Hitesh portfolio

@sreejithc1989 When buying it is generally better to give more weight to fundamentals because valuations are cheaper when we buy.

If we have bought correctly and the stock has gone up, over time, due to a mix of EPS growth and PE rerating, then usually it is better to give more weight to technicals because our biases tend to make us value what we own, higher than what they are actually worth in the eyes of somebody who doesn’t own that stock. And thanks to rerating, valuations often go to absurd unsustainable levels. Hence one can give more weight to technicals and less to fundamentals, when selling.

That being said, often times technicals can be misleading and one needs to have a lot of fundamental conviction to be able to hold the stock when the charts aren’t looking very good.

To cite an example, Usha Martin had gone to ₹370 levels in Sep 2023 and had been consolidating between ₹270 and ₹370 levels for close to 8-9 months. Like everything else in life, context is important. This consolidation was happening when a roaring bull market was on and sectors such as railways, defense, PSUs, renewables and many other sectors went up like crazy and in many cases multiplied investor wealth multi-fold, leading to opportunity costs for those who held on to Usha. Meanwhile Usha went below the sacrosanct 200 DMA level during the March 2024 correction before breaking it’s all time high levels 2-3 months later. My guess is, future returns in Usha will more than make up for the long consolidation phase, because the co. is eyeing global leadership in some of the segments that it operates in.

So fundamental conviction was a must-have during that drawdown in Usha, in order to be able to enjoy the subsequent rally.

All said and done, selling at the right time can be difficult even for best of investors and multiple factors such as availability/non-availability of better opportunities, market phase (bull/bear/sideways), exit valuations, risks in the story, etc. come into play.