Accumulation VS Distribution Phase

 How to know if the stock of a company is in 'Accumulation Phase' or Distribution Phase'?

 This is a very common question every investor asks before an investment in value stocks. Sometimes what we see is stock, take the move and go sideways so it becomes difficult for an investor  to identify whether this sideways phase is for accumulation or distribution and how we should understand this?

Here is the simple trick with the help of which you can easily identify the stock phase.

There are three major players (Smart Money) which play an important role in shareholding of any company.

a) Promoter.

b) Mutual fund or Insurance companies.

c) FIIs (Foreign Institutional Investors)

So let us understand how we will identify smartly which company is good for investment.

Step 1:

Find a good fundamental company.( Smartly)

a. Sales must be increasing.

b. EPS should be increasing.

c. Low debt.

d. P/E should be less than industry.

eg. KEC intnl.

Step 2:

Look for past 6 months' shareholding of 'Smart Money'. It should be increasing, you may look this from any website like Ticker Tape, Market Mojo, Screener.in etc. which you find comfortable.

Step 3:

Look for a technical chart. This increasing stake should not reflect in price. . In the following chart you can clearly see smart money holding was increasing, the Company was growing in terms of sales and EPS. Still price were going down, this is a perfect example of smart money

If all conditions met, good to go.!

Disclosure: This is not a stock recommendation. It is a back test You should try to do more test on different companies to get confidence on it.

Happy Investing Good Luck !