you since you are a FA person and not a chart person... short story... sensible entry price for BHEL is now 162.

I would have zero discomfort if price fell another 50% from here.

Just like that, I have some other stocks lined up... it is very interesting you see.

Have you tried using discounted dividend method instead of free cash? Because dividend is even more free then free cash on books as you get it in your pocket. And it is more reliable and predictable. So you use support and resistance to time your fundamental trades. What happens when it never hits a support? What do you do when it hits resistance?

 

[jamit_05]

Have you tried using discounted dividend method instead of free cash? Because dividend is even more free then free cash on books as you get it in your pocket. And it is more reliable and predictable. So you use support and resistance to time your fundamental trades. What happens when it never hits a support? What do you do when it hits resistance?

It does happen that price of a stock in my list does not hit for an extend period. For ex... I have been waiting every since for Gruh to come down... it has not... it reversed back to upside in May '13.

Then I have to work for my money... which is when it really gets interesting and twisted...

 

[jamit_05]

Have you tried using discounted dividend method instead of free cash? Because dividend is even more free then free cash on books as you get it in your pocket. And it is more reliable and predictable. So you use support and resistance to time your fundamental trades. What happens when it never hits a support? What do you do when it hits resistance?

I don't do this Excel Analysis myself... I outsource it. There are plethora of good and reliable sources for such information. Nothing special really. The final price of purchase I get is after considering a few price models including the two we talked of.

My originality comes in application of the concept of Margin Of Safety.