High crude oil prices coupled with near-Emergency-like situations in the agri-commodity prices have forced many an investor to re-jig their strategy to account for this factor. Here is a remedy that could help investors:
Basis of theory I have been advocating ‘Hubbert’s Peak’ in crude oil since October 2005 and have been proved dead right. The Hubbert’s Peak theory says productivity of oil wells will constantly be on the decline across the world.
There are various ways you can counter this energy food shortage - keep your petrol tanks full at all times and keep your kitchen & attic well stocked with food grains and items of daily consumption. But they are short-term solutions to a long-term problem.
The gameplan:The following stocks are outperformers (rally more than indices and decline less in times of duress). If the beta delta factor is lower, higher weightages have been allocated. Some ideas appear to be laggards, we are simply betting on future prospects.
Buy and wait or wait and buy? This is a million dollar question as the time period after deploying money actually decides your annualised rate of return.
While we do not rule out price volatility in the near term, we suggest you go ahead and buy these scrips in a phased manner. Like real estate, you need to buy and then wait for the fruits of your labour to materialise on these stocks.
Cairn India: From being a market performer (RSC@100, where 100 = base), the stock is a market outperformer after October 2007. (RSC is a technical term standing for relative strength comparative. When two assets are compared, you basically take one as a yardstick, such as a Nifty) Note that stock is near all time high when the indices remain 20% below peaks.
Aggressive players may keep futures long positions rolling in the mid far month series on an ongoing basis and hedge by selling the deeply out of money calls in the near month series to reduce costs. This strategy is capital intensive & risky but will yield higher returns over time. The higher the crude prices, the better for this scrip, as a positive co-relation exists. Our conservative target is at 345 + in the long term.
Gail Gaining momentum of late, the stock lagged in the last few quarters and that is changing as the RSC has started gaining since October 2007.
Note the bullish channel was overcome and has not yet been violated downwards as the scrip remains above the threshold of the erstwhile channel. Gann chartists will instantly realise that the scrip has moved upwards into the next higher angle, thereby signaling intentions of edging higher.
The Rs 400 level is now the de facto short-term floor above which the bulls are likely to retain dominance over the bears. Traded volumes are lower than what we would prefer to see. A target of Rs 600+ levels in the next 15-18 months seem a possibility.
Gold BeES: This age old hedge against inflation is available in electronic (demat) format. Note the RSC=100 (same returns as Nifty) of late. Also note the traded volumes in the last 6 weeks, which are showing massive interest emerging on a relative basis. These are signs of “flight to safety” of the smart money and it should pay suit.
If crude is to rally (high probability), this bet is a low risk “no brainer”. Drawdown potential is limited to approximately 100 points. Upside headroom is over 4 times as much. The risk reward ratio itself is compelling and the bet is attractive for long-term players. Investors need not panic on the news of the IMF offloading Gold in the physical market to raise funds cool off overheated sentiments. We see declines as a buy opportunity. Practically the lowest risk proposition of the entire list.
Petronet LNG: The long term wave count was confidence inspiring since 2006 but the time frame appeared laborious. While we expected a long haul, the performance has been almost double that of the Nifty ( RSC = 192 ) and counting. We feel a 25 % reduction in the expected waiting period of 27-30 months is justified.
Should the scrip remain consistently above the 80 mark, expect above average performance as the upmove of the next higher degree unfolds. Traded volumes are picking up since the last fortnight and need to perk up, in line with prices. Aggressive players may keep futures long positions rolling in the mid far month series on an ongoing basis and hedge by selling the deeply out of money calls in the near month series to reduce costs. This strategy is capital intensive & risky but will yield higher returns over time.
Reliance Industries: If the market is to rally, it will be led by this counter. Many triggers exist - high gross refining margins, retail foray (I just bought Reliance tea, salt, sugar), gas discoveries, NELP VII and another refinery coming up at Jamnagar. Even amateur technical analysts will recognise the 52-week simple moving average acting as a support from where the scrip has rallied. Traded volumes are beginning to perk up —- a sign of optimism.
As long as the stock remains above Rs 2,650 levels, the case for the bulls is strong and a rally to (or past) the previous peak is a high probability. We suggest a buy for the long-term investors.
Aggressive players may keep futures long positions rolling in the mid far month series on an ongoing basis and hedge by selling the deeply out of money calls in the near month series to reduce costs. This strategy is capital intensive & risky but will yield higher returns over time.
Suzlon: This scrip is a game of patience and strong nerves. Usually highly volatile and unpredictable, the stock has been a market performer - the RSC = 103. Unfortunately, the beta factor is one of the highest in this list, which makes it a lower exposure proposition compared with the other recommendations.
Note the perfect trend-line support at the 230 levels and therefore a 25 % drawdown from present levels. Traded volumes have spiked higher and that implies stronger hands buying, thereby reducing the chances of a decline to the trend-line. We expect a 50 % and higher appreciation from the current levels and therefore recommend a buy based on risk reward perceptions.
Basis of theory I have been advocating ‘Hubbert’s Peak’ in crude oil since October 2005 and have been proved dead right. The Hubbert’s Peak theory says productivity of oil wells will constantly be on the decline across the world.
There are various ways you can counter this energy food shortage - keep your petrol tanks full at all times and keep your kitchen & attic well stocked with food grains and items of daily consumption. But they are short-term solutions to a long-term problem.
The gameplan:The following stocks are outperformers (rally more than indices and decline less in times of duress). If the beta delta factor is lower, higher weightages have been allocated. Some ideas appear to be laggards, we are simply betting on future prospects.
Buy and wait or wait and buy? This is a million dollar question as the time period after deploying money actually decides your annualised rate of return.
While we do not rule out price volatility in the near term, we suggest you go ahead and buy these scrips in a phased manner. Like real estate, you need to buy and then wait for the fruits of your labour to materialise on these stocks.
Cairn India: From being a market performer (RSC@100, where 100 = base), the stock is a market outperformer after October 2007. (RSC is a technical term standing for relative strength comparative. When two assets are compared, you basically take one as a yardstick, such as a Nifty) Note that stock is near all time high when the indices remain 20% below peaks.
Aggressive players may keep futures long positions rolling in the mid far month series on an ongoing basis and hedge by selling the deeply out of money calls in the near month series to reduce costs. This strategy is capital intensive & risky but will yield higher returns over time. The higher the crude prices, the better for this scrip, as a positive co-relation exists. Our conservative target is at 345 + in the long term.
Gail Gaining momentum of late, the stock lagged in the last few quarters and that is changing as the RSC has started gaining since October 2007.
Note the bullish channel was overcome and has not yet been violated downwards as the scrip remains above the threshold of the erstwhile channel. Gann chartists will instantly realise that the scrip has moved upwards into the next higher angle, thereby signaling intentions of edging higher.
The Rs 400 level is now the de facto short-term floor above which the bulls are likely to retain dominance over the bears. Traded volumes are lower than what we would prefer to see. A target of Rs 600+ levels in the next 15-18 months seem a possibility.
Gold BeES: This age old hedge against inflation is available in electronic (demat) format. Note the RSC=100 (same returns as Nifty) of late. Also note the traded volumes in the last 6 weeks, which are showing massive interest emerging on a relative basis. These are signs of “flight to safety” of the smart money and it should pay suit.
If crude is to rally (high probability), this bet is a low risk “no brainer”. Drawdown potential is limited to approximately 100 points. Upside headroom is over 4 times as much. The risk reward ratio itself is compelling and the bet is attractive for long-term players. Investors need not panic on the news of the IMF offloading Gold in the physical market to raise funds cool off overheated sentiments. We see declines as a buy opportunity. Practically the lowest risk proposition of the entire list.
Petronet LNG: The long term wave count was confidence inspiring since 2006 but the time frame appeared laborious. While we expected a long haul, the performance has been almost double that of the Nifty ( RSC = 192 ) and counting. We feel a 25 % reduction in the expected waiting period of 27-30 months is justified.
Should the scrip remain consistently above the 80 mark, expect above average performance as the upmove of the next higher degree unfolds. Traded volumes are picking up since the last fortnight and need to perk up, in line with prices. Aggressive players may keep futures long positions rolling in the mid far month series on an ongoing basis and hedge by selling the deeply out of money calls in the near month series to reduce costs. This strategy is capital intensive & risky but will yield higher returns over time.
Reliance Industries: If the market is to rally, it will be led by this counter. Many triggers exist - high gross refining margins, retail foray (I just bought Reliance tea, salt, sugar), gas discoveries, NELP VII and another refinery coming up at Jamnagar. Even amateur technical analysts will recognise the 52-week simple moving average acting as a support from where the scrip has rallied. Traded volumes are beginning to perk up —- a sign of optimism.
As long as the stock remains above Rs 2,650 levels, the case for the bulls is strong and a rally to (or past) the previous peak is a high probability. We suggest a buy for the long-term investors.
Aggressive players may keep futures long positions rolling in the mid far month series on an ongoing basis and hedge by selling the deeply out of money calls in the near month series to reduce costs. This strategy is capital intensive & risky but will yield higher returns over time.
Suzlon: This scrip is a game of patience and strong nerves. Usually highly volatile and unpredictable, the stock has been a market performer - the RSC = 103. Unfortunately, the beta factor is one of the highest in this list, which makes it a lower exposure proposition compared with the other recommendations.
Note the perfect trend-line support at the 230 levels and therefore a 25 % drawdown from present levels. Traded volumes have spiked higher and that implies stronger hands buying, thereby reducing the chances of a decline to the trend-line. We expect a 50 % and higher appreciation from the current levels and therefore recommend a buy based on risk reward perceptions.
1 comment:
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