BC MARKET CYCLE
Saved by @AnmolNarula11

Markets are all about patterns and tendencies that have an edge. Here are a few I have observed and learned over the years.

A Thread.

 Identify the Sector(s) of this cycle. Typically mid caps which are enjoying an earnings tailwind due to the external environment and you have a 3 year visibility into a 25% or higher eps growth. Will seem expensive throughout the cycle but will make big money.
Breakout post a genuine earnings surprise. Popularly called PEAD. Structural pattern. Works like a charm at all points of any cycle.
Serious debt reduction. Drives as much shareholder value as a high growth stock.
52 week highs across stocks in a given sector. Something is happening. Pay attention.
All time highs in ANY stock.
Spin offs and demergers. There is one whole book on this. Huge edge works more often than not.
New IPOs breaking out to all time highs a month or so after the listing.
Low capacity utilisation, negative profits and a turnaround in the sector - typically buy on first signs of turnaround.
Media pessimism about a sector reaching highs as per news reports in papers/mags while the sector in forming consolidating bottom or breaking out - huge winners here.
52 week low + insider buying + but no sector issues ie sector not likely to die or go into oblivion.
Large opportunity good execution and good management will always be overvalued, ignore pe and add them during corrections without waiting for pe to correct to "my value levels” which will never come.
3 years 50% test, Can this business trade 50% lower after 3 years? Can be done for predictable businesses only. This one by @BMTheEquityDesk
Can the profits (5 years out) in the future be equal to the current market cap? This was Ramdeo Agarwal if I remember it right.
Change in management (especially for financials but generally for others).
Playing the liquidity premium and discount in small caps in bull and bear markets. In bear markets they are oversold and and in bull over bought - hence small caps make for very good market cycle play
Fall after a sharp deterioration in margin due to temp factors, which is likely to bounce back.
This is the big one and may happen due one of the reasons above. Delta in RoCE leads to multi baggers - esp if delta is from single digits to two digits.
All engines firing. Improved margins faster cash flows and better asset turns which happen when cwip assets start sweating by @varadhar1
https://t.co/VPnK3xS2nA
https://t.co/DvOYLg95pt
https://t.co/8KVNjz9piP

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A recently listed IPO (Sep 21). Promoter did OFS at X alongwith fresh issue. Made record for highest subscription ever. Company currently at more than 5X of OFS price.

Let's glance a bit on Financials.
1/2

Mcap - 3500 cr
Company does about 150 cr revenue. And about 15-20 cr in profits.

I am at a loss of words on valuations.

Maybe market is smart, promoters dumb and value investors like me dumber 🙂

My exp of almost 3 decades in the market tells me, this will end badly.
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Same guy in 1999: "Yes, a 250 P/E makes sense for Cisco."

Guy in 2011: "Wow, those tech bubble investors were so stupid."
Same guy in 2021: "Yes, 25x sales and a 450 P/E makes sense for a car company."
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When the upcycle in a sector is very strong
Poorly managed companies also make returns

2021 steel cycle-
SAIL went up from 30 to 120

Now in the current credit upcycle:-
PSU Banks are making money!

But does this mean credit culture has changed for PSU Banks?
No evidence of that
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Revenue growth over the last year (TTM)...
AMC: -40%
Zoom: +100%

Net Income over the last year (TTM)...
AMC: -$2.08 billion
Zoom: +$1.14 billion

Stock price over the last year...
$AMC: +1,131%
$ZM: -45%

Data via @ycharts
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You take a loan from the bank.

The bank asks you, “what if you don’t pay back?”

You say, “take my home and sell it”.

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That makes sense. The bank gives you a loan and in case you don’t pay, the bank will take over your house and sell it and recover its money.

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MEENAKSHI AMMAN, MADURAI (TN)
#bharatmandir #navratri2021

A paadal Petra sthalam where Shiva took the form of Sundareswarar (the handsome one) and married Devi Parvati (Meenakshi).
Devi is also known by the name Angayarkanni (mother with the beautiful fish eyes).
@GunduHuDuGa


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It is said that Indra found a swayambhu lingam at Kadamba Vanam. He placed it in Madurai where the kshetram stands. Here, Shiva is seen on the vehicle of Indra.
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