Chronicles of Investment Wisdom from an NITK Alumni idiot not ashamed of his continuing serial
failures – Episode 3:
Subject: Why I am confident of achieving 50% annual returns in any market – One of the armoury
is to leverage event calendar and exploit the collective psychology of the market participants.
Context: Investment game is filled with risk and rewards. Good investment game manages risk well
and yet optimizes the rewards. Also, it uses a set of proven strategies and tactics. Here I am
highlighting one such tactic, which I have benefitted from in the recent past.
Since I am approaching the age of 60, conventional wisdom says that I should not put more than
(100-60) % in equity. In fact, most of my assets are illiquid in real estate, and my current % of equity
over total assets is only 4%, hence I can be bit aggressive within the equity portion, and I hope to
bring in more money to equity, may be to the tune of 20% over next 2 years by selling some real
estate as now I have become a wise person over serial failures.
My current investment strategy from this year onwards is as follows:
1. 70 percent in blue chips (for risk management), achieving 30% average returns annually.
2. 30 percent in short term trading (not day trading, pls. do not do day trading, why I will write
a separate note). Short term tends to be anywhere between 3 days to 30 days. I target
average 50% annual return here, as the repeated short term plays will bring superior annual
return. For example, if you hold a stock for 10 days with 5% return, its effective annual
return = 5%*365/10= 163%. Of course, you can not be right in all your games, so key is more
churn out, limiting losses and increasing success chances and maximizing return on each
success. So, it is fair to assume 50% annual return here.
3. Effective portfolio level return = 30%*70% + 70%*50% = 21%+35% = 56%, higher than the
50% target I have set for me and all others aggressive like me in the equity segment.
In this note, I will explain one tactic I successfully used in Q1 (US) for short term plays, I could not use
it for Q2 as I got stuck with some investments causing liquidity issues at the cash level. I hope to
spring back to this game in Q3 (July onwards), and I hope many of you joining me, we can team up
and do more due diligence and share our homework and insights, play together and move towards
100% annualized return.
Please note, this is just one of the armouries for the short term play, please alert me to add more
armouries here. I have been effective with this game in the US market, I hope to leverage in the
Indian market too soon, for which I need to infuse new cash, for which I have to sell some real
estate, lockdown has been a dampener here.
Concept Summary:
Equity space is dominated with quarterly results. There is a pre-published event calendar indicating
quarterly result announcements. The stock market operates on projections by professional analysts
and the company guidance. But, fuelling this is the greed and fear of market participants. If the
projections are bullish, the greed takes over, else the fear takes over. In side way market, the
relatable trends influence as it influences in other markets too.
For example, let us say the current Indian IT companies now have bullish projections in general.
Therefore, one can anticipate some run up on the stocks, days before earning announcement, then
depending how far the earnings surprises in which direction, there can be further ramp up or sharp
correction against overbought situation. This game works very well with US tech stocks, especially
the stocks like FB, AAPL, NVDA etc.
So, assuming you are good in technical analysis, knowing the event calendar, you can anticipate the
run ups or downs, confirm through tech analysis, and invest a portion of your portfolio,
Having invested, you can then track the gains until results date. If the run up is too much and you
already have close to 10% gain in a few days, you can even sell off before results and move on to
next opportunity. In some cases, additional upto 10% gains happen in one session if the results are
bullish. Therefore, you may even choose to wait for the results. It is left to you based on your
analysis, intuition and play approach.
In a bull run, your projection of gain can be bullish, in side ways situation, you should limit to 5% max
as 5% gain in one week is equivalent to 5%*52 = 260% annual gain. In this approach, I take profit
even on meagre 2 to 3% gain in 2 to 3 days as the annualized gains is huge even here.
In a bear market situation, you should either short the stock if you can (not possible in India or
retirement accounts of US) or buy Puts. I limit myself to bullish plays only for now.
There is a reasonable projection as to which companies fall in which date range of a quarter when it
comes to results announcement date. But, each quarter, actual date may move up or down by
couple of days. So, while I have shared a generic calendar here, one should create a quarter specific
calendar to exploit the opportunities to maximum. To do this, one needs to do homework at the
beginning of each quarter, update calendar as the company announces changes, read market news
on a daily basis, and have cash ready to strike, follow the plays for optimal gain and close the trade
in time, manage risks and portfolio. This is lot of work, but does not take more than one hour per
day.
Method to Madness:
Now, here is the opportunity for all of us working together. I gave the example of multiple blind
people feeling the elephant at different parts, pooling their experience and then building a superior
understanding. This is the basic advantage of collaboration. Since there is lot of home work here,
there is need for intelligence, projection, anticipation of dates and alerts, need for regular
communication etc., we can pool some volunteers including me, who can commit to lead and guide
the rest. I can lead the volunteer’s team and manage the work allocation, those of you like to help
this pls. ping me. (Nataraja Upadhya, +91 9632824391). Plan is to provide details for both the US and
Indian market on a regular basis towards maximum exploitation of event calendar.
Once we master this technique, some of us will hit 100% annual returns. We can then foray into
many other armouries like this.
We can share lot of details regarding this approach which may flood our current investment groups.
May be, those of us committed to this play alone can create a separate group to avoid spamming in
the current investment groups. But, there is one downside here, which is if the generic investment
groups have already became 10+. Due to superior returns of this approach, the new groups may
grow beyond 10, then we have a nightmare of managing 20+ groups, different other approaches
adding more groups. So, if all agree to learn to ignore flooding of messages not relevant to them,
better we stick with these original 10 groups alone. Let us see how the decision emerges.
Attachment:
I have created a first draft of generic results calendar for the US and Indian market. More scripts
need to come into this. I will own this and regularly update it as new versions on the google drive.
https://drive.google.com/file/d/1vOb8UzyIJYfyK0yAssA_mxIneueeeKoH/view?usp=sharing
Next Steps:
1. Give feedback to me personally to refine the generic calendar.
2. Volunteer registration with me to create a collaborative team to divide tactical work on a
regular basis.
3. Volunteer work allocation
a. Quarter specific event calendar maintenance for both the US and Indian market
b. Analysis of companies and results projection before the greed / fear starts showing
in the technical analysis
c. Alert on technical analysis confirmation as to window of opportunity opening.
d. Alert on event calendar for the next two weeks – this week events is to manage the
decisions made in the last week, next week events is to take trade action through
this week.
e. Post mortem of results based play and key learnings
f. Many more assignments as they pop up. We will have a task leader for each task,
supported by a set of folks, hence people may come in and go, but the mission
remains on for the benefit of all concerned.
4. Separate WhatsApp group dedicated to active volunteers only.
When I said we all deserve a minimum of annual 50% return in our meet recent, I was not
bullshitting. I already have some success with it, playing alone. I am confident that if we play
collaboratively, we will hit 100% annual return by this one approach alone.
Better days are ahead. I used Hit and Run approach (need separate note on this) last year to get 25%
in the span of 3 months. This year, I made some mistakes due to speculative play in Q2 in a side way
market and missed this game for Q2 due to liquidity issues, but I will be back in Q3. Still, I am
tracking 20% gain so far towards my target of 40% returns this year. So, I am very hopeful for myself.
But, more than that I am more hopeful for all of us together, marching towards 100% annual returns
through this approach alone, but this happens only if we learn to work together with voluntary work,
sense of adventure and sportsmanship spirit and most importantly generous sharing of experience
and insight like this note itself.
Namasthe – Nataraja Upadhya
14 June 2021