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  #1  
Old 25th January 2011, 07:45 PM
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Default When to Sell?



My holdings are mostly in the small cap sector. I have not followed the following stock market axioms and have burnt my fingers. .

1. Put a stop loss for the holdings and sell if it gets crossed.
2. Never follow a downward moving scrip.
3. Buy only when a scrip starts moving up.
4. Don't fall in love with your scrips!

I bought Jubilant Organosys when it was trading at rs. 355 or so 7 months ago. since then I have been buying it in small lots and now I have 240 shares! all the time it has been moving downwards. now my notional loss is 25%! We retail investors sell when a scrip moves up say 10 or 20% and lose out on further profits. I don't make this mistake now but I am guilty of the above 4 points.

Now my entire portfolio is in the red because of this single scrip!
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  #2  
Old 25th January 2011, 08:22 PM
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How many times did you average the stock?

You need not average stocks after every 5%-10% fall.

Whenever you buy a new stock, you must have a predetermined strategy for the stock.

1. For every position, you should know whether you are trading or investing.
2. If you are a trader, stop-loss is a must.
3. Your averaging levels and quantities should also be predetermined.

-----------------------------------------------------

For a trader, stop-loss is essential.

An investor may or may not keep a stop-loss. For an investor, "value" of a stock increases when the price falls and thus it doesn't make much sense for him to have a price stop-loss. The stop-loss for an investor should be worsening of fundamentals of the company. If the fundamentals change for the worse, the investor should rethink about his investment.

When someone buys a stock, he should also have exit strategy in mind.

A trader should have a stop-loss in mind and a target too. If he wants to ride the bull run in a stock without an upside target, he must use a trailing stop-loss.

Traders as well as investors should also have a predetermined averaging strategy. Before buying a new stock, both should decide at what price levels they will average and in what quantities.

Again after averaging, if the stop-loss for a trader is hit, he should exit.

For an investor, if the price erosion turns out to be more than what he had initially anticipated, he shouldn't average further. If the stock remains subdued for a long period, the investor needs to relook at the fundamentals of the company. If he is unable to explain the price fall, he should conclude that his analysis was incorrect or that the market knows more about the stock than he does. .
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  #3  
Old 25th January 2011, 10:37 PM
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Quote:
Originally Posted by kumar1214 View Post
My holdings are mostly in the small cap sector. I have not followed the following stock market axioms and have burnt my fingers. .

1. Put a stop loss for the holdings and sell if it gets crossed.
2. Never follow a downward moving scrip.
3. Buy only when a scrip starts moving up.
4. Don't fall in love with your scrips!
I have no opinion about the last one, but the first three are garbage.
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  #4  
Old 27th January 2011, 12:09 AM
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Originally Posted by vinvest View Post
I have no opinion about the last one, but the first three are garbage.
Kindly explain your opinion, so that we can get some more knowledge on it.
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  #5  
Old 27th January 2011, 04:28 AM
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Originally Posted by niki_baroda View Post
Kindly explain your opinion, so that we can get some more knowledge on it.
All my opinions are with regard to investing, not trading.

If you think something is worth buying at Rs. 80, how can you think it's not worth buying at Rs. 75. That should be enough to take care of all three points.
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Old 27th January 2011, 05:17 PM
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Originally Posted by vinvest View Post
All my opinions are with regard to investing, not trading.

If you think something is worth buying at Rs. 80, how can you think it's not worth buying at Rs. 75. That should be enough to take care of all three points.
I agree with you. You are absolutely right.

The strategy for investors should be to buy stocks when everyone is against that sector. One should be a visionary when buying stocks for investing.

The most important thing, "buy right and hold tight".

Eg. The entire world is against ADAG currently. But, if you look at the valuations they are quite attractive.

Not all his stocks are good, I like Rel infra and Rel power.

Just be sure about the valuations that you are paying.
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  #7  
Old 27th January 2011, 06:34 PM
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Default buy right

Quote:
Originally Posted by ajitpalsingh View Post
I agree with you. You are absolutely right.

The strategy for investors should be to buy stocks when everyone is against that sector. One should be a visionary when buying stocks for investing.

The most important thing, "buy right and hold tight".

Eg. The entire world is against ADAG currently. But, if you look at the valuations they are quite attractive.

Not all his stocks are good, I like Rel infra and Rel power.

Just be sure about the valuations that you are paying.

Well, I still stand by my 4 points. 'buy right and hold tight' is quite ok; but when to buy when the scrip is going down is a big question; so a stop loss for even an investor is a must.

Kothari Industries, a plantation co. scrip was popular 20 years ago. the elder Kothari passed away and his sons were into court battles. The scrip is not being traded anymore. a stop loss would have saved me some money.

Many people also sell for a lesser profit. That is the bane of retail investors: buying near a peak and selling too soon; a case in point is empee sugars. I had bought it at about rs. 8; when the price rose to about 16 I sold it. It's price rose and rose and now it is trading near rs. 65. covering the sale was a possibility.
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  #8  
Old 27th January 2011, 07:11 PM
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Originally Posted by ajitpalsingh View Post
Eg. The entire world is against ADAG currently. But, if you look at the valuations they are quite attractive.

Not all his stocks are good, I like Rel infra and Rel power.

Just be sure about the valuations that you are paying.
Reliance Power is trading at an earnings multiple of close to 60. It's not paying any dividend. Has not had much profit or sales growth this year. Current Ratio doesn't look good. Net current assets is negative.

I don't see how it's valuation is attractive?

Reliance Infra looks much better, though.

How linked are the ADAG companies though. If Rel Power has major problems, can it take down Reliance Infra with it?
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  #9  
Old 27th January 2011, 08:30 PM
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Originally Posted by vinvest View Post
Reliance Power is trading at an earnings multiple of close to 60. It's not paying any dividend. Has not had much profit or sales growth this year. Current Ratio doesn't look good. Net current assets is negative.

I don't see how it's valuation is attractive?

Reliance Infra looks much better, though.

How linked are the ADAG companies though. If Rel Power has major problems, can it take down Reliance Infra with it?
Rpower does not have much operating plants currently. Therefore, the current valuations don't look attractive.

I am not too bullish on rpower and therefore I don't have it in my portfolio. I am waiting for a time correction or price correction in that stock before entering into the stock. Other details, I am posting on the rpower thread, otherwise Alchemist will delete the post.

I am much more bullish on rinfra though. I have it in my portfolio and will continue to add that. According to me, it offers a large amount of margin of safety. I have posted about it already on rinfra thread.

As far as rinfra holding in rpower is concerned, it is about 38% after rpower and rnrl merger.

At cmp, it is worth Rs 15000 crores. You need to give a holding company discount as well. I don't see it impacting much to rinfra on the downside because rinfra in itself is a great company. Their only doubt is about:-

1) Feasability of the road projects they have bid for- I seriously doubt it. But, it does not offer much risk, because their equity contribution to Reliance roads will be less than Rs 2000 crores. The one who should be worried, should be the companies who have given loans to Reliance roads pvt. ltd.. Liability is limited. But, I have faith in their management who can't take idiotic decissions. They have one of the best management in the current listed companies.
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  #10  
Old 28th January 2011, 11:56 AM
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But, I have faith in their management who can't take idiotic decissions. They have one of the best management in the current listed companies.
I hope you are not kidding with our forum members .

By the way me too one of the victim to ADAG group stocks
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  #11  
Old 28th January 2011, 12:34 PM
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Originally Posted by kumar1214 View Post
Well, I still stand by my 4 points. 'buy right and hold tight' is quite ok; but when to buy when the scrip is going down is a big question; so a stop loss for even an investor is a must.
Can you explain why in the absence of other factors, if a stock was worth buying at 100, it suddenly becomes a sell at 80?

Quote:
Originally Posted by kumar1214 View Post
Kothari Industries, a plantation co. scrip was popular 20 years ago. the elder Kothari passed away and his sons were into court battles. The scrip is not being traded anymore. a stop loss would have saved me some money.
You can find some such evidence for any rule you lay down.

For eg. I will lay down a rule that - any stock is worth buying when it touch Rs. 25 and then give you an example of which would have made a lot of money if you had bought it at Rs. 25.
Quote:
Originally Posted by kumar1214 View Post
Many people also sell for a lesser profit. That is the bane of retail investors: buying near a peak and selling too soon; a case in point is empee sugars. I had bought it at about rs. 8; when the price rose to about 16 I sold it. It's price rose and rose and now it is trading near rs. 65. covering the sale was a possibility.
I am sure there are a lot of stocks which rose from 8 to 16 & then went to 6.

So I don't understand what's your point?
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