BlogTurtle Wealth

When to sell?

In a market reaching all-time highs, with the NIFTY 500 showing a 10 per cent increase in the current quarter and a remarkable 22 per cent in the current calendar year, investors find themselves torn between excitement and apprehension. Despite robust GDP growth, stable inflation, and a bullish outlook for India, concerns linger about the unexpected market rally. As the CEO and Fund Manager of a USD 100 million PMS Fund, I observe a cautious sentiment prevailing in the market.

Contrary to expectations, there is no euphoria; instead, investors seem more fearful than excited about the market’s surprising ascent. A closer look at NIFTY 500 from 2017 to 2022 reveals a prolonged consolidation, with a significant doubling down only occurring post-2020.

Examining NIFTY 50, where the top 10 stocks contribute over 50 per cent of the weightage, reveals that eight out of these ten have been underperformers. Interestingly, it’s the broader markets that have exhibited more robust performance than the major indices.

However, the market does not seem to be in an oversold zone, considering three crucial parameters: 

* Price
* Emotion
* Valuation

In all three aspects, the market does not show signs of being overbought. As the saying goes, “There are decades when nothing happens, and there are months when decades happen,” and this holds true for the stock market. Understanding that the market operates on an 80-20 principle—80 per cent of the time providing 20 per cent returns and vice versa—investors must navigate the unpredictable nature of market movements.

A case in point is PFC, a top performer in NIFTY 500 this calendar year, showcasing a 400-per cent increase. However, over the last 15 years, it remained at the same price despite consistent YoY profits. Timing the market is challenging, and deciding when to exit poses a million-dollar question. To address this, we propose two quantifiable approaches.

  1. 200 EMA Indicator: Utilizing the simple yet effective 200 EMA indicator, which is available for free on various platforms, can guide decision-making. Any stock trading above the 200 EMA is considered a hold, irrespective of the reasons for selling. The 200 EMA acts as a powerful tool in gauging a stock’s potential and works consistently across various assets worldwide.
  2. Outperformance Assessment: The primary reason for investing in stocks is to outperform the market index. Regularly evaluating a stock’s performance relative to NIFTY 500 over a one-year horizon provides insights. If a stock consistently outperforms, it indicates its potential to continue delivering positive results.

A strategic approach involves identifying stocks that both underperform NIFTY 500 and fall below the 200 EMA for potential exits. Swapping such stocks with outperformers can optimize portfolio performance, akin to building a winning cricket team with top-performing players.

Understanding the simplicity and precision of these approaches, investors can make informed decisions about trimming, exiting, or holding their investments. It’s a strategic move toward sustainable wealth creation in the ever-evolving landscape of the stock market.

I hope this will create excellent value for your further wealth-creation journey.

Rohan Mehta,
CEO and Fund Manager at Turtle Wealth Management Pvt Ltd.

BlogTurtle Wealth

The Aluminium Buzz

Aluminum prices have been rising steadily since the beginning of 2021 but in the past three weeks, the metal has become about 14 percent more costly, and touched $3,000 per tonne, the highest since 2008.

The behavior of a company’s stock usually reflects the performance of the underlying company. When a company performs well and generates earnings, its stock price rises, which further increases the stock’s demand, which further increases the stock price. This positive loop continues until the stock price reaches a point where it may correct for two primary reasons: the valuation or earnings peaks.

Short-Term vs. Long-Term Corrections

When the valuation peaks but earnings are still strong, the stock might enter a correction period lasting a few years. After this period, it can bounce back. These are short-term corrections, and one should not exit the company during this time. The resilience and strength of the underlying business often lead to a recovery, making patience a valuable trait for investors.

However, when earnings peak, the correction phase tends to be much longer. This extended correction indicates that the company needs time to restructure, innovate, or find new growth avenues. When a company’s stock price then again reaches and surpasses its previous high, it signifies that the company has entered a new era and is now more capable of generating higher profits.

The Indian Market’s Emergence from Prolonged Correction

Consider if the entire Indian market has emerged from a prolonged correction. By observing the price trends of major listed companies, many have reached new highs, surpassing their previous multi-year highs, and entered a structural bull run in the last two to three years. The indices also reflect this trend, signifying a broader market movement.

What Does This Signify?

It shows that we are in a structural bull market. Companies from various sectors are demonstrating growth. Examining earnings reveals that, in just three and a half years, the corporate profit-to-GDP ratio has almost doubled. In the Nifty 500, nearly 170 companies have entered a structural bull market after long periods of consolidation (five or more years where the price went nowhere). This suggests that one-third of the Nifty 500 companies have experienced a turnaround.

What to Do in a Structural Bull Market?

In a bull market, at every point, you may not believe that prices can go up from here, and the market continuously proves you wrong by going higher. As proud price followers at Turtle, we follow the price without any bias. This approach has led us to be part of some of the best-performing multi-bagger stories, which we have experienced with public money.

  1. Always Be in the Game: In every market condition, stay invested because you don’t know when and where a big move will come. According to RJ’s sayings, when you are less confident, be 100% invested in the market, and when you are confident, be more than 100% in the market.
  2. Don’t Miss the Best Days: Missing some of the best days can significantly change your returns. Data supports that missing these days can drastically affect your overall returns.
  3. Don’t Focus on Downside, Embrace the Uncertainty of Unlimited Upside: To participate in the market, you need cash, courage, and conviction. Cash and conviction you can get easily, but courage is something that comes from practice. If you only see how much you are going to lose, you can never enjoy the upside. Loss aversion makes you cut your profits and stay in loss. Instead, when you realize that the upside is unlimited and if you are right, you win by multifold. Focusing on unlimited upside gives you the courage to participate in the market.
Conclusion

Navigating a bull market requires understanding how stock prices reflect company performance and broader market trends. Companies entering a bull phase demonstrate strong performance, creating a positive cycle of rising stock prices and increasing demand. While corrections are inevitable, resilient businesses often recover and reach new highs. The recent emergence of the Indian market from prolonged correction highlights significant growth potential, with many companies reaching new highs. Staying invested, embracing market uncertainty, and focusing on potential upside rather than downside can lead to substantial returns. By following market trends without bias, investors can capitalize on the continuous opportunities presented by a structural bull market.

– Jaymin Shahukar
Quant Research Analyst

Investments in securities are subject to market risk and there is no assurance Or guarantee of the objectives of the Portfolio being achieved or the safety of the corpus. Past performance does not guarantee future performance. Investors must keep in mind that the mentioned statements/presentation cannot disclose all the risks and characteristics. Investors are requested to read and understand the investment strategy, and take into consideration all the risk factors including their financial condition, suitability to risk return profile, & the like, and take professional advice before investing. Opinions expressed are our current opinions as of the date appearing on this material only.

Our Client, PMS, may hold the following discussed securities, this blog is not stock investment advice this is just for educational Purposes for more details visit: https://turtlewealth.in

BlogTurtle Wealth

Be a Bull in a Bull Market

When we talk about a bull market, it’s essential to understand how stock prices work. Let’s explore how stocks typically enter a bull phase.

The behavior of a company’s stock usually reflects the performance of the underlying company. When a company performs well and generates earnings, its stock price rises, which further increases the stock’s demand, which further increases the stock price. This positive loop continues until the stock price reaches a point where it may correct for two primary reasons: the valuation or earnings peaks.

Short-Term vs. Long-Term Corrections

When the valuation peaks but earnings are still strong, the stock might enter a correction period lasting a few years. After this period, it can bounce back. These are short-term corrections, and one should not exit the company during this time. The resilience and strength of the underlying business often lead to a recovery, making patience a valuable trait for investors.

However, when earnings peak, the correction phase tends to be much longer. This extended correction indicates that the company needs time to restructure, innovate, or find new growth avenues. When a company’s stock price then again reaches and surpasses its previous high, it signifies that the company has entered a new era and is now more capable of generating higher profits.

The Indian Market’s Emergence from Prolonged Correction

Consider if the entire Indian market has emerged from a prolonged correction. By observing the price trends of major listed companies, many have reached new highs, surpassing their previous multi-year highs, and entered a structural bull run in the last two to three years. The indices also reflect this trend, signifying a broader market movement.

What Does This Signify?

It shows that we are in a structural bull market. Companies from various sectors are demonstrating growth. Examining earnings reveals that, in just three and a half years, the corporate profit-to-GDP ratio has almost doubled. In the Nifty 500, nearly 170 companies have entered a structural bull market after long periods of consolidation (five or more years where the price went nowhere). This suggests that one-third of the Nifty 500 companies have experienced a turnaround.

What to Do in a Structural Bull Market?

In a bull market, at every point, you may not believe that prices can go up from here, and the market continuously proves you wrong by going higher. As proud price followers at Turtle, we follow the price without any bias. This approach has led us to be part of some of the best-performing multi-bagger stories, which we have experienced with public money.

  1. Always Be in the Game: In every market condition, stay invested because you don’t know when and where a big move will come. According to RJ’s sayings, when you are less confident, be 100% invested in the market, and when you are confident, be more than 100% in the market.
  2. Don’t Miss the Best Days: Missing some of the best days can significantly change your returns. Data supports that missing these days can drastically affect your overall returns.
  3. Don’t Focus on Downside, Embrace the Uncertainty of Unlimited Upside: To participate in the market, you need cash, courage, and conviction. Cash and conviction you can get easily, but courage is something that comes from practice. If you only see how much you are going to lose, you can never enjoy the upside. Loss aversion makes you cut your profits and stay in loss. Instead, when you realize that the upside is unlimited and if you are right, you win by multifold. Focusing on unlimited upside gives you the courage to participate in the market.
Conclusion

Navigating a bull market requires understanding how stock prices reflect company performance and broader market trends. Companies entering a bull phase demonstrate strong performance, creating a positive cycle of rising stock prices and increasing demand. While corrections are inevitable, resilient businesses often recover and reach new highs. The recent emergence of the Indian market from prolonged correction highlights significant growth potential, with many companies reaching new highs. Staying invested, embracing market uncertainty, and focusing on potential upside rather than downside can lead to substantial returns. By following market trends without bias, investors can capitalize on the continuous opportunities presented by a structural bull market.

– Jaymin Shahukar
Quant Research Analyst

Investments in securities are subject to market risk and there is no assurance Or guarantee of the objectives of the Portfolio being achieved or the safety of the corpus. Past performance does not guarantee future performance. Investors must keep in mind that the mentioned statements/presentation cannot disclose all the risks and characteristics. Investors are requested to read and understand the investment strategy, and take into consideration all the risk factors including their financial condition, suitability to risk return profile, & the like, and take professional advice before investing. Opinions expressed are our current opinions as of the date appearing on this material only.

Our Client, PMS, may hold the following discussed securities, this blog is not stock investment advice this is just for educational Purposes for more details visit: https://turtlewealth.in