Maximize your wealth: The MILARS way!

Let us share another little-known fact: every market cycle sees specific industries leading. At the same time, most stocks whose prices are on the rise, belong to leading industries. You can see how worthwhile it is to consider a stock’s industry before making a purchase

Every bull market has its own set of leading stocks, which are almost entirely different than the leaders of the previous bull market. These leaders typically belong to the same industry or there will be 2-3 industries leading at one time

At StockAxis, we have created proprietary systems to be ahead of the curve in identifying leading industries and ranking them according to their growth performance. The leading industries will typically be those experiencing structural changes that have a positive impact for some time to come.

People usually tend to buy stocks that have achieved their peak valuations during a previous bull cycle and have thereafter, fallen in value due to external changes such as new competition, technology upheavals, etc. or internal factors such as promoter disputes. Buying such stocks with the assumption that they will regain their peak valuations is wishful thinking at best.

At StockAxis, we identify companies which belong to a leading industry and have the best earnings and growth profile, best ROEs, healthy/improving balance sheets, good cash generation and showing a high price strength. These companies typically gain market share from older/unorganized players with their superior products/services. Such leading companies can remain leaders for a long time and keep delivering great returns to investors.

A leading company does not necessarily have to be a blue chip name or a large market cap company. Our definition of a ‘leading’ company is a company that is a leader in its industry. Even a small sized company can be a leader in its industry if it has the largest market share, best-in-class products, exponential growth, profitability and return metrics. At times, these smaller leaders go on to become big names. By investing in such leaders, you are part of their growth journey reaping the fruits of your investment with multi-bagger returns.

Institutional investors (financial institutions, mutual funds, insurance companies, etc.) usually look for companies recording high earnings growth. Stocks of such companies rise in price as a result of high demand from such institutions. At StockAxis, institutional interest forms a part of our overall market monitoring systems and stock analyses.

Remember, for a stock to continue being a leader in its industry group, the company needs to constantly grow by innovating, entering new markets, expanding its market share and achieving high brand value.

Stocks rise in value as a result of higher earnings that are achieved from higher sales and margins; mere cost-cutting to improve margins does not signify business growth. Stock valuations rise when there is an increase in earnings through greater market share, new products, higher prices, additional capacities, etc.

Relative price strength (RS) comparison is our proprietary rating tool which rates stocks based on their price performance. We have a percentile ranking system, which ranks stocks between 1 and 99 based on complex, dynamic price-tracking algorithms. The interpretation of our RS rank is - a stock ranked 99 is performing better than 99% of the market in terms of price.

History shows that the best performing stocks are almost always rated above 70 on the RS scale. In fact, once a stock crosses the 70 scale, it has a fair chance of achieving a significant price rise.

When something is structurally changing in the underlying company, it is always reflected in the price and its RS. RS is a leading indicator of price moves going forward. It indicates positive developments in the company and the possibility of buying interest from institutions and other large investors. Our analysis and research reveal whether the uptrend in price can be sustained, and based on the stock meeting all other parameters, we make our recommendation.

Investors must always act to preserve to preserve a maximum of the profit that they’ve built up during the bull market rather than ride their investments back down through difficult bear market periods.

We understand that if an investor hesitates and allows his loss to increase by 20%, He/She will need a 25% gain just to break even. Wait longer until the stock is down by 25%, and he/she have to make 33% to get even. Wait still longer until the loss is 33%, and he/she have to make 50% to get back to the starting gate. The longer you wait, the more the math works against you, so don’t vacillate. Moving immediately to cut out possible bad decisions is the better idea. Also, an investment strategy without having proven selling rules is incomplete. Hence, we have developed the strict discipline to act and to always follow our selling rules.

Letting the losses run is the most serious mistake that almost all investors make.

You must accept the fact that mistakes in stock selection and timing are going to be made frequently, even by the most experienced of professional investors. I’d go so far as to say that if you aren’t willing to cut short and limit your losses, you probably shouldn’t buy stocks. Would you drive your car down the street without brakes? If you were a fighter pilot, would you go into battle without a parachute?

Exiting your stock at the right time is as important as selecting it. Cut your losses short and let your winner run is the golden rule to optimizing profits. And no, it isn't easier said than done. Anxieties of having to decide whether to hold or exit from a losing stock gives investors sleepless nights. And the result is usually to ‘hold on’ and ‘hope for a recovery’. To avoid this difficult decision, MILARS ensures strict use of the stop-loss tool which shields your portfolio’s gains while limiting losses.

Selling rules apply to exiting winners as well. It is very hard for investors to sell a stock that is moving up in price. The key is to keep the emotions aside and objectively analyse every situation to preserve the profits.

At MILARS, we have strict selling rules for both cutting losses and booking profits. We don’t budge from our rules at any point which helps us to stay in the game for a very long time.

The moral of the story is: never argue with the market. Your health and peace of mind are always more important than any stock.