CIRCUIT STOCKS-Safety First Approach!
UCs are very beautiful. But, both as a doctor and a value investor, I am a very strong advocate of ‘Safety’.
Profits are all “Virtual” until booked!
So, how to make money in UC Stocks
(A rough guide - thumb’s rule) -
UCs are very beautiful. But, both as a doctor and a value investor, I am a very strong advocate of ‘Safety’.
Profits are all “Virtual” until booked!
So, how to make money in UC Stocks
(A rough guide - thumb’s rule) -
1. Have a comfortable PE to fall upon. For me it is 12 for small caps and 12-15 for midcaps (as suitable for current market conditions - Note, that this itself is highly variable, as there’s no perfect safe PE for all seasons!). PE refers to TTM (Trailing 12 months) PE here.
2. Sometimes, you have stocks trading at PEs much higher and still going higher in UCs. These may be cases of excellent earning visibility; wherein you can take comfort from a forward PE factoring in the upcoming qtrs (EPS improvement).
3. It’s always prudent & wise to book at least 20-25% at upsides of 25-30%,more so if you are newcomer, or have no much time to monitor.Disadvantage of this You lose out on any compounding advantage,but it’s alright as long as you are still making good gains, way higher than...
...benchmark indices or even other asset classes.
4. Exception to Rule 3-can be when there is massive valuation gap-e.g. my recent pick,Titan Bio suggested at 73. Now it’s still trading at 4 odd PE.Hence, you can review on a case by case basis,& in these cases at every 100%...
4. Exception to Rule 3-can be when there is massive valuation gap-e.g. my recent pick,Titan Bio suggested at 73. Now it’s still trading at 4 odd PE.Hence, you can review on a case by case basis,& in these cases at every 100%...
...you can review or book partly.
5. Rare cases-Exception to even Rule 4,when there is a concrete story and your conviction in what the company is going to become is so high,that you hold on for as long as it takes for the company to get there. In short, if these are...
5. Rare cases-Exception to even Rule 4,when there is a concrete story and your conviction in what the company is going to become is so high,that you hold on for as long as it takes for the company to get there. In short, if these are...
...what you think are mega multibaggers in the making. Biggest advantage of this Rule is - you get the benefit of “Compounding”. This rule, hence, is reserved for very high conviction bets set to grow multiple times.
6. Last but not the least-Don’t have a portfolio exclusively comprising of circuit stocks.Small caps offer superlative growth & it’s natural to try & get only these.However, resist that temptation & have at least 15% large caps, another 25% midcaps, so that even during...
...some adverse situation, about 40% of your wealth can still be made liquid at will.
By & large Rule 3 is to be followed taking PE support (either TTM or forward) as a guide with obvious exceptions (Rules 4,5).
By & large Rule 3 is to be followed taking PE support (either TTM or forward) as a guide with obvious exceptions (Rules 4,5).
Ultimately, unless you lock the high price you see on your screens, the same can’t find a way to your bank accounts!
