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  • Feb 14, 2020 - Here's Why I Recommended 15 Stocks in One Day Flat

Here's Why I Recommended 15 Stocks in One Day Flat podcast

Feb 14, 2020

Rahul Shah believes that you should invest in this strategy for big and fast returns.

Here's more on momentum investing

Hi, I have something interesting to share with you today.

Now, Earlier this week, I recommended 15 stocks in one go. Yes, 15 stocks in one shot in one report. Under my momentum investing service called profit velocity.

Now, this was the first time I did that in almost nine months. It turns out that my momentum indicator flashed green this time around. And that's why I had to move the stock exposure to 100%. That's why I recommended those 15 stocks

Up until now, over the last nine months, the indicator was flashing red because of which I had to reduce my stock exposure to 25%. And now, since I moved to 100% I recommended 15 stocks.

Now I know some of you might be surprised, even shocked maybe that how come I am talking about momentum investing all of a sudden.

I proclaim myself to be a value investor. I keep writing about Warren Buffet and Benjamin Graham. So why momentum investing all of a sudden have given upon value investing? Am I no longer a value investor.

Well, that's certainly not the case. I am still a diehard value investor.

I think I still believe in the core principles of value investing, and I believe that it's one of the most effective forms of investing if you have to compound your wealth at a good rate over the long term.

But that's true for the 80%-85% of your investment corpus, 80-85% of your investment portfolio should be managed based or value investing, but for the remaining you know, 10-15% you can always try out higher risk- higher return strategies which you know, fulfil those aspirations that you have had.

Aspiration to maybe, you know, take a foreign vacation and aspiration to buy an expensive phone that you always wanted to buy or any other gadget that you wanted to possess.

In order to fulfil these aspirations, there is no harm in, you know, putting 10-15% of your corpus into higher risk higher return strategies like momentum investing. Now, why momentum investing? There are a lot of studies done historically, which have shown that, you know, momentum investing works as well or even better than value investing If you practise it right.

And it works well, across geographies and across market cycles, and its history actually goes back further than even value investing. It's an old form of investing, it's a proven form of investing, and therefore it's not as if you know you are taking some wild gambles or being extremely speculative. It's a sensible, proven strategy and therefore to earn those high returns where you earn those quick 30-40% returns and move out of stocks, you should definitely give momentum investing a try.

Now. What exactly is momentum? Momentum investing to me is the mirror opposite of value investing. Let me try and make you understand this in the form of an example. Value investor believes in investing in stocks, which are trading at 52 week lows and selling them at 52 week highs. And this is a sensible form of investing.

I believe if you are investing in stocks at 52- week lows, you are ideally buying stock, which is trading around It's fair value or below its value. And then when the stock reaches it's fair value, it touches its 52-week highs, you are selling the stock, but what momentum investor does is he does not invest in the stock, which is trading at 52 week lows. He believes that there are some stocks which are poor in quality, and therefore they can go down even more somewhat.

Momentum Investor always looks at stocks, which are trailing at 52 week highs because it believes that once the stock has touched a 52-week high, it can continue to go higher. So, he does not believe in investing in stocks, which are trading at 52 week lows. He believes in investing in stocks, which are trading at 52 week highs in the hope that they will continue to go higher.

So, for example, say Page Industries. A lot of value investors, you know, would have invested in the stock at a PE of 17-18 times, and the moment the PE touched a high of 30 35 times, they would have moved out of the stock. And this is perfectly fine because value investors believe that you should buy at low PE, 16 17 PE and move out when the PE is like 30 35.

What a momentum investor would have done is he would have got into the stock at a PE of 30 35 times because he believed the stock had much greater potential, so he would have entered at a PE of 30 35 times, and he would have come out when the PE touched 59 60 or even more.

Likewise in 2019, a lot of FMCG stocks like HUL, Nestle, Asian paints, these are the stocks, which value investors are used to seeing trade at a maximum PE of around 25 30 times. So lot of value investors maybe would not have touched stocks HUL, Asian Paints, Nestle when they went beyond a certain PE of 30 35 times. What a momentum minister would have done is he would have invested in these stocks at a P of 30 35 times, and he would have continued to hold on to these stocks and would have, of course, made money.

So, both forms of investing have a place in your portfolio. Value investing when you invest at 52 week lows, sell at 52 week highs and momentum investing you invest at 52 week highs and hold on till the trend reverses and get those quick 30-40% gains.

Both forms of investing have a place in your investment portfolio. But having said that, momentum investing, I believe, is in a high risk high return kind of a strategy. While it promises you quick upside, the downside can also be tremendous. For example, if you invest in the stock at a PE of 30-35 times and it does not turn out to be the right stock, the PE can go to as low as, you know, 10 times, even eight times. So your downside is a lot more as compared to value invoicing. In value investing, You are investing at a pe of 10-12 times, and if it goes to a pe of 7-8 times, the downside is not gonna be as high as momentum investing. But if you practice it right, if you get into the right stocks, momentum investing can give you this quick 25 30% returns, which you can you know, encash and move out and invest in another high momentum stocks.

And this is exactly what I'm doing with my momentum investing Service Profit Velocity where I recommended those 15 stocks. Now these 15 stocks you know are already doing well, some of them are up 15%. A couple of them are up 11% in a matter of just few trading days. And this goes to show the power of momentum investing if done right.

But having said that, it's a high risk high return strategy, and you should definitely not go overboard with it and restrict your investment to this particular strategy to say, 10 15%.

If you do that, if you invest sensibly, there are good returns for the taking from momentum investing as well, Thank you.

If you liked this video, please do not forget to click on the like button and also share comments that you have about this video. What you liked about this video, what you did not like. And I will be sure to address them in the forthcoming videos.

Thank you

Rahul Shah

Rahul Shah (Research Analyst), Managing Editor, Microcap Millionaires has led the team from the front in developing some of our most stringent and rewarding research processes. As per his own admission, the turning point in Rahul's life as a financial analyst came a few years back when he got introduced to the works of Warren Buffett and Charlie Munger. From Buffett, he understood the value of investing in good quality business with powerful moats and strong management teams. Charlie Munger on the other hand inspired him to be a lifelong learner and use mental models in order to arrive at the crux of matters across most disciplines. Rahul firmly believes that in order to be successful at investing, you have to do the big things right and possess a great temperament and a contrarian streak.


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3 Responses to "Here's Why I Recommended 15 Stocks in One Day Flat"

Chirayu Mehta

Feb 20, 2020

Send 15 stocks names

Like 

Sharad Phadke

Feb 20, 2020

09322264893

I did not see the list of 15 recommended stocks.

Please repeat the list

Thanks

Like 

R.Kumar

Feb 17, 2020

Sir,
My capital is around 60,000. I a looking for equity recommendations in Fast profits daily.
thanks and regards.
kumar

Like 
  
Equitymaster requests your view! Post a comment on "Here's Why I Recommended 15 Stocks in One Day Flat". Click here!

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