Following the Peer Trends

There are various techniques and metrics for selection of stocks in the share market. But no method is foolproof nor does it yield results on a uniform basis. In fact, the movement of stock does not obey any scientific formula. The technical and fundamental analysis has their limitations too. Notwithstanding its unpredictable nature, the market throws up opportunities at times which if properly studied and applied can be converted into decent profits. What is required is unwavering confidence in such a situation and sticking to it in spite of temporary blips.

There are times when the price of some stocks rise not so much due to general market factors as due to their intrinsic value. To take advantage of such a situation the business and products of the companies as well as the basic tenets of investment such as profit margin, EPS, P/E ratio, book value, debt to equity ratio etc. need to be thoroughly checked and comprehended. When the share prices of two or more companies with similar products start rising up, it is time to extrapolate that their businesses are improving due to increasing demand for their products and or their price(of the products) rise. It generally happens that the stock price of one such company increases first and the others follow.  The logic is that when the share price of a company moves up to an extent, the chance of price rise of other company/companies with similar products and with sound business economics is extremely high. It is sometimes better to purchase shares of the company initially lagging to minimize risk factors. 

The main business of Jindal Saw Ltd  is manufacturing  of SAW pipes, seamless pipes and DI pipes which are extensively used in oil & gas, water transportation, sewerage etc. The stock of the company with good profit margin, high EPS and low P/E ratio was trading at around ₹82/- in November 2022. It started moving up from that point and in its upward journey crossed ₹114/- in January 2023 and traded around ₹ 153/- in February 2023, ₹174/- in March 23, ₹261/- in June 23 and crossed ₹530/- in February 24. Man Industries with similar product portfolio which was trading around ₹80-82 in November 2022 traded around the same level till January 2023 but thereafter made rapid progress crossing ₹ 430/- in February 2024. Welspun Corporation, also a saw pipe manufacturer, made rapid strides during the period. Meanwhile the growth prospects of the companies was substantiated by their declaring excellent quarterly earnings.. This has also happened with TVS Motor & Hero Honda in 2023-24 and many others like tyre and power companies etc. TVS Motor was trading around ₹1100/- in April 2023 and moved to around ₹1300/- in May 2023 while Hero Honda moved from around ₹2500/- in April 2023 to around ₹2550/- in early May 2023 and thereafter both the stocks moved up without any impediment, the former reaching ₹2200/- and the latter ₹4400/- level by early part of 2024.  Recently, engineering companies like Thermax, Siemens, ABB, L&T etc. are also moving in the same pattern.