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CM Strategy

Actionables: The Reliance Rights nets 4%, POWERINDIA gets us 2.5%

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This post covers the results from two recent experimental actions we posted for our premium members

We had entered the Reliance Rights issue trade on the 20th of May, read the detailed post about it here.

As of 27th May’20 we exited the trade in a fairly decent profit. We did have room till 29th May’20 (Friday), however we decided to be conservative and exit with the gains we could pocket.

We expected to do around 4% on this trade, and we ended up with 3.6%, in about 7 days. 

Here are the numbers

Actionables: The Reliance Rights nets 4%, POWERINDIA gets us 2.5%

Net 3.6% gain in a little over a week. Not bad for a few days’ work! 

Remember, the Reliance partially paid share will trade after June 12, so we could do a version of this with the Reliance partial share later. Watch the #experimental-actions channel on slack.

A Fixed Income Experimental: POWERINDIA for 2.5%

In April, we noticed an opportunity on the POWERINDIA share. This is a company that was demerged from ABB, and will eventually be taken over by Hitachi. Now, Hitachi will end up owning 75% of the shares, when it buys this from POWERINDIA, and thus, has to do an open offer for at least 26%.

If you have only 25% non-promoter stake, and you have to make a 26% offer, that means you’re literally willing to buy all remaining shares. 

The company had announced that the open offer would be at Rs. 852, but gave no time frame for it. The stock was trading at Rs. 800.

So if you bought and waited for the open offer, the profit  you would make was Rs. 52 on an investment of Rs. 800, or about 6.5%. Just that you couldn’t guess how long it would take. We estimated about four months for it.

Yesterday the stock traded at 821, which is a 2.5% gain. The lockdown has probably extended timelines, and we still have no idea how much longer they will take to announce and execute the lockdown, so we exited.

The gain: 2.5% in about two months. We suggested an investment of Rs. 100,000 so in absolute terms this is about Rs. 2,500. 

Overall the two trades above generated a decent amount. Both had potential for a lot more money to be used – we used sample values that make sense for our audience, but the logic allows for anyone to increase their size if they built their confidence. More such interesting trades happen, regularly, in #experimentals

Click on the image below to access the #experimentals-action channel [Premium access required]

Actionables: The Reliance Rights nets 4%, POWERINDIA gets us 2.5%


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