Beginner's Luck

One of the first stocks I had put my hard-earned money in was Blue Bird (India) Ltd. My rationale for that investment was like this-

1) The company had applied for Debt Restructuring under CDR package which was approved. Without debt and interest (for some time, moratorium period i.e), company's profit was expected to swing back to black as it had operating profit in the past.

2) Price-to-Sales ratio, PSR, a very important ratio (for these kinda investments) was just about 6%. Hence, there was huge margin of safety.

3) About 93% of promoters shares were pledged. So, only way for promoters to make money was to run the company effectively. It was not possible to make money off minority shareholders now.

In fact, I was so positive that I placed order at 5% more price than the last day's closing.

Fast forward to today......... So, how did the stock and the company performed? Comp first.

1) Nothing good happened. CDR is taking a lot of time to materialize.

2) PSR proved to be a mirage. Quarterly sales were just not in same terms as annual sales. Probably they were cooking the books earlier.

3) Management seems to least bothered about the company. They are quite busy somewhere else.

And so stock should have nosedived.    

Yes, it was down about 95% of the time I was holding it. But briefly, rather strangely, twice it took U-turn and gave me an opportunity to exit. Couldn't exit first time. In fact, new shareholders gave me some profits also... strangely. See below-

Lessons Learned-

1) Don't invest all money in one go. Something which is cheap, can become even cheaper. Have patience. SIP.

2) Long term view is good. But don't completely ignore quarterly numbers. Do look for very large drops in numbers.

3) Good management can do no harm to your investments. Same can't be said about bad management.

4) Don't feel ashamed to take losses if things are not going well.