HIL had a stellar run from levels of 600 in march 2020 to 6700 in August 2021, a rally of more than 10 times in less than 18 months. All said and done it remains a cyclical business inspite of noises about diversification into more solid business etc.
The understanding about the business I have formed after watching it over the years is as follows:
It is a business which has margins of 10-15% during good times which often last 2-3 quarters and during bad quarters margin falls to 1-5%. This too lasts few quarters. Idea should be to buy when it suffers from poor business conditions with sales and margins affected for 2-3 quarters and there are signs of bottom formation on charts and sit tight for few quarters and hope the cycle has turned in your favour and plan your exit when company has had a couple of good quarters and there is froth and company is described as a “structural growth story” and starts getting fancy valuations.
Its difficult to exit when price moves up fast and the narratives keep improving, but one has to develop the understanding about the business cycles and act accordingly. At the core of the understanding the fact remains that it is a cyclical business and will remain so unless something drastically changes.
Coming to GMMA charts, there is breakout from two trendlines of different timelines, One is longer term trendline drawn in green solid line and other is shorter term trendline drawn in solid black. On bar chart on weekly chart, there is complex inverted head and shoulders breakout and now it seems to be on a corrective mode on daily charts which could provide opportunities to buy. ( I don’t own it but it remains on my watchlist. )
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