Case Study learnings

April 3, 2024 3 min read

In the world of stock investments, understanding when to buy and sell is crucial for maximizing returns and minimizing losses. Today, we delve into two case studies that shed light on the importance of strategic decision-making in your investment process.

Alkyl Amine

Let’s start with Alkyl Amine, a stock that experienced a whirlwind of price fluctuations. Initially purchased near Rs. 600 in 2020, it soared to nearly Rs. 4700 within a year and a few months. However, as the momentum waned, the stock began its descent, prompting the strategy to exit around Rs. 3800, still securing significant returns. Subsequently, the stock plummeted to nearly Rs. 1700, highlighting the importance of timely exits to mitigate losses and capitalize on gains.

Laurus Labs

Next up is Laurus Labs, a stock that struggled in its initial years before witnessing a remarkable upsurge. Purchased near Rs. 95 or Rs. 100, it surged to almost Rs. 720 before sharply declining. Despite the subsequent recovery to Rs. 600, the momentum was insufficient for reentry into the strategy. By adhering to the strategy’s principles, losses were minimized, and capital was effectively utilized elsewhere.

These case studies underscore the essence of momentum investing, where stocks are bought and sold based on their upward or downward trajectory. While this approach may seem short-term focused, it emphasizes the importance of structured decision-making in navigating volatile markets. By adhering to predefined rules for buying and selling, investors can optimize returns and mitigate risks effectively.

Perhaps the most significant takeaway from these case studies is the importance of having a structured approach to investing. Whether it’s momentum investing or any other strategy, having clear guidelines for decision-making is paramount. This ensures that emotions are kept in check, and investment choices are based on objective criteria rather than speculation or sentiment.

WeekendInvesting Strategy SpotlightMi India Top 10

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There is one crucial aspect we would like you to understand in this case. BAJAJ AUTO has a 1.05% weightage in Nifty 50. Effectively, a 100% move in BAJAJ AUTO will only contribute 1.05% gain to Nifty 50’s overall performance.

Whereas, Mi India Top 10 remains bias free in its approach towards weightage allocation and allocates a uniform 10% weight to all 10 stocks in its portfolio. 

So performance combined with sufficient bias free weightage gives the portfolio an all round chance to extract alpha from its parent universe.  

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    Case Study learnings