My Latest Stock Recommendation

Oct 9, 2020

Apurva Sheth, Editor,Profit Hunter Pro

In this video, I want to give you a sense of how we go about picking stocks.

Vijay and I run a service together, Fast Profits Report. We recently closed a position for our subscribers at a good profit.

I thought it would be a good idea to take you through the recommendation step by step.

This way you can get an idea of how to pick winning trades the professional way.

I hope you find the video useful in your personal trading.

Watch it and let me know what you think. I love hearing from you.

Hi, I'm Apurva Sheth and I welcome you to this edition of Fast Profits Daily.

So friends today want to share our winning formula in the markets. On the 17th of July, I recorded a video and published it for you. Now, in that video, I gave a glimpse of what we do here in Equitymaster.

Now, most of you might be aware that I and Vijay jointly run a product, which is called the Fast Profits Report. In this product, we recommend stocks based on a couple of things. Now, let me explain with this slide.


So I told you in in that particular video that financial markets are inter-related. So although we may be trading in equity markets, they are not in isolation. You cannot see them in isolation with the other markets. Now what are these other markets?

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So the largest of these markets is the currency market. So as you can see on your screen out here, the biggest fear is the currency market, where the volumes are in billions and billions of dollars on a daily basis.

Slightly smaller than that is bond market and even smaller than that is the commodity market. So equity markets are the smallest of all, and you cannot see them in isolation. So equity markets are directly connected with commodity markets.

So a simple example for this is a textile company. Now, let's say, if you want to buy a textile company, can you ignore the prices of cotton? Absolutely not. You cannot ignore the prices of cotton if you want to see how or what kind of performance the textile company will give.

So let's say, if the bottom prices are rising and the company is not in a position to increase the selling price of its final product, then chances are that the stock price may also not perform so well. On the other hand, if the cotton prices are falling and the company commands of good position and it has the pricing power to increase its or prices or keep the prices as they are, as they were before, then the profitability would improve and the stock price could also be rising in a couple of weeks to months.

So that's how we use trends in the commodity markets to predict trends in particular stocks in the equity markets. So last time I spoke about example or my recommendation and which had gone live recently and that was related to aluminium.

 

So Vijay had spotted this beautiful trend aluminium commodity. What happens with the aluminium is that aluminium is a vastly available natural resource. Aluminium more deposits are abundant all over the earth. So the aluminium prices do not jump or do not stay at higher prices, higher levels for too long.

Whenever there is a jump in prices, eventually it cools off and that's what we have been noticing for the last five years that aluminium, although it had jumped after the Trump sanctions, Trump sanctioned the Russian Aluminium Company, the aluminium rally eventually ended and it corrected. So aluminium, normally it tops out in the range of 12-40% kind of up move. So that's what we had spotted and the view on aluminium was that the aluminium prices are likely to head lower.

So now traders could use this information in two ways. Either you could go and short sell aluminium producers, or you can look for aluminium consumers. Companies which are consuming aluminium and go and buy those companies if they fit in all the other parameters as well.

Now I had ended my video last time, and this particular slide. Now I am sure you may be aware that we cannot disclose our recommendations in the public domain but now I would like to show what kind of company we had selected and how it has done. Obviously, we have closed the recommendation for a good profit. So let's see what the company was.

 

Now the biggest consumer of aluminium in listed space if I could say that, would be a pressure cooker company. Companies which manufacture pressure cookers and TTK Prestige is one of the leading companies which is producing pressure cookers.

It has a 30% market share in pressure cookers and 31% market share in the cookware segment. So aluminium consists of 20 to 25% of the operating cost of the company. So any fall in aluminium is a major benefit for TTK Prestige.

Apart from this, normally people would identify TTK Prestige with only as an pressure cooker company but that's not the case. Only 50% of the sales of TTK Prestige comes from pressure cooker and cookware segment. The other 50% comes from kitchen appliances segment from gas stoves and mixer grinders.

So now this particular, the other half of the TTK Prestige company is where there is a high growth. Especially during the lockdown, we have seen that people have being staying at home and cooking at home, and demand for such kind of products was increasing and that was a major benefit for the company.

So now apart from this, the company is a debt free, and it is tightly held by promoters. So the promoters own 70% stake in the company. 10% is held by FIIs and 10% is held by DIIs. So 90% of the stock of the company is blocked or if you can say that it is not going to come into the market so soon. So whatever trading happens, it happens only in 10% of the stock, which you can say is freely available for trading, which is in the public category.

So whenever such shades are in demand, stock prices generally tend to move quickly because the stock which is available for trading is very low. So based on all these factors, I send out a recommendation to Fast Profits Report subscribers.

The chart pattern was also very interesting. As you can see out here, stock prices had dipped to a low of about Rs 3,900 by March, and it had quickly jumped to a level of Rs 5,200 by April. So over the last two or three months, the stock was consolidating in an ascending triangle pattern. I've marked this pattern in blue.

Now this pattern is where the tops are flat and bottoms are rising. So the stock had broken out of the 5,200 level and I had recommended by this stock to our subscribers. 3,900 was exactly the range out here. So 5,200 minus 3,900 would give you 1,300 and the same levels added to this breakout level would give us a target of 6,500.

 

So that's how I had come up with target of 6,500 and this is how the stock has a performed after I recommended it. So the stock managed to move up and even hit our target price of Rs 6,500 by September. So in the last month our target price was achieved and the company also declared a Rs 20 dividend so even that is added to the profits.

This is how our recommendation has done. Now, apart from this, now I would like to tell you that this month, we have again come up with new recommendation, and this month recommendation is based on the commodity which is in the news recently. It is natural gas.

 

As you can see on your screen out here, this is the chart of natural gas. It's a weekly chart of natural gas since 2016. So the black arrows that you can see are marked around the months of November and December. That's when the natural gas, normally tends to top out as the winter season goes away, and demand for natural gas, which is generally used for heating, the demand drops, and that's when the price of the commodity also drops.

So natural gas as you can see in the last five years, has generally tended to top out around the months of November and December. So this is likely to happen this time around as well and so this would benefit in two ways.

The natural gas consumers, the companies which use natural gas, could benefit with the falling natural gas prices and apart from this, there is one more thing which is working in favour of natural gas consumers. The government of India has recently announced prices of natural gas, it has fixed the prices of natural gas at US$ 1.79 per MMBtu.

So no matter what the cost for explorer to explore the natural gas is but since this is a price fixed by the government, natural gas consumers will be able to buy the gas at this fixed price. So this is the 10 year low in natural gas prices, which is fixed by the government. So this is also a benefit for the consumers.

So this is the commodity which we have identified and based on this, natural gas is used in several places, so plastic manufacturing companies, fertiliser companies, chemical companies, all these companies use natural gas for production, and they could be the likely beneficiaries.

Now, I have eventually rounded out one company, which is likely to benefit from lower gas prices. I am sure that you would be aware that we cannot reveal the name of the company in public domain.

So that's how we use an integrated approach of using all the four markets, and especially the commodity markets, which are very closely linked to equity markets, to identify exciting trading opportunities with profit potential. Now I'm not saying that this is the only way or the only winning formula to identify stocks in the market but I certainly feel that this is one of the best ways to trade in the market.

So I hope that you benefit from this style of trading. That's all from me for today. I hope you enjoyed watching this video. In case you did then please do like it, share it with your friends and family members who also want to become better traders. That's all for me today. Thanks a lot and have a nice day.

Stay safe and have a great weekend!

Warm regards,


Apurva Sheth
Senior Research Analyst, Fast Profits Report
Equitymaster Agora Research Private Limited (Research Analyst)

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9 Responses to "My Latest Stock Recommendation"

Deepak Shastri -MD

Oct 22, 2020

09845262287
Your mails are mails within mails .Goes round and round . You enter into one tunnel and that leads to another sub tunnel and further into a tributary. One ends up forgetting where he/she is . Stick to the subject and be specific.

Like 

KAMALDEEP BEDI

Oct 19, 2020

Hi. Please let me know the stock name to invest. Thank you,

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Kedar

Oct 16, 2020

The video was very insightful. I am interested to understand your recommendations. How can i have access to it?

Like (2)

Vijayakumar

Oct 14, 2020

What is the latest recommendation

Like (2)

Dilip Dedhia

Oct 13, 2020

Stock recommendations based on lower gas prices

Like (2)

Mahesh Agarwal

Oct 10, 2020

Tell me Pre ipo and unlisted good stocks

Like (2)

Mahesh Agarwal

Oct 10, 2020

Dear sir, please tell me lettest stock for invest.

Like (1)

Amit Nisar

Oct 10, 2020

Pls let me know the charges

Like (1)

Jeevan Shetty

Oct 9, 2020

Gentlemen, Equity master everyone need a training on communication. You do not expect readers to spend 15 to 20 minutes of their time and realize, that they watched something their is not of their interest. Right at the out set please state clearly what's subject, what the objective etc. No wonder people have stopped logging into equitymaster. My apologies if you find this harsh. Being a lifetime time member, I hope I will get some use from equitymaster.

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