The old Wall Street adage is “Buy on Rumors, Sell on News”
Many people have lost money following this adage.
Take for example, Ramsarup Industries.In June 2010, a rumor spread that it is a takeover candidate for Arcelor Mittal.The stock shot up to around Rs.80.85.
There was no basis for that rumor.As truth came out and the dust settled, the stock drifted downwards and is now selling at Rs.4.5 !!
We cannot imagine an Apple without Steve Jobs.The two are so closely inter-linked that it is difficult to separate the founder from the company.
When the founder passes away, the company and hence the stock price are drastically affected. (as can be seen in Apple’s case )
There are many examples in the Indian context.The recent one being Amitabh Parekh of Parekh Aluminex.The stock has got hammered beyond shape after the unexpected demise of its charismatic founder.
If you cast an eye (not an evil one !) over your portfolio, you will find many companies which are closely interlinked with the founder.It is difficult to visualize that these companies can succeed and grow without them.
A sad but sobering thought.
5 stocks that hit their all time highs yesterday:
As the cliche goes, any company’s biggest assets are its employees.So while researching a company, equity analysts try to figure out the ability, motivation levels etc of the employees. In private equity, it is fairly common to touch base with ex employees to get some color on what exactly is happening in the target company.
In this instant age, many analysts instead of actually speaking to employees (or ex employees) get their employee assessments from Glassdoor.
Glassdoor is a website where employees can write reviews about their company and even of their CEO.So these armchair analysts visit Glassdoor, if they see a couple of negative reviews, they conclude “The management sucks” and drop the opportunity.On the other hand, if their reviews are positive, they go ga ga and recommend the stock.
I believe this is a serious mistake mainly because there is no authenticity.You can go right now and write a review of any company you want.So if you want to have positive reviews for your company, you can do so.On the other hand, if you want to spread malicious rumors of a company, just go and write some garbage.
Many analysts have been led down the garden path by relying on Glassdoor reviews for their equity research.Take for example, Arshiya International.A search on Glassdoor indicates “75% of employees recommend this to a friend !”
On the other hand, if you rely on online rants of employees, you will never invest in a TCS,Infosys,Wipro,HCL Tech etc.The employees of these companies are tech savvy and use the net to vent their frustrations etc.
Take for example, TCS. If you google “TCS Sucks”, you will get 269,000 results !Does that mean TCS is a lousy company to invest in ?!!
There is only one way to assuage the employee strength of the company-that is offline.Speak to the employees themselves, they will tell you about the company’s management,sales, competition, outlook etc .
Relying on online reviews is plain lazy, foolish and unprofitable !
There is an old quip “The problem of being experienced is that you keep forgetting what the experience was !!”
Today as I was perusing the stock exchange data, Tricom caught my eye.Tricom crashed by 18.46% today to close at 2.65 Rs.
I remember in the hoary past (in 2006) to be precise, Karvy was going around town recommending Tricom.It had put a buy target of Rs.220 then !!
Am screwing up Michael Jackson’s lyrics of his song “Remember the time”
Do You Remember
When Karvy Fell In Love with Tricom
We Were Young
And Innocent Then
Do You Remember
How It All Began
It Just Seemed Like a Multi Bagger
So Why Did It End?Remember The Times
Do You. Do You, Do You,
Do You, Do You
Remember The Times
On the TV, On The Internet
Remember The Times
Karvy & Tricomn
Remember The Times
What About, What About…Remember The Times
Ooh… In NSE
Remember The Times
After Market Hours…, Do You, Do You, Do You
Remember The Times
Do You, Do You, Do You, Do You
Remember The Times
Yeah Yeah