Lesson # 1: The stock can underperform for a long period of time sometimes even 10 years
As you can see in the chart above: Hindustan Unilever stock traded below 300-310 for 10 long years. The stock for the most part of the time traded sideways, and yes 2003-2007 bull market also did not help the stock.
Lesson # 2: When a stock breaks out, it undertakes a powerful move over next 12-36 months
Hindustan Unilever stock broke out 300-310 in July CY 2011
Is HUL ready to take off? http://goo.gl/fb/jaaJZ
— Deepak Singh (@smarket) July 6, 2011
The breakouts in good quality stock rarely disappoints you. HUL stock moved from 310 to 930 in following 4 years.
Lesson # 3: When a stock breaks out, then don't argue with the market
Hindustan Unilever stock performance is a classic example of what matters to the market: Growth visibility and trajectory AND not Valuations
— Deepak Singh (@smarket) July 24, 2012
Lesson # 4: Stocks consolidate after running a long distance
The stocks make a big move and then they take a rest to let earnings catch-up. This is what HUL stock has done since 2015
One of the things you hear all the time: Market has rallied too much and hence Sell before the gains disappear. Really is this the way market works especially Good quality stock? Market is always not a Up down machine
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers