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September 2016

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India has Successfully done surgical Strikes in Pakistan Today. The Stock Market have become nervous and sold off sharply today. As I write this Sensex is down 480 points and Midcaps have fallen very sharply by 4%.

We at Stallion Strongly believe in Data. The First thing I did after i saw this news was to see what happened to Sensex when Kargil War happened, Below is the market of Sensex in 1999-2000.

 

kargil

Clearly Markets Rallied a lot after the Kargil War after an Initial Phase of Correction.

I have stated many times that we have two important factors that affect the market.

1)Earnings

2)Emerging Markets (flow of funds)

We had shown you this chart  in the blog the most important thing.

The Below chart is of MSCI Emerging Market Index (Red) and BSE SENSEX Dollar 30; Clearly there is strong Correlation in them and over long period of time i strongly believe the correlation will remain.

 

msci-eem-vs-dollar30

Earnings don’t change with these Surgical strikes, Neither does it affect the Emerging Market Index.

Will i be a buyer today?

Well i have been a buyer today selectively. THERE IS A OLD SAYING THAT BUY WHEN THERE IS BLOOD IN THE MARKET, BUT WHAT IF ITS YOUR OWN BLOOD. Capital is limited and we all have to allocate it smartly.

Can markets fall Further?

In my last monthly letter we had pointed out that there may be a correction, markets were also showing sign of Tiredness at 9000 levels. I Personally believe that the downside is less than 5% from current levels in the market and we will continue the bull market.

The Most Hated Bull Market Over?

This Bull Market was the very Much hated by many market participants, as they couldn’t participate much. I believe we will see larger participants in the next run.

Conclusion – Today was an unknown Unknown and with every crisis comes an opportunity. I strongly believe that those who haven’t Invested, or have invested in the wrong stories should look at Premium services Stallion Asset Offers. I am very confident of our ability to consistently beat the market. Click Here

For the First Time, We at Stallion Asset have revealed our model Portfolio.

This Morning We had a Query by one of our Clients regarding how will the outcome of the US Election affect our Portfolio.

query-desk-2

Lets First look at the history of Sensex Returns with Various Presidents. We have presented data for 9 Elections from 1981 as Sensex started in 1979. The US Polls are on the 8th of November 2016 and the Race is between Donald Trump for the Republicans and Hillary Clinton for Democrat.

 

us-elections-vs-sensex

 

As Data suggest,In last 36 years we haven’t had any negative returns in any Presidential Cycle (4 Years).

The Republicans have been better for Sensex compared to Democrats.

 

democrat-vs-republican

 

Coming to the Main Part of the Topic, does all this matter for a Equity Investor?

I certainly believe it doesn’t matter to Anyone except TRP Rating of Media Companies. In the coming day there will be a massive hype about what will happen to the World and Capital Markets if Donald Trump becomes President, i personally believe unless you have exposure to IT Stocks, you shouldn’t care much.

Peter Lynch in his Book One up on Wall Street Writes ” Buy a Business that a Fool can Run, because someday one will”. 

Warren Buffet when asked in 2005 about president’s role to economy said “We’ve had all sorts of bad Presidents, but have still done well. Our real GDP per capital rose seven-fold in the last century, which is remarkable.”

We Reveal our Model Portfolio for the first time. In the Below Charts you can see that our Exposure to International markets is very less. We remain extremely Confident on the Prospects of companies we have investments in whether it is Hillary or Trump who wins it.

 

model-portfolio

 

Conclusion – Time has taught me that it makes sense to have a consistent strategy in place and be away from Noise.

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Those who know me know that I buy more books than I can finish. I sign up for more online courses than I can complete. I fundamentally believe that if you are not learning new things, you stop doing great and useful things.

Today i thought why not combine ‘Art of War’ with Investing, a book i am greatly influenced by . I Learned about the book called ‘Art of War’ from this movie called “Wall Street” (1987). Art of War is written by Sun Tzu, a Chinese general 2500 Years ago and the learning’s are still very relevant. I am Convinced that if he was a Investor, he would be the best Investor in the world.

 

Those who know me know that I buy more books than I can finish. I sign up for more online courses than I can complete. I fundamentally believe that if you are not learning new things, you stop doing great and useful things.

Today i thought why not combine ‘Art of War’ with Investing, a book i am greatly influenced by . I Learned about the book called ‘Art of War’ from this movie called “Wall Street” (1987). Art of War is written by Sun Tzu, a Chinese general 2500 Years ago and the learning’s are still very relevant. I am Convinced that if he was a Investor, he would be the best Investor in the world.

START YOUR FREE TRIAL

I am Going to Write 3 Quotes from his book and show to how Investing is so Similar to a War, the only difference is that its a Financial War and there is no Bloodshed.

Quote #1 – If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.

I Would say this, know the market and know yourself and in 100 years you will consistently beat the market. 90% of investing wins is because of your Psychology and discipline rather than your IQ, its really important to know yourself. Understand the market is prime and We at stallion have been consistently beating  the market, and till the time we are learning the right things, we will beat it. We follow a consistent Strategy of Growth at a Reasonable price and have full conviction in it.

Quote #2 – Every battle is won before it’s ever fought.

If you know your strategy has worked well for last many decades, you know that you will win this time too. In our Blog Good to Great, I had written “Have You ever seen a Dealer at the Casino nervous after loosing 3 consecutive games? The Answer is No, but on the other hand if a Gambler loses 3-4 games consecutively he will get nervous and probably order a whisky. This happens because the casino dealer has a strategy in place and he knows he will win repeating the same thing again and again.”

Quote #3 – The supreme art of war is to subdue the enemy without fighting 

The Supreme art is to win in the market without fighting the market, Never ever go against market trend. The market can be irrational long enough for you to stay liquid.

Equity Investing and War Rules Remain the Same. Its all about following a consistent strategy, Research, Position Sizing, Risk Management and Rules.

START YOUR FREE TRIAL 

Trend is in favour of emerging markets and looks very strong for India – Shankar Sharma, First Global.

On 12th September Shankar Sharma, who i am a fan of said that emerging markets are set for a major bull market. We went a little deeper to dig in the data points that suggest why he said what he said.

We compared two Indexes MSCI Emerging market Index and MSCI World Index.

MSCI World – The MSCI World Index captures large and mid cap representation across 23 Developed Markets countries. With 1,645 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

The MSCI Emerging Markets Index captures large and mid cap representation across 23 Emerging Markets (EM) countries. With 836 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

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We did a Relative Strength study of Emerging Market Index and World Market.

 

Emerging Market Index Relative Strength

 

Emerging Market Index’s Relative Strenght against World Index has started gaining momentum as the Relative Strenght Index has crossed it’s 20 mont moving average. This is a sign of strength as you can see from 26 years of data that we have presented here.

 

msci-eem

The above chart is of MSCI Emerging market Index.The MSCI Emerging market index was in a range between 35 and 45 for 4 years between 2011 and 2015. The Range Shift happened when crude prices went below 40$.  Crude prices have bounced back and are consolidating between 40-50$. There is a Inverse Head a Shoulder pattern appearing on the Chart which shows bullish sentiments in the Index.

 

msci-eem-vs-sensex-dollex

 

The Above Chart is of MSCI EEM (Red) and Sensex Dollex 30(Black). Clearly there is strong correlation between the two. Sensex 30 is all Sensex companies in USD dollar terms, it is an proxy of gains of FII Investments in India.

Conclusion – We are bullish on the prospect on emerging market index, infact this year economies which have struggled the most have performed the best like Brazil (+32%YTD). If Prices rise on Bad news, normally the price is right. We believe if MSCI emerging market ETF is to rally to 45, then Sensex dollex 30 can rally all the way upto 4000-4500.

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We at Stallion Asset concentrate our studies based on data on wealth creation. Today i am going to reveal a Secret which will make Stock Investing simpler for all of you.

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.” – Sun Tzu

Have You ever seen a Dealer at the Casino nervous after loosing 3 consecutive games? The Answer is No, but on the other hand if a Gambler loses 3-4 games consecutively he will get nervous and probably order a whisky. This happens because the casino dealer has a strategy in place and he knows he will win repeating the same thing again and again.

The Only thing consistent about markets is your strategy. We at Stallion Asset don’t Trade Stocks, instead we believe in a strategy. I am very confident that our Strategy of Growth at a reasonable price will consistently outperform Markets.

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We at Stallion Asset are in business of Buying Multibagger stocks and holding them. According to our Wealth Creation Study, Companies become Multibagger’s because of a Transition.

The 3 Most Important Transitions are

1)Worse to Bad (Highest Return)

2)Bad to Good (Stallion Normally Invest’s Here)

3)Good to Great

 

Worse To Bad – These Transitions normally happen to due change to change in Management, Change in corporate Governance, asset Sale, or Change in Macroeconomic activities. Lately the Rise in Sugar Stocks due to rise in Global Sugar prices and Paper Stocks Come under this category. These are not sustainable for long term as these business’ continue to remain bad.

Bad To Good –  These Transitions Normally Happen due to change in Macroeconomic Environment.  They last an entire business cycle of 3-4 years. This is where we at stallion Asset concentrate as we believe in Buy and Rotate approach. The recent change in Cement Stocks due to pick up in Infrastructure activity is an Example of this Sector.

Good to Great– These are Normally companies where visibility of earnings of Increases. The more longevity of Growth market senses, the more valuation Increases. Consumption companies are an recent example where market expect sustainable growth of 15-20% for next decade hence all these companies trade between 30x-50x

Conclusion – The Current Real GDP Growth of India is about 8%, adding 5-6% Inflation to it, Increases Nominal GDP Growth to 13-14%. There will be Sectors growing at 25% and there will be sectors growing at 2%. We strongly believe that wealth will be created if your in the right stocks in the Sector growing at 25% in this bull market rather than bottom fishing 2% Growth Sectors.

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