Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Concepts & Tutorials

Entry Strategy Using Fundamentals: MV Chronicle

I speak of Entry Signals in the latest MarketVision Chronicle. (Registration required, free)

Entry Strategy Using Fundamentals: The Market Vision Chronicle – July 16, 2011

Learn about using fundamentals for entry signals into your portfolio, and create an appropriate entry strategy for a medium term investor. That, and all at MarketVision awaits you.

Entry Signals: The Fundamentals

Many of you have written back after last week’s newsletter asking about creating entry signals. Stocks go up and down every day; how does one ever figure out what we should buy?

Let’s first understand the time-frame. We want to figure out “good stocks”. Good, for some of you may mean that the stock will go up intraday, so you can buy in the morning and sell in the afternoon. But to others who don’t have the time to be a terminal gazer, it might mean a year from now or indeed many years from now.

What is an entry strategy?

Now let’s say you’re an arbitrageur. You want to buy stocks and sell futures and profit from the difference. There are indeed stocks that veer away from their future prices, sometimes intraday, and come back. There are some profits (probably very light) to be made from such trades. The entry process for the arbitrageur would be:

1)      Get all the stock and future real time prices

2)      Have a program that calculates the difference in real time

3)      Alert me if a tradeable opportunity, post transaction costs, comes by.

4)      (Or better still, automatically take the trade – the realm of algorithmic trading)

For the really long term investor the entry process might be:

1)      I don’t have time for an entry process

2)      I’ll just buy a diversified mutual fund every month.

3)      Which one? Just go to value research once a year, pick the best fund and put money in it every month. No need for anything more frequent.

Entry strategies are different for different kinds of investors. I’m going to assume you’re a medium term investor – that the 1 to 3 year time frame excites you. For this, we’ll use a combination of fundamentals and technicals. That is, stocks that have good financial history or prospects, and where the price is showing strength as well.

 

Editor’s Picks


A set of links chosen just for you (Visit our Picks section for a regular update)

Mobile transactions to soar in India: BCG

Payments and banking transactions through mobile phones in India are expected to touch $350 billion (Rs 1,560 crore) by 2015, according to The Boston Consulting Group (BCG), a global management consulting firm.
Mobile phone companies slash dealers margins to deal with receding profits – The Economic Times
Mobile phone companies have started slashing dealers’ margins on recharge coupons and rejigging voice and text tariffs in certain regions.

India may no longer be outsourcing hub as UK companies move work to home country – The Economic Times

A high UK jobless rate coupled with rising costs in India, are driving firms such as Aviva, BT and Santander to move work back home.

Videos


Past Short Takes:

(Read the whole chronicle)