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”