Any indian value investor in search of bargain priced securities would never have missed geodesic ltd in his screens.
Being contrarians in stock pickings, catching the falling knives is the profession they have signed up for. seeing their stocks going down in price is a way of life for them. they dont jump on a trend. often go against the trend.
Its a very unpleasant job in the short term and very rewarding in the long term. they have scars to show and yes, they have massive bank balances to show for.
Indian stock market is still a very much of a teenager and it shows. There are very large inefficiencies existing to the delight of thankful value investors and the little problem is they don't correct too rapidly either.
We indians are very emotional people, and it shows in our stock market. when we love we simply love too much and when we hate , we simply hate to the extreme. Going overboard is in our genes and ii is a perfect recipe for disaster in stock market investing.
It throws up so many overpriced craps and underpriced bargain gems that you will simply lose count. The number of overpriced gems and heavily underpriced craps it throws is even more mind boggling.
When you find a bargain and snatches it you know only two things. One is the intrinsic value of the piece of business that the stock represents calculated by traditional valuation measures like discounted cashflow method or relative valuation methods. The second is the current price of stock that market throws.
Only when the current price is significantly lower than the intrinsic value , thereby offering enough margin of safety , value investors venture out to do business with MR. MARKET and buy those bargains.
But when you find a stock with 100 rs of intrinsic value selling at 70 and chose to buy it, there is absolutely no guarantee that it can't go still lower to sell at 60 or 50 or 40 or 30.
And thats exactly what had happened at geodesic. This gem of a stock, representing a stable,high margin business with many exciting new business opportunities lined up, run by some honest, hard working,down to earth people has been bundled with some crappy stocks and thrown to the dust bin of market.
Any value investor who entered this script watched with horror the stock price moving lower and lower while the EPS growing higher and higher culminating in a PE multiple which as a rule of thumb indicates strict avoid.
With 40% being held by reputed FIIs, 23% by promoters, 10% by corporate bodies, 7% by 45 HNI guys each holding more than one lakh shares, 20% or 1.6 crores are held by 25,000 retail guys
Some of whom are long termers and genuine investors with value perspective.
BUT, very many of them would not recognize a true value stock if it comes and kick them at their balls.
They just jump in and out of stocks each and every rise and dip and with their stop loss nonsense , they have managed to bring the stock to the PE multiple of 1.5.
This is a sort of multiple that no professional investor or institutional fund manager will touch with a ten feet pole.
Even traditional, conservative value investors who are contrarians and low pe guys as a rule consider such ridiculous multiples as indicative of unobvious, hidden, serious anamaly and prefer to ignore them.
When general market overreacts and underprice some securities, its the value investors who seek out those bargains and bid them up to reasonable price levels. But, geo has reached such ridiculously low levels that, even they will not touch it.
Now, the million dollar question is who will buy it up.
The most probable short term outcome, in the absence of any significant,jolting action from the company will be that it will drift lower and lower. Each movement down will justify the sellers pessimism and ridicule the buyers optimism and it can and may reach 20s.
Horrifying thought for existing investors.
But, that'.s the occupational hazard that value investors must learn to live with
Being contrarians in stock pickings, catching the falling knives is the profession they have signed up for. seeing their stocks going down in price is a way of life for them. they dont jump on a trend. often go against the trend.
Its a very unpleasant job in the short term and very rewarding in the long term. they have scars to show and yes, they have massive bank balances to show for.
Indian stock market is still a very much of a teenager and it shows. There are very large inefficiencies existing to the delight of thankful value investors and the little problem is they don't correct too rapidly either.
We indians are very emotional people, and it shows in our stock market. when we love we simply love too much and when we hate , we simply hate to the extreme. Going overboard is in our genes and ii is a perfect recipe for disaster in stock market investing.
It throws up so many overpriced craps and underpriced bargain gems that you will simply lose count. The number of overpriced gems and heavily underpriced craps it throws is even more mind boggling.
When you find a bargain and snatches it you know only two things. One is the intrinsic value of the piece of business that the stock represents calculated by traditional valuation measures like discounted cashflow method or relative valuation methods. The second is the current price of stock that market throws.
Only when the current price is significantly lower than the intrinsic value , thereby offering enough margin of safety , value investors venture out to do business with MR. MARKET and buy those bargains.
But when you find a stock with 100 rs of intrinsic value selling at 70 and chose to buy it, there is absolutely no guarantee that it can't go still lower to sell at 60 or 50 or 40 or 30.
And thats exactly what had happened at geodesic. This gem of a stock, representing a stable,high margin business with many exciting new business opportunities lined up, run by some honest, hard working,down to earth people has been bundled with some crappy stocks and thrown to the dust bin of market.
Any value investor who entered this script watched with horror the stock price moving lower and lower while the EPS growing higher and higher culminating in a PE multiple which as a rule of thumb indicates strict avoid.
With 40% being held by reputed FIIs, 23% by promoters, 10% by corporate bodies, 7% by 45 HNI guys each holding more than one lakh shares, 20% or 1.6 crores are held by 25,000 retail guys
Some of whom are long termers and genuine investors with value perspective.
BUT, very many of them would not recognize a true value stock if it comes and kick them at their balls.
They just jump in and out of stocks each and every rise and dip and with their stop loss nonsense , they have managed to bring the stock to the PE multiple of 1.5.
This is a sort of multiple that no professional investor or institutional fund manager will touch with a ten feet pole.
Even traditional, conservative value investors who are contrarians and low pe guys as a rule consider such ridiculous multiples as indicative of unobvious, hidden, serious anamaly and prefer to ignore them.
When general market overreacts and underprice some securities, its the value investors who seek out those bargains and bid them up to reasonable price levels. But, geo has reached such ridiculously low levels that, even they will not touch it.
Now, the million dollar question is who will buy it up.
The most probable short term outcome, in the absence of any significant,jolting action from the company will be that it will drift lower and lower. Each movement down will justify the sellers pessimism and ridicule the buyers optimism and it can and may reach 20s.
Horrifying thought for existing investors.
But, that'.s the occupational hazard that value investors must learn to live with
Good Start.
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Good write-up!
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