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

Monday, November 12, 2007 24 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.

Mindtree and Sasken- How "buy and hold" guys lost money?

Monday, November 12, 2007 24 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.