Stock markets and Sani Bhagwan
‘What should I do with this stock?’ is not a new book title by Po Bronson. It is the ubiquitous chorus in the boards of moneycontrol nowadays. If only someone can start an agony aunt equivalent for share trading, he would be a millionaire.
For those new to the world of stock market gyrations.
There is this company called Prajay Engineers in Hyderabad. Once upon a time, Real Estate stocks were the darling of the Lehmans and Sachs, the sweetheart of the Merrills, and in general the Triloka Sundaris of the Indian stock market, with Rathi being DLF, and Rambai being Unitech. Home loans were fast, furious and cheap. Prajay was quoting at Rs.260 at that point and I really wanted to buy this stock. The only reason we chose not to buy was… we could not. We would not have got 20 shares for each person with the kind of ‘share capital’ we had. And so we stayed away.
Two bad quarters after which comes the US credit crises and the same share is now available at about 23 Rs – much less than a kg. of tomato costs in our Annachi shop. Too bad we can’t use Prajay’s shares in our Sambhar nor can we ‘buy and hold’ tomatoes for like 5 years.
I honestly think this stock is much more valuable than the so many other stocks who have more debt than what Perumal in Tirupathi owes to Kuberan. But who cares? The market does not think so! And that’s what counts.
How can a company with an avg. EPS of about 18 Rs. with its book value is Rs.152, can go at Rs.23? That’s stock market for you! Sanity and market do not go hand in hand.
If someone asks me if I had made money in the market in the last nine months, the answer is no and I will likely remain that way for the next three to five years, and its not out of my choice! The only consolation factor remain what I’ve learned so far. You can’t learn that without putting your own hard earned money. Suddenly, some esoteric numbers will make your life so damn interesting.
The other reason being, if only I had invested in some other stocks by following the trend or technical analysis, I would’ve gone the way of Lehman and Merrill pulling some co conspirators along the way. Now at least I am still investing a little a month, and the story continues, albeit with a tinge of sadness.
Some say stock markets are like casinos. I would say stock markets are like the Sani Bhagavan that we fear, respect and despise at the same time in our mythology.
If the market works in your favour for like seven and a half years, chances are you need not work again in your life – ask Rakesh Jhunjunwala. On the other hand, if the market goes against you for as little as seven and a half weeks, you will have to work for a decade more, ask all the NRI’s who lost money during the October crash in US.
BTW, if you are an IT employee, you will know that almost any website might get blocked in your company, but not ICICI direct, geojit, sharekhan etc. Ever wondered why? Because those sites are more important to your managers than you can ever imagine!
October 22nd, 2008 at 1:35 pm
Prabu.
during the bonus day i was away on a personal issue where I was no where near a Comp with internet.Same is with JM financial and ACE and many…..
i have lots and lots to name it as ” What do i do with these stocks” for example HDIL which i bought for 890
Every body wants to sell and i dont know when the DDAY will arrive for all…Diwali Damaka also is disappointing this year….:(
October 22nd, 2008 at 2:14 pm
Your comments are casual, entertaining and fills the gap left by Writer Sujatha (atleast to me!)
“Because those sites are more important to your managers than you can ever imagine!”
This financial meltdown was expected long time ago, but when it came, i was least prepared (learning!!) and cash starved also to invest. SP500 has been trading below 1000. But the consolation comes from Peter Lynch ” who said that market declines by 10 percent every two year and 20 percent every six years). I will be reserving Cash for the next downturn. Mr.Market in the short term may be irrational but in the long term, he will be always right. If invested now, in the long run, it will definetely beat the inflation and fixed deposit returns.
BTW, the stocks that you and your friend talk are little known to me. Did they monopolize their market? Make investment in a company which anybody would known and at a fair price. For example Coco-cola is number one co. in beverages (because they got one secret formula) and Mr.Buffet bought it at fair price when its price crashed unexpectedly in 1986 (due to its famous marketing fiasco). Similar is his investment in American Express Credit card.
October 22nd, 2008 at 10:46 pm
Karthik
I am no expert in stock picking. Having said that, I do avoid stocks which are in the limelight and in vogue. Let’s call them ‘Page3′ stocks.
Another thing to be wary of is the ‘Research reports’ with ‘buy’ or ’sell’ ratings.
Detailed a mail panren!
October 22nd, 2008 at 10:50 pm
karthikeyan
when he means markets, he means the index, right? The markets have come down by 50% in the last 1 yr. I would like to know how frequently does this happen….
I am nobody to dispute Mr. Buffet. His buying of Coke, and his recent purchase of GE are part of folk lore…
But I dont get the theory that one should only necessarily purchase excellent, monopoly stocks…
Also what is ‘reasonable’ rates..adhuvum therila…
October 23rd, 2008 at 2:44 am
prabu
To calculate market returns, we have to wait until year end. We should ignore day-to-day fluctuations. On october 1987, when dow lost nearly 25 percent on single day, people called it end of world, but that year dow finished on net positive!!. So we have to wait until year end whether lynch is correct.
I remember another quote by W.buffet “if one bought stock and cannot see it loses more than 50 percent, he should not be in the market”.
October 23rd, 2008 at 3:40 am
>
Chacha ennoda old companyle parapatchame illai. Ella sitesum blocked
October 23rd, 2008 at 10:16 am
karthikeyan
I get your point.
October 23rd, 2008 at 10:17 am
AAR,
In a way that’s better than blocking everything else except these sites. I’ve worked in such companies!