Category: ForecastingFolly

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ForecastingFolly

Forecasting Folly:Everest Kanto Cylinder

Crisil is one of the most respected rating agencies in India.

So when they decided to enter the equity research field, I was quite enthused.I felt that finally we could get our grubby paws on unbiased world class research.

However, the results have been a disappointment.

Consider the case of Everest Kanto Cylinder.

In a research report dated Oct 08, 2010, Crisil Research gave a Fundamental Grade of 4/5 and a Valuation grade of 4/5 indicating it is a good buy.The then market price was 124 Rs/share and they valued the company at fair price of Rs.146/share indicating an upside.

Now fast forward 2 years to the present.Now EKC is trading at around Rs.30 per share…around 20% of the fair price indicated 2 years earlier !!

Now Crisil in its latest research report on EKC dated Nov 29, 2012 gives it a Fundamental Grade of 2/5 and a Valuation Grade of 4/5 with a fair value of Rs.33 per share !!

Crisil’s reports and quarterly updates on EKC indicates that they kept revising downwards the fair price in tandem with the falling stock price !!

Am reminded of this old Wall Street saying:

Who needs equity analysts?In a bull market you don’t need them and in a bear market, they’ll kill you

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ForecastingFolly

Forecasting Folly:Tulip Telecom

This post in in continuation of my Forecasting Folly series.

I have been asked by some of my readers why I am writing these kind of posts when most people know that sell side recommendations are shit anyways.Well, the answer is for my own personal amusement !!

The stock I am covering today is Tulip Telecom.

On Nov 8, 2011, Emkay Global Services put out a buy on Tulip Telecom.

Then the prevailing price was around Rs.150/share. Emkay Global in its wisdom put out a price target of Rs.218/share…an expected return of 45%

Instead, the stock crashed over the next months to close at 36.65 today…a whopping loss of around 76%.

A recent article in ET explains the travails of this beleaguered company which is struggling to pay the salaries of its employees.

Forecasting Folly, anyone ?

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ForecastingFolly

Forecasting Folly:Bharti Airtel

Tadas Viskanta of Abnormal Returns was one of my inspirations for writing this blog.

What I liked about his blog was that it was “forecast free”. He didn’t make any predictions or tout any stock picks.

I wanted to create a blog on the same lines…where the reader thinks for himself/herself.

Great investors like Warren Buffett have time and again said that they can’t predict the market or forecast what individual stock prices will be.

But in the Indian scenario,we have various brokerages and pundits making predictions/forecasts like crazy.The old adage “If you want to forecast, forecast often” seems to hold true for them.Their target prices follow the stock prices resulting in considerable losses to their investors.

I thought it would be interesting (amusing ??)  to see what actually happened to these predictions made by Dalal Street’s finest.

On 5 Nov, 2011, Motilal Oswal put out a buy on Bharti Airtel with a target price of Rs.515.This implied an upside of 29% over the then prevailing price of Rs.398

A year later, Bharti Airtel’s price is languishing around Rs 304, a decline of 23%.

Forecasting folly, anyone?