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Enticed by falling stock prices, I was tring to create a "shopping List".
The criteria was:
- Must be NIFTY stock
- Low debt
- Good ROCE/RONW
- Good growth over the past 3-4 years
- Not be a bank
- Not make cigarettes / liquor
After some numerical analysis based on moneycontrol.com data, landed up with the following list:
Bajaj Auto
BHEL
Coal India
Sesa Goa
Siemens
Sun Pharma
TCS
If you were to pick ONE stock out of these for long-term investment, which would you choose?
My current inclination is towards Bajaj Auto as it is driven by local consumption and has a strong brand.
Not sure what Siemends does and if it is India driven or export driven. Same for Sun Pharma.
Enticed by falling stock prices, I was tring to create a "shopping List".
The criteria was:
- Must be NIFTY stock
- Low debt
- Good ROCE/RONW
- Good growth over the past 3-4 years
- Not be a bank
- Not make cigarettes / liquor
After some numerical analysis based on moneycontrol.com data, landed up with the following list:
Bajaj Auto
BHEL Coal India
Sesa Goa
Siemens
Sun Pharma
TCS
If you were to pick ONE stock out of these for long-term investment, which would you choose?
My current inclination is towards Bajaj Auto as it is driven by local consumption and has a strong brand.
Not sure what Siemens does and if it is India driven or export driven. Same for Sun Pharma.
A few observations regarding your portfolio. For a growing economy like India the banking sector will outperform the broader market by and large. Volatility cannot be a reason to avoid a prospective sector.
Please do not use moneycontrol data, as they do not use consolidated figures and is often misleading.
The comparisons page from Edelweiss is pretty useful to look at everything at one go. For Bajaj Auto check this
My long term picks would be :
HDFC Bank
Larsen & Toubro
Bharti Airtel
Coal India
ITC Limited. ( Consider as pure play FMCG and not cigarette)
Cigarettes is one business with so much free cash flow and pricing power that it is hard to ignore from investor's point of view.
Even I am a non-smoker and truly dislike smoking, but investment and smoking are two different domains altogether.
Just study Philip Morris international, with their sustainable cash flows they acquired so many companies over the years.
Even in ITC, they are channeling so much cash to non-cigarette FMCG.
A few observations regarding your portfolio. For a growing economy like India the banking sector will outperform the broader market by and large. Volatility cannot be a reason to avoid a prospective sector.
I feel there is some pain in store for India's banking sector in the next 3-4 years. HDFC Bank is the best banking pick in the NIFTY but it has too much FII ownership. While FIIs are dumping India stocks, I want to stay away. I may buy HDFC Bank later if I feel that FII dumping risk has been reduced.
Quote:
Originally Posted by Prudent_Investor
Please do not use moneycontrol data, as they do not use consolidated figures and is often misleading.
The comparisons page from Edelweiss is pretty useful to look at everything at one go. For Bajaj Auto check this
Thanks. This is really helpful!
Quote:
Originally Posted by Prudent_Investor
Even I am a non-smoker and truly dislike smoking, but investment and smoking are two different domains altogether.
At a fundamental level stocks represent ownership. When you buy ITC stock you become part owner of a business that makes cigarettes. I have a problem with that.
I feel there is some pain in store for India's banking sector in the next 3-4 years. HDFC Bank is the best banking pick in the NIFTY but it has too much FII ownership. While FIIs are dumping India stocks, I want to stay away. I may buy HDFC Bank later if I feel that FII dumping risk has been reduced.
Thanks. This is really helpful!
At a fundamental level stocks represent ownership. When you buy ITC stock you become part owner of a business that makes cigarettes. I have a problem with that.
I think you should have no qualm while investing in stocks. A few years ago the ITC share was quoting at a lower rate; but I bypassed buying it for the above reasons and regretted it later.
I also have 350 shares of nhpc but bought at rs. 35; I don't know when it will reach this figure if at all!
This stock is never going to give "fantastic" returns. I think 10% per year is the limit. By this, it's going to be a long time before it reaches Rs 35.
Quote:
Originally Posted by kumar1214
I think you should have no qualm while investing in stocks. A few years ago the ITC share was quoting at a lower rate; but I bypassed buying it for the above reasons and regretted it later.
As I have mentioned before, owning stock means owning part of the business. I have no doubt ITC will give good returns but I prefer lower returns instead of making cigarettes.
I had been very busy at work and did not pay attention to the market.
I now find that my NIFTY shorts are showing a huge loss
That's what you get when you play with derivatives and don't pay attention
Now have to decide whether to book loss or hope for some correction by Feb expiry.
It is suicidal to go for naked shorts in this kind of a market.
You should have bought adequate Feb Call Options to cover your position. That way you would have enjoyed unlimited profits on the downside but your losses would have been capped at the upside.
It is suicidal to go for naked shorts in this kind of a market.
You should have bought adequate Feb Call Options to cover your position. That way you would have enjoyed unlimited profits on the downside but your losses would have been capped at the upside.
I have no clue of options. How would the case you indicated work? It sounds too good to be true that you get umlimited benefit on one side and losses get capped.
I have no clue of options. How would the case you indicated work? It sounds too good to be true that you get umlimited benefit on one side and losses get capped.
With very high volatility (as there was in Dec end) it is extremely risky to go for naked shorts. A covered short would have worked much better for you.
You shorted one Mini Nifty Feb Future @4742 and other @4775.
Now you had a exposure of -40 units @4758.
Suppose you want to keep a stop loss and buy an out-of-the-money call option of 4800 for 50 Rs premium (say). So total outgo = 50X40=2000.(option premium)
Now there are three possible scenarios.
A) Nifty Feb expires @ 4750
Profit from Futures = 8 X 40 = 320
Loss from Options = -2000 (Options expire worthless)
------------------------------------
Net P&L = -1680
B) Nifty Feb expires @ 5400
Loss from Futures = -642 X 40 = -25680
Profit from Options = 600 X 40 = 24000-2000 (premium amount)=+22000
------------------------------------
Net P&L = -3680
C) Nifty Feb expires @ 4400
Profit from Futures = 358 * 60 = 21480
Loss from Options = -2000 (Options expire worthless)
------------------------------------
Net P&L = 19480.
So using this strategy your downside is limited to max 3680 Rs loss while you have unlimited upside ( 19480 in this case)
Suppose you want to keep a stop loss and buy an out-of-the-money call option of 4800 for 50 Rs premium (say). So total outgo = 50X40=2000.(option premium)
Quote:
Originally Posted by sudhashbahu
I have no clue of options. How would the case you indicated work? It sounds too good to be true that you get unlimited benefit on one side and losses get capped.
Except that the 4800 Feb call with Nifty spot @4750 (in early Jan) and almost a month and a half to expiry, would not be trading @ Rs.50. Maybe closer to Rs.200 (Try a options calculator).
Or try for instance, the 5400 March call (Nifty spot @5380) as of today is Rs.180. The premium paid is closer to Rs. 9,000 and not Rs.2000. If it were so cute, everyone would be buying calls @ Rs.50 and that would drive the price up itself.
So, you would hedge a part of your losses but also give up an equivalent part of your gains. Like you know, if it sounds too good to be true, it probably is.
P.S. I have used Nifty Spot to illustrate my point here. Using Minnifty options would only make it worse since there seems to be absolutely no liquidity and asking price for Mar 5400 call is Rs. 225
Last edited by Rainman : 11th February 2012 at 11:41 AM.
You made a loss of over Rs 30,000 on a mere 2 Mini-Nifty contracts. Here are a few points I have learnt from your trade.
1) Stop Loss, Stop Loss, Stop Loss. Whenever a trade is set up, Alexander Elder always insists we must first know when to exit should the trade not go according to plan.
2) One can't afford not to pay attention to the market when they are having open positions, especially if those positions are in the derivatives segment.
3) Proper money management. (It is one of the three legs of the stool on which a trader sits). I don't know how big your trading account is but one must never lose more than 2% of their trading capital on a single trade and should not risk more than 6% on all the trades.
4) All trades must be backed by proper technical reasons. (the second leg) When you put up the trade @ about 4750 even though the market was in an intermediate downtrend; the short term trend was upwards, the market was oversold and the RSI was heading upwards all of which point to sit on the sidelines (or if you are an aggressive trader, to go long - which I would not have recommended then because 'conservative trading' dictates to look for opportunities to set up shorting trades in an intermediate downtrend.)
http://img207.imageshack.us/img207/8026/bakedcharty.png shows a short term uptrend, rising volume, rising RSI. (There may be other complex technical indicators supporting your shorting trade but I believe in simple indicators.)
5) You maybe knowing everything I have said above as you are much more experienced than me in the markets but still you made those errors, this is where the third and most important leg of the stool comes into focus, the disciplined mind.
This above wasn't meant to criticize but to merely learn from your trading mistakes and make us a better trader in the future.
- arcus.
Last edited by arcus : 24th February 2012 at 10:39 AM.
You made a loss of over Rs 30,000 on a mere 2 Mini-Nifty contracts. Here are a few points I have learnt from your trade.
1) Stop Loss, Stop Loss, Stop Loss. Whenever a trade is set up, Alexander Elder always insists we must first know when to exit should the trade not go according to plan.
2) One can't afford not to pay attention to the market when they are having open positions, especially if those positions are in the derivatives segment.
3) Proper money management. (It is one of the three legs of the stool on which a trader sits). I don't know how big your trading account is but one must never lose more than 2% of their trading capital on a single trade and should not risk more than 6% on all the trades.
4) All trades must be backed by proper technical reasons. (the second leg) When you put up the trade @ about 4750 even though the market was in an intermediate downtrend; the short term trend was upwards, the market was oversold and the RSI was heading upwards all of which point to sit on the sidelines (or if you are an aggressive trader, to go long - which I would not have recommended then because 'conservative trading' dictates to look for opportunities to set up shorting trades in an intermediate downtrend.)
http://img207.imageshack.us/img207/8026/bakedcharty.png shows a short term uptrend, rising volume, rising RSI. (There may be other complex technical indicators supporting your shorting trade but I believe in simple indicators.)
5) You maybe knowing everything I have said above as you are much more experienced than me in the markets but still you made those errors, this is where the third and most important leg of the stool comes into focus, the disciplined mind.
This above wasn't meant to criticize but to merely learn from your trading mistakes and make us a better trader in the future.
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