Introduction:
On 16th November, 2017 GEMIC (GEM Investment Club) executed its first trade for the academic year 2017-2018, thus starting to build its portfolio in the coming days. In GEMIC, we make use of Fundamental Analysis and mix it with Technical Analysis to find good stocks and execute our trades. While Fundamental Analysis helps us to find good value stocks who are in growth stage or recovery stage due to either Sectorial (Industrial), Economical, Political or Cyclical factors, Technical Analysis helps us to find the right entry and exit point of our position.
As on 25th November,2017 GEMIC has 2 open positions in the market:
- Alibaba Group Holding Ltd (NYSE: BABA)
- Amundi Asset Management Company (EPA: AMUN)
Alibaba Group Holding Ltd (NYSE: BABA):
Alibaba Group Holding Ltd., recommended by Alexis Giroudeau – 1A in GEMIC, is the biggest player in the Chinese Online marketplace (like Amazon of china) with growing business across the world. It has had growing revenues and net profit over the past few years and is considered of strategic importance for the Chinese market.
Even though normally we would compare the financial ratios of the company, its difficult to do the same with this company as similar companies in the Internet space do not have a uniform standard valuation method. While a company in Internet space may be allowed to trade at 5 times its valuation, another similar company may be allowed to be traded at 20 times its valuation due to other underlying factors.
Therefore, after confirming that the company is in its growth stage, with the help of its Profit and loss and revenues figures, we moved to look at its technical to see if it’s a good stock to buy or not.
Looking at its past movement patterns; One can observe that the stock is on a continuous upward trend with small corrections in between. This makes it a perfect up-move since its correcting for its up-move as it rises and therefore not creating a bubble.So when we tried to analyse its short-term trend using its 50 DMA (Day Moving Average), we observed that the stock bounces back by approximately 15-20 points after touching the 50 DMA.
Therefore, we bought the stock at the price of $185.65 with expected upside of $14 and stop-loss below the 50 DMA. The closing price of the stock on the last trading day was $191.19 thus giving us a net return of 2.9% in last 7 trading session. Not bad right?
Amundi Asset Management (EPA: AMUN):
This is the second stock which GEMIC has added to its portfolio on last Thursday – 23rd November, 2017. The stock, recommended by Adrien de Boissezon – 1A in GEMIC, also has growing Revenues and Net Profit with increasing ratios.
The company is a top Asset management company of France, with established reputation and growing business. The financial sector is expected to rise with the expected recovery of the economy in the coming years. Therefore, the company was ripe for a good buy.
But, before we could actually buy it, we needed to do the Technical analysis on the stock to see if its right time to enter the stock or not.
As you can see from the chart, the stock has a good support at around 70.5 with next support level just below the 68 mark which would be our stop-loss mark. The support of 70.5 has been tested twice and the stock has bounced back 2 times showing that it’s at crucial support level for the stock with a big upside as compared to the low amount of risk it carries. We also had big support from the Fibonacci retracement levels which is a very strong indicator. Therefore, we decided to buy the stock at 71.70 mark (since the GEMIC meeting happened after it had already risen from 71.5 mark which would have been favourable) with a prudent target of 75 and expected upside till 80 while the stop loss lies below 67 to be on a safer side, given the volatility of the stock. The closing price for the last trading day was 71.68, therefore there is almost no change in the current mark to market position of this stock for our portfolio.
Overall:
The GEMIC, as of 25th November, 2017, stands with a portfolio of a stock with 2.9% return in 7 trading days and another at its break even price.
Sannidhya AGRAWAL
Consultant – GEMIC
Respo – GEM Finance Chronicle