Dating with X

Most of us like heroism i.e. rising like a phoenix, when others gave up. I am not an exception. May be that is the reason, I like Ajay Jadeja, Sachin Tendulkar, Rajnikanth & Ajithkumar.

In spring 2006, Stock Markets were corrected (down) by 31% from its all-time high achieved in the winter. On those days, I was an avid trader tracking “Top Gainers” “Top Losers” lists. I found one stock in the Nifty Basket, which most often found a lonely place in the “Top Gainers” List, while the overall Index (Nifty) is down for the day. Some days, it had company of other defensive stocks (FMCG* & Pharma) also.

*FMCG: Fast Moving Consumer Goods (Soap, Tooth Paste, 

Shampoo, Biscuits, Snacks & Savories, etc; which forms part of our daily routine life and they have to purchased & consumed repeatedly.)

*Defensive Stocks: The expenditure on medical & FMCG are the last one to find a cut in our budget. So, the amket assumes that the companies engaged in these businesses are defensive bets. i.e. they will continue to do good business, regardless of boom or gloom.

It is an unwritten theorem, “In tough times, defensive stocks are the best bet”. 

 

Lets come to my favourite "X". If you look at the recent history, from January 2008 to November 2012, the Sensex is down by nearly 10%. i.e. If you have invested Rs. 10,000/- in the Sensex, it is worth Rs. 9,000/- now. If you consider Inflation, it may be worth less than Rs. 7,000/-. In contrary, “X's” price has more than tripled in this period. No stomach burning, I haven’t invested in X.

By having a steal look at (not reaping/profiting) this kind of return, by now, many more could have joined the bandwagon as one-side lovers of “X”.

In my romantic days, like Rajnikanth’s popular dialogue in Velaikaran “I can talk X, I can walk X, I can sleep X, I can drink X, I can dream X”. 

As I said in my first blog post, those days we used to sleep in our client’s office, because of their proposed IPO. In toiling(?!) midnights, I used to stare at the price of X & read the news column, the so-called experts views & targets, comments by fellow one –siders.

Since , I will wake up very late in the morning, I mostly skipped breakfast those days (paying the price now). My friends used to tease me, I am dating (sorry, investing) X with my breakfast money. Ouch.. I said investing. Please forgive me, those days I don’t know the meaning of investing.

Really, I should be proud of X, because it is my only love, which reciprocated. LOL… It never let me down, not even a single time. Always, I made profits in it. At one time, it gave me an unrealized profit of 25%, but soon it fell down and when my profits became 5%, I sold it. Then, it started to move up, just like my other trades.

Whenever I am investing in X, I felt guilty because I am making money at the cost of others lives… What a socially responsible person?... Santhanam’s Wow…

So, finally with bitterness (like Kalaignar said that DMK will support FDI, with bitterness), I let my "X" go out of my life.

However, I am not sure that I will never invest in X. Now, I am not thinking of it (just keeping it in my Watch list), because it is quoting at very high price.

 

If it trades at sub-100 levels(greed?!?!, may be...), am 99% sure that I will invest in X by giving an explanation like politicians that “Whether the smokers will quit smoking, if I am not investing in this Company?”.

Yes, that X is “ITC”… Brand Owner of the seductive temporary sixth finger.

Year 2006 Experiments Continued...

Experiment 4:

Scrip: Williamson Magor

Reason for Purchase:

Adrenaline Rush

 

What I did:

It was a day, in which most experts will be debating about What Finance Minister should do. Yeah, it is a Budget day- 28^th February 2006.  Then Finance Minister P. Chidambaram was delivering his Budget Speech in the Parliament.

Barath told us (Nafiz was on leave/came late) that there will be good news for fertilizer stocks and Williamson Magor will freeze in upper circuit* today. Suddenly my adrenaline rushed & I put a buy order of 100 shares @ Rs. 85.50/- to make a gain like "meter vatti". 

After that both my mood & stock price were spiraling downwards. Then, I started to search my mobile (like a BP patient searching for tablets) to call the broker. Sold @ Rs. 82. The 15 minutes adrenaline rush costs my 4 days stipend. "Adrenaline Rushed... Im Crashed... Broker Cashed..."

After my sale, the stock was spiraling upwards & finally froze @ upper circuit –Rs. 87.60/-. I was in situation like the dialogue in 3 idiots movie "It feels bad when a friend fails, but it feels even worse when he comes first”. Likewise, "It feels bad when u sold at a loss, but it feels even worse when the sold stock rises after that."

*Freeze in Upper Circuit: For the stocks which are trading only in Cash Segment (not in both Cash & Derivative Segments), the Stock Exchanges will fix circuit filters of 5%, 10%,20%. The circuit filters will vary based on the stocks. i.e. If previous day closing price of a stock (in 5% Circuit Filter) is Rs.100/-, the next trading day the stock may trade at a high of Rs. 105 (or) at low of Rs. 95 & not beyond that. If it closes @ Rs. 105, the stock is frozen @upper circuit (or) if it closes @ Rs. 95, the stock is frozen @lower circuit.

Experience learned:

Nothing

Experience we can learn from this experiment:

Learn the art of practicing Self Control.( I am practicing, but yet to improved a lot)

Experiment 5:

Scrip: Reliance Natural Resources Limited (RNRL)

Reason for Purchase:

To make a Quick Buck

What I did:

I went to my heaven Jayankonda Cholapuram for collecting my Voter’s ID card, when the demerged Companies of Reliance Industries (bcoz of the dispute between Ambani Brothers) i.e. ADAG Companies were listed on the stock exchanges in March 2006. 

When I came back to office, the three musketeers told me that Barath & Nafiz made a killing (quick buck i.e. profits) in one of the Demerged Company, RNRL(which has no assets/business with it). They bought the shares around 16 levels and sold it around of 30 levels within a week’s time. 100% profit in a week (5200% annualized return). 

Then also, it was continuously frozen @ upper circuit in the following days to reach a high of Rs. 40. Next day, it was down to Rs. 39/-. 

By hearing and seeing this, what I would have done?... Yes, u guys are absolutely right. Yeah, I bought that stock @ Rs. 39/-. From then, it was continuously frozen @ lower circuit in the following days. Finally, I sold that @ around 24 levels. 

Even after my selling, the stock was falling like a knife to find its anchor in the ground. It did found its anchor @ its listing price Rs. 16/-.

Experience learned:

Since, whenever I sell a stock, it will move upwards like a rocket waiting for my sell trigger. Even after my sale, it was falling. It was new to me & I was literally shocked. LOL….

Experience we can learn from this experiment:

There is no free lunch in Stock Market.

I did speculated my stipend in so many other trades in 2006, some yielded miniscule profits which is not even comparable to the losses I have incurred.

But, one stock which I found in 2006 is worth of writing a separate blog post. Hope that is my next post.

WINTER 2005-06 - EXPERIMENTS 1,2,3 WITH A GREAT TIP

Experiment 1:

My first stock purchase (not investment) was 20 shares of Chennai Petroleum Corporation Limited at Rs. 245.00/-.

Reason for Purchase:

Since Nafiz had bought this one, he used Alt+Tab to watch the price of this stock regularly. He told us that it was oscillating in the range of 230 to 270.

What I did:

I bought it at 245 in December 2005, the very next day it rose to 249 to blossom my face through happiness, but only to fell down to 220 levels. Thereafter, it was oscillating in the range of 220 to my break-even (instead of 270) for a month’s period. Finally, I sold it in February 2006 at the same 249.

Experience learned:

Nothing

Experience we can learn from this experiment:

Never buy or sell a stock, just because other person (including Warren Buffet) is doing it.

Do your own research.

Experiment 2:

Scrip: Ashok Leyland

Reason for Purchase:

Since I have learned nothing from my earlier experiment, I was tracking the same stocks which the other three musketeers (Nafiz, Barath & Mahesh) were tracking.

What I did:

I bought it at 31 levels in January 2006. It went down to 28 levels and was trading in the range of 28-30. Some time in the next month, it reached my break-even (Purchase Price +Brokerage +Taxes).  As I was very much influenced by Break-Even Theory*, I have sold it immediately at my break-even, just to watch it rose from 70% from those levels in next 3 months. 

* Break-Even Theory is not an accredited one, but it’s the top most influential theory in Stock Markets because most of the active participants are traders subject to high emotions by psychology.

Experience learned:

Since, In this case I have not done any research and just made the transactions by looking at the ticker price, I have learned NOTHING in losing an opportunity of 70% profit.

Experience we can learn from this experiment:

If YOU have well researched a stock and YOU are pretty much aware that it is grossly undervalued, the only thing you require is PATIENCE to reap the fruitful rewards.

Patience is the Key for Stocks Treasure.

“Blessed are the meek, for they shall inherit earth”

Experiment 3:

Scrips: Williamson Magor & KCP Sugar

Reason for day-trading:

Since, Nafiz is an active day-trader who stares at the best 5 quotes of nseindia’s website (those days, we have not opened an account in ICICI Direct) every second, we disciples just followed his foot-steps.

Further, the real motivation for day-trading came from the superstar status that comes along with the successful day-trader in predicting stock movements rather than the process of making very quick bucks.

What I did:

If I remember the date correctly, it is 29^th December 2005, I sold 50 shares of Williamson Magor @ 42 and bought it back @ 41. HURRAY!!... My first intra-day is a success…

Once you tasted day-trading, whether u succeeded or failed, it is an ADDICTION like cigar butts… U can’t come out of it easily…

Since 1^st January 2006 is Sunday, the next day-trading was on 02^nd January, I sold 50 shares of KCPSUGIND (the stock code which I can never forget in my life) @ 522 and successfully bought it back @ 520…


WHAT TO SAY ABOUT MY FEELINGS… I AM THE NEW WARREN BUFFET… I AM THE GOD… But my mind voice said… “THAMBI, TEA INNUM VARALA…” (Even Telugu Pokkiri was not released by that time)…

Mahesh created a PPT “INTRA DAY SUPER STAR” “ELAMVAZHUDHI” like the “SUPER STAR “ “RAJNI” comes in RAJNI films…

The very next day i.e. 3^rd January 2006, I came to office, after others had come. Everyone was busy looking the Best 5 Quotes of KCPSUGIND. I wondered why these guys are checking out this scrip so impatiently. While, I enquired they told Barath has sold 50 shares @ 535. My tempted young blood forced me to put a sell order for 50 shares @ 532. Barath to prove that he is also a youth put another sell order for 50 shares @ 532. We were pressing F5 key every 5 seconds and the price was around 540 levels. My heart beats @ 200 bps continuously ever since Sachin & Jadeja batting days. Suddenly, partner of our audit firm came there. That’s the time, we realized we are working in Audit firm, not in Stock Broking firm. The partner told us that our prestigious client is proposing for an IPO, so we have to sit late nights and stay in the client’s office to finish the work at the earliest.

The meeting went on till afternoon with our hands tied of not pressing F5 key. By the time, my watch shows it is already 02:30 p.m. When we checked out the price, I was totally devastated. It was quoting at 560.When we called our broker to place a buy order, he said the price was 572. My heart busted. 

I have lost half of my monthly stipend in just few hours. I would have felt better, that Barath lost all his stipend.

Within 24 hours, “Super Star to Comedian”, “Warren Buffet to Beggar”… Guess, what my inner voice would have told… U may Guess “Arasiyalla idhellam satharanamappa….”, but it told “Andavan vechan paaruda aapu”…

The day was the only day in my life I went to temple for the sake of peace of mind. This day-trading disturbed my sleep for the next one week.

After this, you may think that I have quitted day-trading, but after a week, my mind voice told me “Ha.. Ha... Arasiyalla idhellam satharanamappa….”. The day-trading and I were closely associated till 2008. After that, we parted ways.

Experience learned:

Never indulge in day-trading, when a partner visit is due.

Never quit day-trading.

Experience we can learn from this experiment:

Warren Buffet once said, “Derivatives are financial weapons of mass destructions”.

I would say “Day-trading is a cube of derivatives”, but we never learn from other mistakes. 

We will accept it, only if we have done a mistake. That too, we won’t say it in public, because we never give up our ego.

Still, if you want to day-trade in stocks, my suggestion is never day-trade in stock with 100% of your money, just allocate less than 10%.

If you think, who is this kid to suggest us, I would humbly request you to never day-trade in stock with 100%, please borrow 100% more from others, put all 200% in day-trading. In the next three months (maximum), if you have put all your money in the first two weeks of that three months, you will become deaf  automatically when you hear the word “Day-trading”.

Finally, the Great Research Tip:

During my first week, the only best thing I have done is subscribed to The Economic Times Newspaper. While running through the numbers in the Stock Quotes page, I stopped at the quote of then market-darling “Infosys”. It had Day-High (High traded price of the day) @ 3000 and Day-Low(Low traded price of the day) @ 2880.

The difference is 120/-. I thought, if I sell 100000 shares @ 3020 and buy-back @ 2880 or the opposite, I will become a crorepathi in a day.

Experience learned:

I can’t do that.

Experience we can learn from this Great tip:

You can’t. Reasons you find it yourself.