Have you invested in these stocks?
Have you lost money in these stocks?
The most easiest thing to do in this world is “copying”. Maybe that is the reason so much care is taken to avoid copying in schools. Even in the investment world, it is easier to copy the portfolio of others and try to make “money”. The result would be you may loss terribly.
Some of the articles these days suggests the stocks that had been owned by big investors. This is the most terrible idea. Some of the stocks owned by these great investors have also performed terribly.
I can remember one of the quotes of Warren Buffet,
“Only when the tide goes out do you discover who’s been swimming naked”
Mutual fund strategy
Another strategy is to own the stocks bought by mutual fund houses. These fund houses increase the stake or get out complete every now and then. It is easy to track these stock purchases via their portfolio disclosure.
The problem with this strategy is that ‘timing of buying and selling of the stock is not known”. Mutual fund houses are not going to pay brokerage charges as they buy and sell in huge quantities. While you have to pay brokerage charges for both buying and selling.
Further, they can digest losses as their portfolio size is huge, while for you the losses may be huge.
Have you invested in these stocks
Below are some of the stocks, which went burst in the last one year. This is not the end and it may keep rising. Let us look at some of the stocks in detail so that we try to identify the point to exit,
3. Yes Bank
5. Manpasand Beverages
6. Sintex industries
7. CG power
8. Eros international
9. Indiabulls housing finance
10. Cox & Kings
These are just a few of the stocks which tanked between 80% to more than 99% of the invested value in the last one year. 10000 invested in cox and kings in November 2018 would have been worth just 73 in November 2019. (source: Economic times )
Corporate Governance :
The management has been weak in managing any issue of the company in the public domain. Money laundering has been the centre for some of these stocks. If there is any issue with respect to money management and payment of their debts, then you need to take a call immediately. Money being diverted to unwanted parties, senior management being paid for unwanted expenses, etc are some of the governance issues.
Some of these companies would have taken a huge loan looking at the opportunity int the market. Market condition would have changed in the next two quarters and the debt stats widening. Sintex Industries, Mcleod Russel in tea industry suffered huge losses due to weakening demand
Debt management is a strong indicator for gauging the company. It can have big brand value but if the debt is not under control then it is the biggest red flag. Institutional investors offload their stocks in huge tranches in a day and you may not even get the hint of it.
No brand value
Don’t go by the brand value of the company. You need to analyze the company individually and the future prospect of that company.
Tata is a huge brand and it doesn’t mean all their companies are great. TCS has been their jewel and which brings them huge money. Tata Steel, Tata motors suffers from huge debts.
Now you can consider these steps before investing in any stock.