Fundemental Analysis

Happy New Year to all of you. I wish you a happy and prosperous new year to our readers.

After coming back from relaxing vacation, I decided to post my thoughts on fundamental analysis.

Even though, I am a 200% technical trader and also a believer of pure price action, I often hear questions about fundamental analysis.

Let me explain more on what do I mean by fundamental analysis.

Fundamental analysis looks at various indicators (or numbers) that reflects company's health and finances such as earning per share growth (EPS), Sales growth, Revenue growth and return of equity etc. This terms are easy to comprehend and does not require MBA in finances.

When I started my stock market in initial years, I always follow Williom O'Neil's approach on CANSLIM. What is this? I refer to the definition of CANSLIM from www.investors.com website.

C= Current EPS and quarterly sales should be up 25% or more over prior
quarters.

A= Annual earnings should be up 25% or more the last three years. 
Annual ROE should be up 17% or more.

N= New product or service.  Company should have a new product or
service that’s fueling earnings growth.

S= Supply and demand.  Shares outstanding can be large or small, but
trading volume should be big as the stock price increases.

L= Leader or laggard? Buy the leading stock in a leading industry.

I= Institutional sponsorship should be increasing. Invest in stocks
showing increasing ownership by mutual funds in recent quarters. 

M= Market indexes.  The markets should be in a confirmed up trend
since three out of four stocks follow the market's overall trend. 

Sometimes, it is difficult to get all this information and it requires multiple hopping to different sites to get all these numbers, I simplify my criteria to C, A and M.

I will explain in my next post about combining my fundamental analysis with simple technical analysis.

Keep watching.

Mahadevan.L

Hot commodities .....

Last friday, CPI number in the US is higher than ever expected. What does this mean?

CPI number is nothing but Commodity Price Index (CPI). This tracks prices of baskets of commodity goods such as Oil, Food, Energy ,Cloths .. used day in and day out by the consumers. Increase in the value of these index means rise in inflation. How does this affect the stock market?

There may be fear that Fed in US stop cutting the rates. This is not good for the stock market. Market expects cheap money. So this might cause significant sell off in already troubled stock market.

As we have seen in the past, commodity prices tend to do counter cyclical with stock market. What am I doing to take an advantage of this rising in commodity prices?

1. In my retirement account (such as 401k), I moved out from stock index fund to commodity ETFs, funds such as Gold (GLD), Crude Oil (USO) etc.
2. Focus on short term trading with Agri futures (such as Corn, Wheat, Soybean) and Metal futures.
3. Focus on buying currencies for commodity rich countries such as Australia, New Zealand and Canada.

I would encourage everyone to read book called Hot Commodities by Jim Rogers.

Mahadevan.L

Portfolio Update - Again

Sold half of my position on Bajaj and move my stop to break even. Screenshot is attached.

Fed decision .....

As everyone knew by now, quarter point cut in interest rate happened yesterday. What does it mean to Indian market. Let us do some simple analysis.

NSE broke new highs with the banks in the BSE were leading yesterday. Two possibilities could happen

1. Easy to borrow money from US and pump it into India and this drives the market up as it did few months back.
2. US market was expecting 50 points cut but fall down on the 25 points cut. Indian market might reflect the same.

Do I get into new position now? Not really. I would like to wait in the sidelines for the market to settle for next few days before I pull the trigger on any new position. Also I will be carefully watching my existing position.

More posts to follow later.

Mahadevan.L

Portfolio Update

Good morning readers. After a break from last weekend, I just wanted to update my 'Mock' portfolio.

I sold half of my position on GAIL. Move my stopover to breakeven. Why did I do? Go back and revisit my rules posted last week. Here my return on investment number.

Purchase price = Rs 480

Number of Shares sold = 33

Sale Price = Rs 519

Profit per shares = Rs 39

Return on investment = 8.13% in 6 days.

Good trading.

Mahadevan.L

New addition - GAIL

I have added GAIL to my portfolio since the stock is breaking out with huge volume. I have added 66 shares of GAIL at the stop loss of Rs 450 (low of yesterday's price). I have updated my excel spreadsheet with this position.

Mock Account

Good morning everyone. My blog is celebrating its first weekly anniversary. Congratulation to "PaisaPortal".

Thinking aloud, I have decided to create a paper account (not the real one) to track what I have proposed in this blog. I have created a excel spreadsheet to track profit, stop loss strategy etc. Here are my basic rules to start with.

1. I do mostly technical analysis.
2. I look for stocks with support bounce or resistance breakout with huge volume
3. My total account value allocated for the stock is Rs 1 lakh.
4. I hold not more than 5 stocks in my account.
5. Maximum loss per stock should not exceed Rs 2000.
6. Profit strategy : I sell 50% of my stock holding when my profit reaches Rs 2000 and move my stop to breakeven (i.e adjust my stop price to original purchase price)

My goal is to take all of you on this investment journey. I am not here to prove that I will be always right and profitable. But what I can guarantee that I can control my loss.

I will be posting an update of my portfolio every week.

Mahadevan.L