Category: ForecastingFolly

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ForecastingFolly

Forecasting Folly:Opto Circuits

This post is in continuation of my forecasting folly series (see here)

In a report dated Feb 08, 2012, ICICI Direct recommended a buy on Opto Circuits with a price target of Rs.309 as against the then prevailing price of Rs.268

The price of Opto Circuits kept on falling and Dalal Street’s finest kept revising their target price downwards in sync with the falling stock price.

For instance, on Nov 20, 2012, ICICI Direct had a buy on Opto Circuits with a price target of Rs.181 as against the then prevailing price of 106.25.The “target” price was roughly 70% more than the prevailing stock price !

Now fast forward to Feb 26, 2013.The stock is now trading around Rs.50 !This is around 16% of the original target price set one year back by the helpful folks at ICICI Direct !

Forecasting folly, anyone?

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ForecastingFolly

Forecasting Folly:Karuturi Global

This post is in continuation of my forecasting folly series (see here).

Karuturi Global is the world’s largest cultivator of roses. On June 12, 2008, Ambit Capital put a buy on the stock with a price target of Rs.49. Roughly around the same time , on June 20, 2008, Religare put a buy on that stock with a price target of Rs.35.

Currently, the price of Karuturi is Rs. 3.2 !! So the stock is trading around 90% below the original price targets set 5 years back !

Now, I am sure along the way , Dalal Street’s finest must have revised downwards their price targets or even changed the buy call.

But this example highlights the difficulties investors face.If you “buy and hold”, then you just get blown up by investments in stocks like these.

Also, highlights about how difficult it is to predict the fortunes of most businesses.Not every business is a HDFC or ITC which grow along predictable lines (like cells in an Excel sheet).As the fortunes of the business fall, the stock price gets hammered.

Another funny thing about India is nobody talks about corporate governance when the stock price is rising.Once the stock price starts falling, its fall is directly attributed to “Management are crooks”

 

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ForecastingFolly

Forecasting Folly: Shiv Vani Oil

This post is in continuation of my forecasting folly series (see here).

On Aug 19, 2011 Sharekhan put out a strong recommendation on Shiv Vani Oil stating

 

At the current market price, the stock is available at 3.1x its FY2013E earnings and an enterprise value (EV)/EBIDTA of 3.3x. We believe the moderation in order inflow has already been absorbed in the stock as the same has corrected by 60% in the last one year and by almost 36% in the last quarter. The stock is currently trading at attractive levels. Hence, we maintain our Buy recommendation on the stock with a price target of Rs340.

 

 

The then prevailing price was Rs.166.45.In less than 18 months, the stock has crashed to 62.6 i.e around 20% of the target price announced by Sharekhan !

Forecasting folly, anyone?

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ForecastingFolly

Forecasting Folly:Arshiya International

This post is in continuation of my Forecasting Folly series (see here)

On 29th Dec, 2012, Dalal Street’s finest at Kotak Securities came out with their equity outlook for 2013.

As is their wont, they recommended 5 stocks for 2013.

And guess what, one of the stocks recommended was Arshiya International.The then prevailing price was Rs.118, a target price of Rs.188 was assigned to the stock.

A short two weeks later, the stock has collapsed due to allegations of corporate governance issues.Now it is quoting at 77.0 , one third of the then CMP and looks like it is set to go down even further.

Kotak’s response to this is typical of our brokerages here ; it has suspended coverage of the stock !!A note to clients  says

“The stock has declined by 40 percent over the last 12 months, largely driven by slowing economic growth which has led to less than estimated growth in segments like FTWZ/Container rail and high debt position. Given the above and lack of clarity on the alleged wrongdoing by the management we are suspending coverage on the stock till clarity emerges,”

This is probably a record in the Indian equity markets where a buy recommendation has collapsed in a space of two weeks !!

Forecasting folly, anyone?

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ForecastingFolly

Forecating Folly:Gokul Refoils

This post is in continuation of my Forecasting Folly series (see here)

On 7th March, 2011, Dalal Street’s finest at Sunidhi Securities came out with a research report on Gokul Refoils.

The then prevailing price was Rs.98, a target price of Rs.125 was assigned to the stock.

Fast forward, 18 months later, Gokul is languishing at around Rs.44 (today’s price).

This is one third of the target price and half of the then prevailing price.

Forecasting folly, anyone?