Invest Without Emotions
A flat week for our portfolio, we were down 0.2%.
As the NIFTY was down 0.88% over the week, our momentum portfolio was down only 0.2% outperforming NIFTY by over half a percentage. Continuing the process of following a systematic repeatable process, with appropriate risk management steps came in real handy.
Talk to us about our Quantitative Portfolio Strategy Execution.
The NIFTY ended on a negative tone, drifting down -0.88% for the week.
Biggest losers were BHARTIARTL (-8.63%), TATAMOTORS (-6.43%) and LT (-4.84%).
And the biggest winners were AXISBANK (+8.90%), COALINDIA (+4.59%) and CIPLA (+4.15%).
Decliners eclipsed advancers 32 vs 18
Gold: -0.64%, Banks: +0.42%. Infrastructure: -3.87%,
Net FII flows for the week: $885.64 mm (Equity) and $225.01 mm (Debt)
Today’s pick is BIOCON [stockquote]BIOCON[/stockquote]. The stock started the year with a sharp up-trend taking the stock up to Rs. 300. It then started its downward move to fall to Rs. 220 levels by mid-May. Since then the stock has been on an uptrend and saw its 52 weeks high of Rs. 320 level in November. The stock however underwent flag formation which broke down early January, and the stock is currently tracing back the losses. In the last three months, the stock has moved +1% vs. +6% of the Nifty’s.
Oscillators RSI and CMO are in no man’s land. The stock is trading in the middle of Bollinger band not suggesting any directional move. However, short-term technical just saw 4×9 bullish cross-over.
The MACD line has just penetrated the signal line, giving out a bullish signal for the stock. Long-term and short-term GMMA lines are moving very close to each other and hence are not giving any directional bias for the stock.
BIOCON’s average correlation with the Nifty is 0.60 which is positive and strong. The scrip will be replicating movement of Nifty. [stockquote]NIFTYBEES[/stockquote]
BIOCON has a historical volatility in the range of 0.3 to 0.6. The scrip’s volatility is currently in the lower end of the range.
Given these technicals, we suggest a short-term BUY. For the long-term, we will have to wait for the GMMA lines to spread out to give any direction for future. However, for risk management we suggest having trailing stop-losses in case trend-reversal were to take place.
Sometimes, fundamental analysis and technical analysis will be at odds with each other. Nilkamal [stockquote]NILKAMAL[/stockquote] is a case in point.
Looking at its long term chart, one could argue that there is a slight uptrend. It seems like the stock tested the trend a few times and managed to hang on to it. However, is it the best possible bet amongst all other stocks you could possibly invest in? Lets see what Globe Capital has to say about it:
Of these, only #3 and #4 are about the future of the company, #1 and #2 are probably already priced in. However, without knowing how much of its revenue and profitability is derived from MHEB, it is impossible to take a call based it.
To its credit, Nilkamal has tried to get out of the commodity plastic furniture business through its @home brand. However, with an operating profit of Rs. 34.39 crores on net sales of 380.47 crores (9% margin), I think it deserves the ~5 PE it is trading at.
Short-term technicals don’t hold out much hope either. Even though RSI is at over sold levels, MACD and Abhishek’s favorite Guppy Lines are not showing any upside.
To summarize: Avoid Nilkamal. There are bigger fish in the sea.
Abhishek will be back on Friday with his Technical Analysis posts.
Today’s pick is HATHWAY [stockquote]HATHWAY[/stockquote]. The stock has been on an uptrend since the starting of the year. It saw its 52 week high of Rs. 306 in December and since then has been undergoing a flag formation. In the last three months, the stock has moved +11% vs. +8% of the Nifty’s.
Oscillators RSI and CMO are hovering close to over-sold territory suggesting an imminent bullish move for the stock. The stock is trading in the lower end of Bollinger band directing stock towards a bullish move. Although, short-term technical just saw 9×4 bearish cross-over.
The MACD line and signal line are moving very close to each other and hence are unable to suggest any short-term direction. Long-term GMMA lines are fanning out from each other and hence are giving a bullish bias for the stock.
HATHWAY’s average correlation with the Nifty is 0.07 which is positive. The scrip will be not be replicating movement of Nifty. [stockquote]NIFTYBEES[/stockquote]
HATHWAY has a historical volatility in the range of 0.6 to 1.4. The scrip’s volatility is currently in the lower end of the range.
From a fundamental point of view, Globe Capital has a BUY on HATHWAY. They expect that the company will be in a better position to capture the growth opportunity led by the structural changes in cable distribution and implementation of digitization.
Given these technicals, we suggest a short-term BUY. Although, a longer term call in any direction could be taken once a decisive breakout from the current flag takes place. Also, we suggest having trailing stop-losses in case trend-reversal were to take place.
