Home > Education, Short Sell Ideas > Mindtree and Sasken- How “buy and hold” guys lost money?

Mindtree and Sasken- How “buy and hold” guys lost money?

Monday, November 12, 2007 Leave a comment Go to comments

Usually people ask me-” I am holding xyz. The stock is down 50%. Can I hold it? I am a long term investor and can wait for next 5 years!”

If you listen carefully- you will know this is just another case of “not booking losses”. The investor buys the stock on expectations that the stock shall go up and when the stock starts to go down he can’t adjust himself to the “new reality” and finds it difficult to sell the stock. By saying that he/she is “long term investor” he is merely putting up a reason to avoid losses.

Just look at two stocks -Sasken communications and Mindtree Consulting. If you remember when these stocks were listed, the companies were doing good and their issues were hugely oversubscribed . But both these stocks have been in the severe downtrend for last couple of months. Infact, if you remember I had advised one reader to sell Sasken while it was still at around 500 levels.And this had infuriated couple of readers! After all it was their darling stock. To me it was an expected behaviour as no one wants to believe that their stocks can actually go down! Who wants to buy a stock to take a “loss”?

Again this is a case of excellent managements and companies where the stocks have been underperforming. Infact Mindtree is below its IPO price! So if you are still holding these in the hope that they might recover some day, you might be in for some big surprise in the coming days.

Would you like to be a long term investor and hold this stock for next 3 years? Are you sure that these stocks won’t head to 100 or below? Are you sure that recession in US won’t affect these stocks in the telecom services industry? do you know that it took Infosys 7 years to regain its 1999-2000 price? Do you know that WIPRO stock holders who bought the stock at the peak of 2000 bubble are still sitting on loss?

Markets don’t care about future. Future is “unknown’ and “unseen”. It is best to remain in the “present”. Does’t everyone tell you to “live your life in the present”? Following trends is all about that! Those who can’t handle uncertainty can neither be good investors nor traders.

Advertisements
  1. Sampy
    Wednesday, November 26, 2008 at 1:37 pm

    Sasken ‘s management has come under a cloud. Management includes the JB group. Even among professionals people like its CFO (Nita) have reputations of aggressive and questionable accounting. All the guidance given by top management was hogwash. The actions of the CEO and CFO should be investigated by SEBI. These crooks need to go to jail.

  2. sagecapital
    Wednesday, January 2, 2008 at 8:23 pm

    Nirmal- People are now talking about 100% and not 20% 🙂
    Sasken might have moved up 20% but the rest of the market is moving far beyond it.

    Anyways- I play the game by my rules. You can play it by rules and still win the game. Although I am not aware of your rules/reasons for entering Sasken.
    It might just be a coincidence that Sasken bottomed out when I wrote about it 🙂

  3. nirmal
    Wednesday, January 2, 2008 at 7:52 pm

    cisco feeling heat?…I dont think so…and sasken has put up another 20%…anyways, i like ur ideas and follow sometime, good analysis…keep it up

  4. sagecapital
    Monday, November 19, 2007 at 10:26 pm

    Nirmal- As a rule, I don’t buy stocks that are going down. I prefer to make my money in JP associates and Reliance Capitals of the world. We have made 150%+ on the stocks in last 6 months.If you bought Sasken at 600, you still won’t have made any money.Now you need to make 100% on the stock to recover your 50% loss.
    So my 100 rupee in Relcap has grown to 250 bucks whereas the same 100 bucks in Sasken might still be 60 bucks after the bounce!You need to do a lot of catch up.(more than 300%+)
    And what is your rationale for holding it?Didn’t you listen about the slowdown in the telecom equipment sector? Ericsson,Cisco,Qualcomm all are feeling the heat!

  5. nirmal
    Monday, November 19, 2007 at 10:05 pm

    hi sage,
    now what u say , sasken is uo 15% in a day, the guy who listen u on 13th that is wednesday, has lost 15% of his money in 3 trading sessions. I m holding it

  6. sagecapital
    Thursday, November 15, 2007 at 8:38 am

    Gautham- I don’t trade based on “public news”.
    You can expect whatever price you wish.More important is to define your strategy when your expectations are not met!
    I am personally not looking at IT stocks barring one or two. I only short IT stocks on rallies till the downtrend remains. I have seen many It software guys buying IT stocks on the assumption that “they know the business”.
    I know couple of Sasken employees who bought Sasken stock on the assumption that company is doing good!

  7. Gautham
    Thursday, November 15, 2007 at 12:21 am

    With MindTree acquiring an Chip design services company http://www.myiris.com/newsCentre/storyShownew.php?fileR=20071114173653124&secID=fromnewsroom&secTitle=From%20the%20News%20Room&dir=2007/11/14

    what do you think about its prospects in the short term. I saw the profile of TES Electronic Solutions, it seem to have good client base mostly in APAC and Europe (so not much $ effect) very and also potential for cross selling of services.

    I expect 480 levels in spite of the “SELL” rating from IL&FS

  8. sagecapital
    Wednesday, November 14, 2007 at 10:42 pm

    They are good as long as they continue to go up.
    Keep your stops at 135-140. If the stock reverses, you can find an automatic exit.
    If you want to ride for longer term, then keep a stop at 115-120.

  9. Prapti
    Wednesday, November 14, 2007 at 10:19 pm

    Sage

    Tell me something
    If stock are constantly moving upward like power grid or so…
    aren/t they good for long term…
    We should keep them for future or not..
    what u say..
    I m very new in stock market
    So am confuse what to do…one thing sure..I have encashed partial stock to get my capital back..
    now only profit is there in security form..
    Pls reply
    Have A nice time

  10. Gautham
    Wednesday, November 14, 2007 at 8:02 am

    Nice article. I’m one those who’s holding MindTree stocks!! This is surely an eye opener. I’d bought 1000 stocks during IPO + 2ry market.. I sold 50% of them at 859 and kept the rest thinking long term! My foot, I should have sold it off to buy other up market stocks.

  11. sagecapital
    Tuesday, November 13, 2007 at 6:55 pm

    Divakar- I am a Brahmin by birth though I am a big fan of “karma philosophy”.So just do your “karma” honestly.
    I am also a big fan of J Krishnamurthy. His teachings make sense to me. He is one of the original thinkers. You can check out some of his teachings at http://www.jkrishnamurti.org/
    These days I am reading “Living with the Himalayan Masters” and “Black Swan-Nassim Taleb” at the same time 🙂

  12. sagecapital
    Tuesday, November 13, 2007 at 4:18 pm

    Ashish- Reliance capital has been rising since July. The rub off effect might be visible in Indiabulls and Indiainfoline.
    And watch for MOTILAL OSWAL.

  13. ashish ji
    Tuesday, November 13, 2007 at 1:31 pm

    OK. I”LL read.

    SAGEE- Edelweiss, RELIGAER IPOs hittin MARKET SOON, IS THAT WHY RELIANCE CAPITAL RISING????>
    I REMEMBER—THIS HAPPPEN DURING DLF IPO and POWERGRID IPO TOO>

    Disclosure: I MAY HAVE PERSONAL INTREST IN SOME OF THE ABOVE stocks.

  14. sagecapital
    Tuesday, November 13, 2007 at 12:25 pm

    Yes dude..
    The absolute price of INFY in 2000 was about 20,000.
    Read my trend analysis article on INFY.

  15. ashish ji
    Tuesday, November 13, 2007 at 12:19 pm

    “do you know that it took Infosys 7 years to regain its 1999-2000 price?” > U CONSIDER INFY stock SPILIT in tHIS equation?

  16. sagecapital
    Tuesday, November 13, 2007 at 12:02 pm

    I see a contradiction here:
    One one hand you are not sure about rupee dollar and on other hand u easily assume 20% growth? What if dollar hits 30 bucks in next 5 years? What if US goes into the recession? Have you taken such assumptions and done your calculations?
    Even INFY management(who know the inside out of the business) might not be willing to give a 5 year guidance and investors are quick to make such naive assumptions!
    Just check what happened to E-Trade stock yesterday in the US? It got slammed by 50% in a day! A year high of $25 and currently at $3. One bad quarter from INFY and you will know what I am saying!

  17. SRI
    Tuesday, November 13, 2007 at 11:56 am

    What is said about infosys and TCS looks very practicle. What will happen about rupee doller equation , how these companies will fare after lifting tax holidays. But at the same time one must look into the FACT THAT THESE COMPANIES DEVELOPED HUGE COMPETENCIES IN LAST few years and a PE of 20-25 is reasonable for a company like TCS and Infosys. Even at a 20% growth ratr they will double their bottomlines in 5 years. Which sector looks so promising these days. Looking at the very high PE of those scrips.

  18. sagecapital
    Tuesday, November 13, 2007 at 11:50 am

    Ashish- Thats a rocking entry! Welcome back.
    Diwali was good.
    I feel RCOM looks the best among the telecoms. But I am not buying the dips in RCOM. let it show some upward momentum and I’d be the first one to add it.

  19. ashish ji
    Tuesday, November 13, 2007 at 10:01 am

    SAGEE- I’m BACKKKKKK …. !!!!!!!

    MARKET ALL DOWN AND DOWN … NOW I”M bcK … I”LL DO REPAIR WORK DON WORRY 😀

    JUS READ —
    Here’s some good news for India’s 210 million mobile consumers. After sitting on a proposal for more than two years, the department of telecom on Monday decided to introduce number portability for mobile services. This means that if you are unhappy with your service provider but have been unable to shift to another because it would mean changing your phone number, you will now be able to switch while retaining the same number.

    THIS IS BEST FOR RELIANCE COMM … SINCE THeY COMIN into GSM … CURRENT TREND LOOKS SAD FOR RCOM, I KNOW U’ll say SO

    aur DIWALI KAISI THI?

  20. sagecapital
    Tuesday, November 13, 2007 at 9:44 am

    Medium term trend is down on IDEA. Below 118, a slide to 105 looks very probable.
    And let me tell you I have no “idea” as to why IDEA is going down 🙂 So please do your own research on that!

  21. shekhawat
    Tuesday, November 13, 2007 at 9:34 am

    sage,
    Is the IDEA CELLULAR going to way of mindtree and sasken.

  22. Divakar
    Tuesday, November 13, 2007 at 6:03 am

    Hi sage,

    Are you a Brahmakurami? your last para (except the last line)says exactly the same as Brahmakurami telling to their beloved brother/sister.Great post sage.keep it up.

    regards
    Divakar

  23. Tuesday, November 13, 2007 at 12:43 am

    Really Sage, I got this ride the winners concept from you and its clearly the winner. One really needs to take his losses and put his money on the winners. That way the losses will also get made over. Do you see a far bigger slide in the days to come?

  24. senthil
    Tuesday, November 13, 2007 at 12:23 am

    Nice one! almost all IT stocks are going down

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: