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BHEL reaches 1700, book 1/4 profits

BHEL has now reached 1700. This is about 50% profits if you’d bought when I first recommended it (2250 pre bonus = 1125 post bonus), and I would recommend that you book 1/4 your profits right away.

BHEL reaches 1700, book 1/4 profits

For the rest, place a 10% trailing stop loss. Meaning, if the share retreats more than 10% from its high, sell the rest of your stock. That may allow you to buy back later at a lower price.

Note that this is my personal strategy – to sell 1/4th at 50% profits. If you have a different way to work things out that might work better for you. For example some people choose ONLY a trailing stop loss, meaning they never sell unless the stock retreats 10%, which can be great in a big bull run. Some others don’t choose to sell if the fundamentals look good – BHEL has a great set of fundamentals. But the stock’s run up quite a bit and the immediate future may be fully factored into the price – if, from here, you make only 10% gains in the next year, one could argue that the money is better deployed elsewhere.

Where else can money be put? Everything looks high now! There are reasons for the market to stay buoyant, as much as there are for the market to crash. If you can’t find a good opportunity, sit on the cash. There’s nothing wrong with sitting on money; you should invest only when the opportunity is very favourable. A 50% risk is not a risk, it’s a gamble. Let the odds come in your favour, and then invest.

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  • Uday says:

    >Hi Deepak,

    I hope you have enjoyed your vacation. Thanks for your suggestions. I just sold my BHEL shares. What is your take on SRF? It is still at your recommended price and has not participated in Bull Run. But is it possible for such shares to participate in the possible bear phase that is coming…

  • Deepak Shenoy says:

    >Uday: SRF is perplexing, they have a good model but the stock hasn’t moved much. Let’s wait for SRF’s Q1 FY08 results that willcome soon, and then see how to proceed. I still hold the stock.

  • Siva says:

    >Thanks. I sold at 1407. Tried to buy @1450, but it reached 1700 -(((
    Waiting for it go down to buy

  • Jagdish Chavan says:

    >Thanks for touching back BHEL Deepak, I have 30 pre-bonus share bouhgt at 2100. I am new [8-9 month old] to Stock market and have one question whether your suggestions to sell 1/4 at 50% gain is also applicable for long term investing ?

    when I started, I thought I will pick up 10-12 scrips and hold them for 5+ year term. Does this makes sense really? Pl. lets know your thoughts here or may be on seperate post.

  • Ranjit kumar says:

    >Hi Deepak,

    Please can you explain me the logic of booking 1/4 of profits when you have 50% gain. Why not 1/2 or 3/4.

    Regards
    Ranjit kumar

  • Deepak Shenoy says:

    >Jagdish: For a more long term investor don’t bother if you have confidence in the stock. And you should hold only a trailing stop loss (i.e. sell if the stock falls by a huge percentage)

    Yes, your funda of 10-12 scrips for longer terms makes sense. But be informed, and track the stocks at least on a monthly basis; if a stock drops too far you should find out the reason for it and either sell or buy more.

    Ranjit: The 1/4th booking at 50% gain is my personal funda. It’s a risk control tool that I use regularly. You could use a different strategy, like apure trailign stop loss (where you sell when the stock retraces say 10%) or use different percentages of booking like you said (1/2 or 3/4th).

    The 1/4th is to ensure that I get to participate in future moves if any and to also ensure that I book some profits in case this is a peak. 50% is an absolute number but for the first year I prefer it to be absolute, further years on I annualise the gain.

  • Nilesh says:

    >Deepak,

    Can you please comment on morgan stanlay growth fund wrt investment in any other fund linked to index (sensex or nifty). it has given better returns than sensex since its launch (+5%). it has calculated its returns considering dividend was re-invested in its own fund. but for sensex, i dont think it has done so. but still +5% is good difference.
    also it is trading at 11%-12% discount to its NAV which should get bridged by Feb-09, which is when it would become open ended.

    also how much of my investible money (in equity), i can put in there.

    I am a active investor spending too much time on investing. but i feel i am not getting much of advantage in doing so, i can/need better spend that time on my work.

    i would appreciate your suggestion on same.

  • Uday says:

    >Hi Deepak,

    What do you think about SRF. Now I am inclined to book loss and move on. Before doing that, I would like to listen what you will say about this stock. Thank you..

  • Deepak Shenoy says:

    >Nilesh: The 11% discount looks good though I have to analyse this some more. You might as well buy and hope that hte discount narrows down in 9 months, because then you have a good downside cover and better upside. Percentage of equity wise: that’s your call if you don’t mind money being locked in till then. (Also check if “open ended” means you can sell back to the fund at NAV price, or should you sell in the market only)

    Uday: Sorry for the delay mate. I was in Chennai for a conference on the weekend. Yes, exit SRF. I will write a post on it – the results are quite lousy on the face of it! It’ll probably come to buyable rates in future quarters.

  • Nilesh says:

    >thanks for replying deepak. am inquiring the msgf for “how to sell” procedure after Feb-09.

    btw discount will narrows down in 21 months (not in 21 months).

  • gsvirdi says:

    >This was a gr8 blog indeed, but u may agree that everybody can’t invest enough. Incidently I had been searching for resourses, where I need not invest lot of money to start.
    I found a website which says “Start trading with as little as $1”, obviously I was thrilled. But sadly its about forex. http://www.liteforex.org.
    Plz give me ur personal advice about Forex, and can I trust these ppl.