Can Gopal Kavalireddi tell us what he looks for before picking a stock

for a short period of time for not more than a week as he always uses
this strategy for trading?

Gopal Kavalireddi, A Data Maverick who trusts quality & numbers for investing
Answered Aug 16

It is strange that people assume that I have any acknowledged trading strategy. As a
matter of fact, I have bare minimum to negligible idea of technical analysis or trading
strategies. (However, started learning Technical Analysis a little).

But that doesn’t mean I don’t know anything about stock markets or psychology of
stocks & traders. I trade mostly based on news, especially more during quarterly results.
So, my active trading periods are - only between ending of each quarter till the
completion of results - basically Jan 10th-Feb 15th, Apr 10th - May 15th, July 10th - Aug
15th and Oct 10th - Nov 15th.

The reason I trade only during those periods, even though many quarterly results
continue to be declared even after that time period is because:

 the best companies results are declared mostly in the first 40 days after the
end of each quarter.
 After that period, it is mostly small companies or companies which are in no
hurry to declare quarterly results or companies which have bad news or poor
results etc.
So, I compile date lists (fortnightly) of Companies which are going to declare their
quarterly results. Giving a list of results to be declared over next few weeks - do you see
that there are not many fundamentally strong, well known, well traded companies here?
Then, I check if the list has any companies which have good fundamentals, are well
traded, recent news about them etc to prepare myself to buy or short for intraday.

 If the results are good, I buy at the time when results hit the exchanges (I
watch results announcements on TV, stock exchanges & also have alerts set
up), so that I can make some quick money.
o In case the results are very good & better than expectations, then I
buy, take delivery, hold for a few days and sell when the momentum of news
dies down.
 If the results are bad, then I sell at that time and make money intraday.
o I trade in cash market only and hence, all short trades are squared-off
the same day. So, I take the profit for the day.
 In case the stock behaves differently to the results announced, meaning,
o the results are good, I bought but stock price is falling, then I square-
off with a stop loss.
o the results are bad, I sold but stock price is rising, even then I square-
off with a stop loss.
 My loss limits depend on the price of the stock. For stocks less than Rs. 100, I
am ok losing 3%. For stocks between Rs. 101 to Rs. 500, I am ok with losses of
2% at the maximum.
This is more or less my trading strategy and continue to do this strategy based only on
results news. Even when it is not results season, if there is any news - good or bad - on a
particular stock, then I trade in that stock.
Giving example of a trading bet turning into an investment bet for short term:

 Aurobindo Pharma[1] : Check the chart below. Aurobindo Pharma fell from
Rs. 830 level to almost Rs. 550 level, a fall of 34% in a very short time. It is a
decent Company with good revenues and profitability. Also with new
acquisition, the revenues were going to be much better. The only issue was that
the debt levels are on the higher side. In the current scenario, I felt it was a
good stock for investment purpose also.

So, what did I do?

I first bought 200 shares after the stock hit Rs. 550 level & starting moving up, which was
on 25th July.

I patiently waited for results, and when they came late evening on 7th Aug, they were
very good by most standards, even beating the CNBC TV18 Poll estimates, which is
normally on the higher side. I actively tweet on results of many companies.
So, I decided to hold the stock till the next quarter, and bought another 100 shares more
the next day. From that day, this has been the performance of the stock price.

So, right now, my position in Aurobindo stands like this:

So, now, I will put a stop loss at Rs. 596 or so, so that, I can make atleast Rs. 33.3 profit
on the 300 shares (Rs. 10,000 profit) and continue to hold it.

Since Aurobindo Pharma’s price was around Rs. 500 levels, I could pay and take delivery
of the shares, whereas for Bajaj Finance[2] , I couldn’t do the same due to the large price.
So, I bought, made some money and squared-off before the time for payment came.

Bajaj Finance fell from Rs. 3520 to Rs. 3000 in a very short time and its results were due
on 25th July. When they came, they were wonderful and the stock as of today, has
bounced back by Rs. 337.
Do note that I have 300 shares of Bajaj Finance[3] held from Rs. 860 levels, which I will
continue to hold, while trading on ups and downs to make some money.
I have done similar things with Endurance Technologies. The results were declared on
8th Aug and they were not bad at all. However, the stock tanked 20% to Rs. 742.15, as
the Board had decided to get into manufacturing of tyres with a capex of Rs. 175 cr. - a
totally unrelated business to their manufacturing of aluminum die casting, suspension,
transmission and braking systems, that too with no past experience in tyre business.

So I watched the announcements[4] and by late evening/night it came, that the Board had
decided to withdraw the proposal. The stock was bound to move up the next day, so
waited for opening, got some shares, made some money and let it go.

I have a select set of 250 stocks which I keep watching for changes, news, results, steep
falls, steep rises, new investors buying or selling etc to buy or short. Bajaj Finance, Indian
Hotels, VIP Industries, Universal Cables, Bata etc fall in that space. I take risk with them
only because, incase the strategy backfires, I can still hold onto the stock as an
investment bet. These are mostly fundamentally sound companies, going through
patchy price movements on a given day.
I tweet a lot more nowadays than before, especially about stocks which I think have a
good possibility of moving up.

When I tweeted the above, VIP was at Rs. 360 and after that it hit a high of Rs. 398 and is
currently trading at Rs. 383. Not a bad way to make Rs. 23 in a short time. A Rs 162,000
investment to buy 434 shares, to earn Rs. 10,000 profit in 8 trading days.

Hope I have been able to provide a silly, unreliable, non-technical strategy, which is still
‘MY’ strategy to make profits in short term trading.

Disclaimer: Pls don’t try this ‘so-called strategy’ and lose money, only to come back and
blame me. What works for me might not necessarily work for you, for various reasons. I
use fundamental analysis to do short term trading, which I am perfecting based on my
knowledge and experience of macro and micro fundamentals, companies, businesses etc.

Image source credits: Author’s own tweets, Moneycontrol Portfolio Manager, BSE stock
exchange announcements.

Footnotes
[1] Gopal Kavalireddi on Twitter
[2] Gopal Kavalireddi on Twitter
[3] Bajaj Finance Ltd.
[4] https://www.bseindia.com/xml-dat...