DELTACORP : A high-risk high-reward opportunity

Currently, I hold positions in this stock, which is deemed to be high-risk primarily due to regulatory concerns surrounding taxation. My current position size stands at 1.25%, leaving an additional 1.25% allocation to reach the maximum limit per stock according to my trade plan.

However, I am exercising caution and deferring the remaining allocation until I gain more clarity on the stock's future trajectory, considering the prevailing microeconomic conditions. The heightened risk, especially in the context of regulatory uncertainties, prompts a more prudent approach.

Analyzing the shareholding pattern, as per data from Tickertape, reveals a substantial reduction in stake by DIIs (Domestic Institutional Investors) and FIIs (Foreign Institutional Investors) from April to September. Notably, mutual funds and retail investors are the only entities showing sustained interest in the stock during this period. Despite this, the data fails to provide a comprehensive understanding of the overall market sentiment toward the stock.

Given these factors, I am closely monitoring the situation and will make further allocation decisions based on a more informed assessment of the stock's prospects and prevailing market dynamics.

The company is fundamentally very strong and has a moat-like nature. The business is highly profitable and enjoys a significant competitive advantage. However, recent regulatory concerns and tax-related issues are major drawbacks going forward.

As of now, I will be looking forward to gaining a bit more clarity on how the company plans to address these issues and how the government will respond to the concerns raised by the gaming industry. Once I have a clear idea, I will consider adding 1.25% more of my capital into the stock, bringing my total holding to 2.5%, as always. Otherwise, I will wait for a deeper market downturn to present a compelling value buying opportunity, ideally in the 40 to 50 range. Then, I will take a calculated risk with a comfortable margin of safety, allowing me to sleep soundly, with the hope that the company will resolve the issues it is facing at some point in time.

My previous posts regarding this stock is attached underneath this post. Do check those out.


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