Purchase Banner

Case Study - Market Exit

Case Study - Market Exit

Rs. 66,600 Mistake (Tata Coffee - Market Exit)

Equity market is like a chakravyuh -

1) Smart investors get rewarded for holding value stocks for long duration

2) Traders get in and get out for quick profit

3) Institutions do 'Buy and Hold' for long term wealth creation

In any of the above cases, the reward is in terms of future cash flow generated as a result of dividends, bonuses/stock splits, de-mergers and growth potential. Once a Vice President of one of the largest global banks told us - "Buying decision is very easy, however it takes time, intelligence and prudence to decide exactly when to exit and maximize risk-adjusted returns". This is precisely what MySmartStocks helps investors and fund managers do in deciding appropriate exit points on their holdings.

(NOTE: All case studies are true experiences of MySmartStocks clients.)

TATA COFFEE In March 2011, the client purchased 300 shares at Rs.973 per share

Tata Coffee is a Tata group large-cap Beverages company with annual turnover of Rs.1,338 Cr and earning per share of Rs. 37 (FY10-11).

After the purchase, the client observed that the stock is moving side-ways for more than 16 months. This coinsided with extended bear market measuring patience of every investor. However, during this period, the client enjoyed three different dividends. Thereafter, Tata Coffee started moving up and in early 2013, it crossed Rs.1,600 level giving decent on paper profit of 65% in less than 2 years.

Now What to do? - many questions crossed client's mind such as -

- Should I take partial profit and hold remaining shares?

- Should I completely exit and lock decent LONG TERM Tax-FREE (as per Indian tax laws) profit?

- Should I take no action?

Access MySMartStocks.com Exit Analyze My Stock Funds Movement

EXITS on client's holdings

Any EXITS for Tata Coffee? Yes...

8 MAY 2013 - the first exit indicated by MySmartstocks as 'Best Return' exit.

What this meant was that this stock has delivered the best return. Investor may consider locking profits. Furhter, on 9th and 10th May, the market allowed to exit Tata Coffee nearly close to 52-week high level above Rs.1,650.

What did client do? The client took no action...

22 MAY 2013 - the second exit indicated by MySmartstocks as 'Traditional Exit' meaning Tata Coffee is beginneing to turn BEARISH. If not exited, positively consider exiting Tata Coffee.

What did client do? The client assumed that it is creating a 'Buy-on-dip' opportunity and hence did nothing.

Analyze My Stock

Funds Movement

Did client ANALYZE Tata Coffee stock? Yes...

23 MAY 2013 - Beginning this date, negative funds news were finally published which indicated that there has been exodus of funds in this stock within last one month. This indicated that exit is preferred.

What did client do? The client took no action...

What did FUNDS MOVEMENT say on Tata Coffee stock? A lot...

24-27-28 MAY 2013 - Funds Movement indicated that money is exiting from this stock incessantly.

What did client do? The client took no action...

29 MAY 2013 - On this date, Tata Coffee was now in bearish trend. And folks, right about this date, Tata Coffee CEO showed up on national financial news channel CNBC-TV18 giving reasonings about less than expected coffee crops affecting their operations and earnings. Need we say more.

What did client do? The client took no action...

31 MAY 2013 - Well, a lot of damage has already been done by now and further beginning this date, Tata Coffee lost its No. 1 rank in Beverages industry turning to No. 2.

What did client do? The client assumed that it is creating a 'Buy-on-dip' opportunity and hence did nothing.

As you can see, MySmartStocks offers financial tools unmatched in the industry and are very comprehensive. It informs clients on bad news well ahead of time to protect the losses and maximize the risk-adjusted returns.

Client Exit 10 Jun 2013

Finally, having seen one-sided extensive damage, the client decided to exit entire position of Tata Coffee on 10th Jun 2013. It was trading at Rs. 1,428 significantly below by Rs. 222 compared to available and known exits on 9th and 10th May 2013 at Rs.1,650!

Guess what? within next 3 days, Tata Coffee experienced seller circuit and was trading 20% lower and more. While the client was able to exit with profit, his actual 'loss in profit' still remained at Rs.66,600! This is what he suffered by waiting too long and selling after a month.

CONCLUSION - MySmartStocks is an intelligent and comprehensive financial tool - A Blue Ocean product based on human behavior.

Make no investment decisions without MySmartstocks.com.