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Kakatiya Cements up 106% since recommendation. What to do now? - Views on News from Equitymaster
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  • Apr 4, 2016 - Kakatiya Cements up 106% since recommendation. What to do now?

Kakatiya Cements up 106% since recommendation. What to do now?
Apr 4, 2016

I have always believed that stock prices don’t go up in a straight line. In fact, they are good candidates for the famous Pareto 80:20 rule. 80% of the stock price movements happen in 20% of the time.

This is precisely why one should never try to time the markets. The odds that you will be right in your timing is a puny 20%. In other words, there’s a huge 80% chance you won’t be able to time your purchase correctly.

Try doing this over and over again and there’s only one place where you will end up - in the poorhouse.

If our Microcap Millionaires (MCM) subscribers need a real life example, they should look no further than Kakatiya Cement and Sugar Industries Ltd.

We recommended this stock back in Feb 2015 at a price of Rs 114 per share. The stock was trading at Rs 120 per share exactly a year later. In other words, it had barely budged.

The reason this is a classic case of the 80:20 rule is what has happened to share price over the last 45 days.

The stock went up literally like a rocket and currently trades at Rs 235 per share. It has more than doubled since recommendation and almost all of the gains have come over the last month or so.

Know the catalysts

Now, tell me, how many of the investors who would have waited for a catalyst to emerge would have been able to capture all of the gains of the last one month? Hardly any, isn’t it? And I am willing to go out on a limb to suggest those who got it right are riding more on luck than skill.

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