These So-called Super Investors Got It Horribly Wrong! - Chart Of The Day 1 June 2018 - Equitymaster
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These So-called Super Investors Got It Horribly Wrong!
Jun 1, 2018


Talking about doing a basic investigation before investing in a stock, it's interesting that some big investors and funds failed to do this in case of Manpasand Beverages.

They got carried away by the growth in sales and profits (which itself was questionable). In just a matter of few years, the company claimed to take market share away from big giants like Frooti, Slice, Maaza etc.

Ever since we launched Smart Money Secrets, we have been talking about how dangerous it is to blindly follow big/super investors.

As the chart shows, some big funds (Mutual funds and Private Equity Funds) had a big stake in the company as of March 2018.

Investors who blindly followed them are now trapped. They are not able to exit the stock as it is hitting lower circuits ever since the auditor resigned.

I am glad to inform you that this company would have never passed our Smart Money Score.

This is because...

  • The management had been decreasing its stake - A big no-no for the Smart Money Score
  • Management's salary was questionable (abnormally low) - A red flag in the Smart Money Score
  • Questionable sources of growth - It was growing much faster than its industry

In investing, you will always make some mistakes. In fact, some of the best investing minds in the world will make mistakes. Thus, blindly following your super investors can be suicidal.

However, you can drastically limit them by following the right super investors and investing only if the stock passes your own check list.

Data Source: Ace Equity, BSE India

This Chart Of The Day was published in The 5 Minute WrapUp - This is How You Can Avoid Investing in Stocks Like Manpasand Beverages

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1 Responses to "These So-called Super Investors Got It Horribly Wrong!"

Bharat Doshi

Jun 1, 2018

You are right. Common investor like us gets into copycat mood and buy blindly what famous investors buy. Of course we come to know about what the big investors buy after a time gap. And even at higher price we blindly put our hard earned money to chase that rainbow. Super investors like Mr. Zunzunwala has a huge capacity to bear loss or have ample time to wait. Common investors are just looking to make some extra money quickly. Well after Suzlon, JP, Satyam now it's Manpasand. Auditors are answerable to general public and share holders. They must have not agreed with creative accounting and hence resigned. This show that there is much more than meet the eyes. Looks like another Satyam. Fortunately I got saved. Been subscribing some services from this site. Presentation of Capital is most important,. Lesson learnt. Don't follow anyone blindly. As they say in West, Trust Everyone But Varify First.

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