Categories
ForecastingFolly

Forecasting Folly:Spanco

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

I had blogged earlier about Crisil’s forecasting accomplishments (see here).

But this example is quite outrageous in its own right.

On July 28, 2011, Crisil maintained a valuation grade of 5/5 on Spanco and gave it a fair value of Rs.289 per share.Then the prevailing price of Spanco was around 130 Rs.

One year later, on June 04, 2012 , Crisil continued to maintain its valuation grade of 5/5 on Spanco and retained its fair value of Rs.289 per share.Then the prevailing price was Rs.66 per share.

Any investor could have been forgiven for thinking that this is a deal of a lifetime.You have the brilliant minds at Crisil valuing the fair price of a stock around 5x times the market price.

What followed in the next months was a complete collapse in the stock price.Now the stock is trading at 16 Rs !!

Forecasting folly, anyone ?