The stock market often behaves unpredictably, moving contrary to what investors might expect. You may believe that a stock poised to rise will continue climbing, only to see it fall, or you might anticipate a decline only to witness a surprising surge. This unpredictable nature of the market teaches us an important lesson: the market is irrational and operates independently of our expectations.

Adani Enterprise: A Case Study in Unpredictability

Adani Enterprise serves as a prime example of the market’s unpredictability. From 2006 to 2023, the stock saw both periods of explosive growth and long stretches of stagnation or decline. Between 2006 and 2008, the stock surged from ₹10 to nearly ₹780.

However, for the next 10 years, it showed no significant growth, moving sideways or falling, and remained stagnant for most of the period.

Then came another dramatic phase between 2021 and 2023, where the stock skyrocketed from ₹100 to ₹4,200, delivering a 127x return in just two years. This sharp growth accounted for nearly all the gains during its 16-year journey. Yet, after this massive rise, the stock quickly lost 75% of its value within two months. It recovered significantly in the next 18 months, only to fall again by 45% in six months.

Lessons from Adani’s Journey

Over its 16-year trajectory, Adani Enterprise delivered meaningful gains during just three to four years. The remaining years were marked by stagnation, declines, or sideways movement. For an investor holding this stock throughout, most of the capital would have been locked up with little to no returns for extended periods. This highlights a critical aspect of investing: timing and momentum are crucial for maximizing returns.

Focus on Momentum

Instead of holding onto a stock during its long periods of underperformance, a better strategy is to align with its momentum. When a stock is rising, ride the trend and invest. When it starts falling or going sideways, exit and reallocate your funds to stocks showing upward movement. This ensures your money is consistently working for you rather than remaining tied up in a non-performing asset.

Efficient Use of Capital

The goal of investing is to use your money efficiently. Why let your capital sit idle in a stock for 15 years when the real returns are generated in just two years? By identifying and investing in stocks that are currently performing well, you can maximize returns while minimizing opportunity costs.

Conclusion

The Adani Enterprise example underscores the importance of following momentum and adapting your investment strategy to market movements. When a stock is rising, buy and ride the wave. When it falls, exit and find better opportunities. This approach ensures that your portfolio remains dynamic and efficient, enabling you to make the most of market trends. Share your thoughts and strategies in the comments—we’d love to hear them!

WeekendInvesting launches – PortfolioMomentum Report

Momentum Score: See what percentage of your portfolio is in high vs. low momentum stocks, giving you a snapshot of its performance and health.

Weightage Skew: Discover if certain stocks are dominating your portfolio, affecting its performance and risk balance.

Why it matters
Weak momentum stocks can limit your gains, while high momentum stocks improve capital allocation, enhancing your chances of superior performance.

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