Category: Trading

Timing an Index Fund

Passive index investing is gaining momentum (pun intended) among millennials. One of the questions that popped into my head

what would be better to buy an index hold or buy and sell using some easy-to-follow quantitative rule?

I ran some numbers

  • ETF – ASX VAS, Invests in Top 300 companies in Australia, It’s our version of USA S&P 500 or NIFTY 50 in India
  • Time Frame – Last 5 years
  • Strategy 1 – Bold and Hold (100 units)
  • Strategy 2 – Buy 100 Units if Current Market Price goes above Simple Moving Average (SMA 20) and Sell 100 Units if Current Market Price goes below Simple Moving Average (SMA 20)
  • The first entry is the same for both strategies

If you are a color person then every time the blue line (price) goes above the red line (SMA 20) you buy and sell if the blue line falls below the red line you sell

The initial results are unbelievable, Strategy 2 beats Strategy 1 by 2X

Also following this quantitative technique one can almost perfectly be saved from the covid crash. Given I was interested in the initial results I wanted to understand what would be benefits in real life … Read the rest

Did the Peter Lynch Screener worked ?

Did the Peter Lynch Screener worked ?

In June 2014, I created a stock screener after re reading ‘One up on wall street’ by Peter lynch. You can read the old post here now lets review how those stocks performed vis a vis broader markets

1 Tata Consultancy Services Ltd. 2213.55 2696 21.80%
2 Lupin Ltd. 983.4 1838 86.90%
3 Amara Raja Batteries Ltd. 491.45 902 83.54%
4 MindTree Ltd. 807.65 1466 81.51%
5 DB Corp Ltd. 299.7 391 30.46%
6 CMC Ltd. 1689.2 2023 19.76%
7 Persistent Systems Ltd. 1060.75 1870 76.29%
8 Lakshmi Machine Works Ltd. 3697.35 3794 2.61%
9 Monsanto India Ltd. 2131.5 3282 53.98%
10 eClerx Services Ltd. 1169.15 1572 34.46%
11 NIIT Technologies Ltd. 427.5 417 -2.46%
12 Finolex Cables Ltd. 162.1 279 72.12%
13 Dhanuka Agritech Ltd. 380.35 642 68.79%
14 Zensar Technologies Ltd. 394.65 731 85.23%
15 VST Tillers Tractors Ltd. 1818.15 1592 -12.44%
Average return (equal weight portfolio) 46.84%
CNX Midcap 25.36%
BSE Small Cap 18.42%
Sensex 16.73%

The screener outperformed broader markets by some distance. Now as with any good screen based trading strategies you need replace the old guard with new performers, I am doing it after nine months you … Read the rest

Trend Investing – Second Take

On 25th may 2014 we wrote about how traders can ride the Modi momentum in large cap companies, we created a management and momentum box, read the old post here

After 9 months, let’s look at some of the interesting data, all the quadrant has been labelled as Q1,Q2,Q3 & Q4 as per below for ease of understanding

Momentum and Mangement box_editedThis is the average returns made by all four quadrant

 

Modified-1

We wrote in May ,

“The underlying theory is simple good companies with capable management will be able to leverage the modified environment to their advantage much faster than good companies with shallow management “

It did came out true as well with Q2 having highest return to date, both Q3 and Q4 on an average were not able to beat return to date market (Sensex) returns

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Don’t be scared of stocks hitting 52 week highs

If you are a value investor and short-term investing is an untouchable concept for you perhaps you will not find much interest in below post

As a traditional investor we don’t know pay attention to stocks hitting 52 weeks highs on a regular basis as they are considered to be hot stocks or tip stocks gamed by speculators. But ignoring such stocks in not a great idea if you are a practical investor

Imagine you were a retail investor and had seen Symphony Ltd mount back to back 52-week highs in Jan’14 . Due to the way we are programmed we would ignore such info and look for other bargains in the market

Have a look what happened in one year

sym-52

In last 365 days the stock has hit a new 52 week highs (the green dots) 67 times. Almost 1.25 times a week

What stops us from buying 52-week high stocks ?

Anchoring bias – The anchoring effect describes how we can be influenced, or “anchored,” on specific information, when stocks are at a 52-week high, this creates a psychological barrier of sorts, beyond which investors think the stock is unlikely to go. Investors discount the possibility that the … Read the rest

Trend Investing

NaMO

 

Even though there are still few hours remaining for coronation of Narendra Modi as India’s next prime minister, the stocks markets have behaved as if India is already transformed. This is the idiosyncrasy of markets they run so high on sentiments. The ground realities haven’t changed much since Manmohan Singh left office, so the exuberance on stock markets for an outsider is very tempting.

Am I the one who has missed the boat ?

Can I still enter markets at this level ?

Where should I put my money – on the stock that has risen 50% in last one month or Something which is still to be played out ?

If these are the questions haunting you – Read on

 First getting the facts right – Stock market is on song and every Suresh, Naresh and Pranesh is making money in stocks in 2014. The benchmark indices have risen almost 8% in last one month with some stocks like BHEL up astonishingly 45% in this period . These are maniac times and it is very exciting to be a stock trader these days. But what about an outsider has he really missed boat ?

My answer is NO, … Read the rest

Applying Nicholas Darvas’s trading principles to Indian equity markets

 

“Long before the internet provided real-time stock quotes and online brokers offered instant fills, Nicolas Darvas managed to grow a $36,000 investment into more than $2.25 million in a three-year period. While on a worldwide dance tour in the 1950s, he relied solely on Barron’s, a weekly newspaper, and telegrams to his full-service broker to get quotes and place orders. Although Darvas developed his stock selection techniques many years ago and in a different investing environment, his strategy has withstood the test of time and is a tool that every modern day trader should consider adapting.” – Investopedia

If you are a stock trader, you need to read this amazing book How I Made 2,000,000 in the Stock Market  by Nicholas Darvas on his trading styles and how he made 2.5 million dollars in span of three years. From making novice mistakes to taking astounding profits this book is quite a roller coaster.

I have used the below example of CARE ratings a stock listed on NSE and BSE to elucidate how Darvas’s box theory holds good in current times.

How Darvas used to identify a stock to trade

I decided that if a usually inactive stock suddenly becomes

Read the rest