SCION CAPITAL

OTIS ID: 26872

JAYSHREE PERIWAL
INTERNATIONAL SCHOOL

FINAL TEAM MEMBERS:

1. SAARA BHATIA
2. MEHER ARORA
3. HARSHNA KHANDELWAL
4. ADHIRAAJ VIJ
5. SAGAR BHATIA
6. RITVIK RAI
7. MANHAR DIXIT (TEAM LEADER)
After we read the case study, we set out to make a strategy for and planned out our
investments. The major decisions included selection of sectors, countries and how we would
allocate money to different industries. Seeing that Mr. Sachin Rekhi is primarily focused on
long term investments but would also like to make short term investments we decided to
allocate $75k for the long term investments, $20k for the short term investments and $5k for
safety deposit.
After much deliberation over the issue we decided to invest in all sectors as we could not
come up with a good reason not to. We knew this was a herculean task and involved filtering
all the stocks but we were up for it if it led to a good investment and satisfied us money-
minded individuals. However, due to lack of growth based companies in the Utilities sector
we planned not to invest in it but in the light of recent China trade tensions we have
reconsidered the sector. Investment in all sectors would strengthen our portfolio, reduce the
risk and make it more diverse eventually leading to creation of wealth. As for selection of
countries to invest in, we decided to primarily invest in the US markets such as NASDAQ
and New York Stock Exchange. US market is one of the biggest and most liquid markets in
the world with a market capitalisation of $32.3 trillion and a share trade volume of nearly
$40 trillion. Although this doesn’t mean that we did not invest in other countries. Till now,
almost all our investments have been in the US but we are investing in India as well as other
countries for a diverse and well-rounded portfolio.
Our Strategy:
After considering all these aspects we needed a strategy that would cater to the needs of Mr.
Sachin Rekhi and eventually lead to perfect investments. We based our strategy on value
investing. After much research we came up with different qualitative and quantitative factors
that we used in our strategy. We understood that our strategy could not be constant and also
that it could not be same for each sector. Since we learn something new with every
investment our strategy is constantly evolving and we keep updating it to our needs.
Our Long Term Strategy:
To carefully analyse our stocks we decided to use a variety of ratios to best tell us the
company’s true worth. Furthermore the ratio analysis helped us in comparing the
performance of different companies in the same industry. We have used a combination of
four ratios to help us measure the stocks on a quantitative level. The first ratio we have used
is the P/B ratio. Since our main strategy was to purchase undervalued stocks the P/B ratio and
the PEG ratio helped us to identify if the stocks were undervalued or were overvalued. The
PEG ratio also allowed us to compare the valuation of companies with different growth rates.
We chose this over the P/E ratio as it gave us a comparatively thorough picture. The next
ratio we have used it the Debt to Equity ratio. We chose this ratio to see how much a
company is leveraged. Also since a company with a low debt to equity ratio has a higher
scope for expansion due to the higher fund-raising options it helped us identifying its
performance in the future. A high debt to equity ratio indicated us a higher risk. The final
ratio we used was the current ratio. This helped us identify the liquidity position if the
company and if it was able to meet its short term obligations with its short term assets. We
also plan to use ratios such as Alpha, Beta and Sharpe as these would give us a larger picture
of how the stock is in terms of return and risk/volatility. We are also looking at M score, Z
score and F score for a better idea about the company.
For the qualitative analysis we are using McKinsey 8 qualitative analysis and other factors
including the reputation of the company in the market, news surrounding the company and
reviews from other investors. We are also looking at the strategic and tactical decisions made
by the company and how innovation-led it is along with its future plans. Thus, our long term
strategy is shaping quite well.
Our Short Term Strategy:
When picking stocks to trade for the short term, we decided to first look at the Relative
Strength Index to compare the strength of each stock. We decided to trade only those stocks
that had an RSI of 50 or below. An RSI of 50 indicates the price is neutral/ not over priced.
We decided to use Exponential Moving Averages. We follow the general rule; When shorter
MA crosses longer moving average from above - it indicates bearish signal, means downward
momentum. When shorter MA crosses longer MA from below, it indicates bullish signal,
means upward momentum. We only buy stocks when we clearly see the upward momentum
signal. Additionally MACD helps us understand the strength of the trend thus helping us
decide how much of the stock to buy. So, we buy when MACD indicator is diverging and sell
when trend changes; i.e MACD indicator converges.
To manage risk we decided to set stop losses. We set stop loss 10% below current price. So if
the price starts falling due to unprecedented market swings we can avoid a large loss or
perhaps any loss at all. We also adjust the stop loss according to the market's volatility; if the
stock price isn't moving too much, then the stop-loss points can be tightened.

Our Plans and Projects:

We are currently working on a sentiment analysis of twitter and news headlines about a
company. We are trying to design a program that would help us analyse a stock qualitatively
as well as quantitatively. This could be a major break-through for our strategy. Furthermore,
we are evolving specific strategies for each sector.
Our Investments:
We have finally achieved the pace of work we had aimed for. Recently we invested in the
Consumer Discretionary, Producer Durables, Energy and the Materials and Processing
Sector. Till now, we have invested around $30k in long term investments and around $10k in
short term investments. We have invested in companies like ABERCROMBIE & FITCH CO,
BP PLC, CHINA AUTOMOTIVE SYS INC and FTI CONSULTING INC. All these
companies agreed with our strategy and showed growth and positive returns. We analysed the
stocks on the basis of our strategy. We had set parameter and made sure that the stocks
fulfilled these requirements. The ratios of the stocks we just what we needed. For example, in
FCN (FTI Consulting INC) the ratios agreed to our strategy completely and the company did
very well qualitatively. Price To Book ratio, Debt to equity ratio, Alpha, Beta etc were just
right.

We continue to invest and traverse this journey of trading successfully. Our aim is to go big
or go home. We are a team that is smart, swift and strong-headed. We think before we act.
We know what we are doing and what we must do to get our investments right. We
understand that this is our opportunity to shine and we must not deter from our goals.