Tradevesting — Notes — 2

Class 2 — Stock Selection

Revise the classes at least three times.

7 strategies, 3 groups, each strategy for different group.

Groups: V40, V40N, V200

Not all strategies work on every stock. 2 times in 3 years applies to all listed stocks.

Different strategies may suit based on time, experience, appetite etc.

Risk is not of losing money, but of volatility and holding period.

V40 and V40N — same selection criteria

# V40 — Large and mid-cap

# V40N — Mid and small-cap

# V200 — Large, mid and small-cap

Large-cap: Top 100 companies

Mid-cap: Next 150 companies

Small-cap: Rest all companies

NSE has more liquidity, most of the retailers trade here.

NSE ~2K companies listed

BSE ~4.5K companies listed

Market Cap of 100th company in the list can tell a lot about market condition.

Market leader can be in any cap, Large, Mid or Small.

Practical experience of the market is more important and valuable.

6 qualitative conditions for #V40 and #V40N, company should:

1. be debt-free.
2. be a market leader.
3. be in business for last 10–15 years.
4. have pricing power (moat).
5. have growth prospects for next 10–15 years.
6. not be a Govt company.

3 conditions for #V200 (excluding Banking & NBFC)

1. Debt to equity < 0.25
2. ROCE > 20%
3. Net Profit (12M) > 200 Cr

2 conditions for #V200 (for Banking & NBFC)

1. ROE > 10%
2. Net profit (12M) > 1000 Cr

~ update #V200 list every quarter

We can manually discard any company when in doubt (e.g. Adani).

Trading means buying low and sell high, investment is buying not to sell.

There are short (20D), medium (50D)and long term (200D) traders.