Equity ~Life Changers or Life Maimers ?
This Thought was inspired by a Whatsapp Forward received this morning titled Power of Equity .It listed many Life Changing Wealth Creators that grew many fold from just Rs 10000 invested in each & carried a concluding Message in Capitals ” INVEST WISELY WITH LOTS OF PATIENCE “
This was the List & I’m assuming the Years & CAGR Maths is correct with Dividends not being considered :
- Eicher Motors-1992 => Rs 80 lakhs
- Asian Paints-1986 => Rs 90 lakhs
- HDFC -1990 => Rs One Crore
- Brittania – 1985 => Rs 1.06 crs
- MRF – 1985 => Rs 1.10 crs
- BOSCH -1985 => Rs 1.20 crs
- Amara Raja -1991 => Rs 1.25 crs
- Shree Cement -1990 => Rs 2.90 crs
- Infosys – 1993 => Rs 3 crs
- Dr Reddys -1986 => Rs 10 crs
- WIPRO -1981 => Rs 400 crs
Cannot Argue with this Message for I’ve seen three of my Scrips,in even relatively quick time inside five years of investment too becoming over 100 Baggers ~Matrix Labs( early Millenium & now delisted as sold to Mylan),Mercator(early Millenium) & WIPRO ( from 1997 to early 2001)
It is rare for most investors to live the Conviction & Temperament to hold for long & ride the Huge Life Changing Gains.Imagine if more than Rs 10000 had been invested in each of the above,especially WIPRO!
However my Thought is what about Wrong Convictions on the High Fliers that became Wealth Destroyers & Life Maimers !
Here are a few of them ,most yet listed & struggling to revive & how much worth would your Rs 10000 invested in each of them be now ….most are Horror Stories of the past decade or a little more…sure you can contribute more…My Horror Stories have been the Damania Group’s Damania Capital Markets to mention one.Bad Judgement Call that Cost!It was compulsory delisted in July 2004.
~Suzlon -2005=>Rs 842 & 2008=>Rs 348 ! => 92% to 97% wiped out after considering 10:2 Split in January 2008 when it reached an all time high of Rs 2300 before split.Current Price Rs 16.Promoter Tulsi Tanti is yet on board though Dilip Shanghvi of Sun Pharma Group has acquired a major stake in it @ Rs 18 in February 2015.Mandatory Open Offer at Rs 18 to other Shareholders in January 2016 met with no success.The Share Price had raced to Rs 30 from where it has halved & is below the Open Offer & Stake Price of Rs 18.Shareholders hold out Hope of Revival back to Glory Days in the years ahead under Dilip Shanghavi.So far it’s been a muted share price trading range in recent months.
~Unitech-2006 => Rs 505 => 95% wiped out after adjusting for 12:1 Bonus & 10:2 Split in June 2006 & 1:1 Bonus in Aug 2007.Reached a high of Rs 14800 in 2006 before Bonus & split .Current Price under Rs 6
~Kingfisher Airlines-2006/7 => 0 ! => 100% wiped out & scrip suspended for trading from 2012/2013 & restricted trading from June 2015 ~ reached a High of Rs 335 in 2007
~Subex-2005 => Rs 250 => 97.5% destroyed after considering 1:1 Bonus in January 2006.Reached a High of Rs 887 in 2005.Current Price Rs 11
~Global Trust Bank=>2001 => 0 ! => 100% wiped out as overnight in 2004 it was removed from Demat ISIN list & Trading & only Assets moved to Oriental Bank of Commerce though RBI had knowledge in 2001 itself of how the bank was in trouble with Ramesh Gelli heading it & it being scammed by Ketan Parekh. Shareholders woke up one morning in 2004 to see no Global Trust Bank Shares in their Demat Account!.Matters were allowed to drift & even Trading was sadly allowed right till the end.I remember an NSE Broker aggressively,foolishly in my view at the time,picking up lakhs of shares in and around par at the fag end in 2004 just before Trading was ended , in a hope of a white knight rescuing the Bank!.Trapped with no Exit!Lost all!
~Reliance Power-2008=>Rs 1269=>87% wiped out! after considering 3:5 Bonus in May 2008 immediately after January 2008 IPO at Rs 450 with 5% retail discount .It recorded a high of Rs 600 in 2008 on Issue Listing.Current Price is @ Rs 47
~DLF-2008=> Rs 1184 => 88% destroyed.However it’s been declaring a 100% dividend of Rs 2 on FV Rs 2 share every year which even if considered computes to 87% destruction of investment.It recorded a high of Rs 1225 in January 2008.Current Price is Rs 145 which is a double from the 52 week low of Rs 72.Rakesh Jhunjhunwala loves this company just in case you are inspired to ‘jhunjhun’ the scrip with him to ‘rake’ in!…:-) just playing with words !
~Vascon Engineers-2010 => Rs 1939 =>81% destroyed!It came out with a book building IPO in January 2010 at Rs 165-175 and fixed price at Rs 165.CNBC’s Managing Editor at the time stated it had pedigree & will trade around IPO price with a downward drift…what a drift!.It sank the very next year to Rs 36 in 2011 and recorded an all time low of Rs 13.50 in 2014.in July 2015 Enam’s Vallabh Bhansali’s Tamla Chemicals subscribed to 14:19 rights at Rs 15 & even more & the share price began it’s hopeful revival march towards Rs 40 high in 2015 & 2016.It is currently @ Rs 38,up in a few days from Rs 30 levels.The destruction is 67% if rights were taken .I believe many of the 5000 odd shareholders at the time did not subscribe to the rights which allowed Tamla Chemicals to increase it’s stake by subscribing for more.
Living on Hope & Dying in Despair….Most of the above Wealth Destroyers were issued at Obscene IPO Premiums in a very Bullish Market fueled by the nexus hype of Promoters,Lead Managers,Brokers & Media Professionals that seduced investors
I have showcased many of the above stocks in my Training Sessions & even here on my blog over the years while assessing Value vs Price
Cut to present 2017 ~ Many are now sensing multibagger opportunity through turnarounds in these wealth destroyers that yet are listed & jumping in & some of the affected original investors are even averaging to reduce their holding cost !
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To each his Risk ! To each his Luck ! To each his Destiny !
6 thoughts on “Equity ~Life Changers or Life Maimers ?”
This is a typical case of Survivorship Bias which is created by peddlers of direct equity sales by broking firms and similarly through surviving schemes by Mutual Fund houses. Investors need to focus more on probability of finding winners than the magnitude of returns . One must develop better decision making sense and save oneself from such manipulative
Reliance Power issue came at a price of Rs. 450.00 and after that given a bonus of 3:5 from the promoters’ kitty (I hope I am recalling it correctly) and therefore the acquisition price is Rs. 270 and not Rs. 1269. Any how, the life time high was only Rs. 600 (as written by you) the acquisition price cannot be more than that.
Hey Kamal,₹ 1269 is what is left of a ₹ 10000 investment in RelPow even after considering the bonus..the ₹ figures I’ve mentioned upfront against all the destroyers is what’s left of an initial ₹ 10000 investment as conveyed in a sentence before I’ve listed such destroyers…If you re-read the blog you’ll get this sense…Perhaps if I had put this sentence in each destroyer it would have been clearer… Appreciate your viewing this blogpost and even commenting…Cheers
Brilliant writing sir..always been a fan of your writing..the detailing that you put is amazing..please keep writing with the same spirit & keep us knowledgeable..
…Living on Hope & Dying in Despair (a line from your post)
Good Afternoon ,
At the very outset,kindly excuse me for taking your precious time to read my note in your busy schedule.
I’d like to thank you for all wonderful,motivating,priceless pool of wisdom published under various headings in the blog.
I got a chance to read the ‘https://www.gauravblog.com/equity-life-changers-or-life-maimers/’, its extraordinarily useful with keen insights and lots of practical takeaways for every beginner investor who want “Living on Hope & Dying in Despair”,Sir cant it be avoided?
Sir My name is Amit, a independent research student and a R&D pro,working on a project at IITD,although i don’t have any Eco./Finance education/background but i am having passion for investing,trading investment mgmt, applied behavioral finance & analytics.Thinking to utilize my research,analytical,due diligence,attention for detail skills for doing investment analysis and developing research based investment strategies.
Sir I have a query & i’m sure your answer to that’d be highly beneficial to all guys who are financially challenged today but having a vision of financially better tomorrow by practicing value/investing–
1a) Is it practically possible for a person who’s having limited money and resources can profitably practice value investing ??Please Guide
1b)(this one is jus hypothetical) How the successful value investor deals with theirs monthly expenses,,would they dare to think of selling any equity provided provided they r Living on Hope…?they must be having side business i.e. investment consulting,research firms,stock broking etc?
Sir Pl.feel free to say no/any reply,i understand the professional/other limitations.
Thank you for your time and consideration.
Please feel free to contact me.
True Leaders don’t create followers…they create more Leaders – A Wise Man
Hi Amit,…thanks for visiting my blog & your appreciating comments…to answer your questions 1a)Yes…from tiny acorns do mighty acorns grow…believe in yourself and never compare yourself to any other…just start investing in your value convictions with your surplus,no matter how little it is…why do you think the market lot is just one share ! 🙂 …often you may have to adjust your lifestyle to make current sacrifices on consumption in order to create an investing corpus do derive future benefit from gains…I began with small retail IPO applications in the 1980s with just a corpus of Rs 10000 & it continues to be a learning process as one continuously evolves in life…life is more valuable than just value investing 1b) You begin investing with any surplus,no matter how little,after your monthly existence expenses….your monthly income to apply to your expenses may be through salary or business…when you’re starting out,unless you have a very strong level of conviction & courage & skills & major luck riding with you it would be challenging to invest all and live off investment sale proceeds,especially when eating into your capital…don’t look for instant gratification as this young generation appears to…this would involve assuming inappropriate risks…do try and attend any one of my full day Value Vs Price Equity workshops…it also covers qualities required to be a Value investor…next one is scheduled in Mumbai on Saturday,June 17,2017…wish you the very best …..Cheers,Gaurav