What do the members think of the buyback price…10000 per share against ~7000 cmp…is the company telling us that the valuation is low, OR they think the future earnings will be more than current earnings? Based on the the run up in the last 18 odd months…I thought stock has smartly rerated, but seems froth is building…but the buyback price is making me think is the CMP cheap or overvalued.

@Siddharth_Goliya

Formulating a strategy on selling, or sitting on the sidelines especially in a roaring bull market is a tough aspect.

Fundamental exits are well defined in terms of extreme overvaluations (where growth for next 2-3 years are captured in the valuations) or change in the growth expected. e.g A company you expect to grow at 25% CAGR for next 2-3 years starts quoting at say 70-80 PE ( it happens in FMCG kind of companies off and on because runway for growth for even next decade is visible) or in another situation where we have bought a company expecting 25% CAGR growth starts growing or commenting about growth at a tepid 10-12% CAGR. But this happens at an interval of atleast a quarter when usually management comes around and comments on prospects for next quarter or few quarters.

Technically I have simplified my processes. In frothy moves I usually look out for signs of stretching of upmoves in form of very high weekly RSI levels exceeding 90, or some kind of divergence in RSI, or stock price reaching twice its 200 dema ( this is usually a crude measure but often works) .

In cases where my techno funda picks, or technical picks fall due to any reason, I usually keep a mental stop loss of around 7-10% of my buy price.

In stocks that I hold for the long term where my fundamental conviction is high, I give a long rope and often prefer to sit through temporary pains.

Having listed all the above basic rules I have for myself, selling decisions are often dynamic and sometimes I prefer to think on my feet and take a call. Most important rule in the stock market is that it follows no rules.

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Keep PE aside for a moment and do a Reverse DCF on current earnings and also on earnings value normalized for margin mean reversion to lets say pre covid value. In both cases you will find expectations of 25%+ growth is baked in the PE.

So without going much into specific fair PE, one can conclude there is fair bit of overvaluation in the stock price.

Thats crux of value investing. Unless there is a new info , i would be truck loading upl at book value.
Sector has headwinds , give it 6 to 12 month to get more clarity