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How We Deal with the 'Satyams' of Today... - Views on News from Equitymaster

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The Equitymaster Research Digest

How We Deal with the 'Satyams' of Today...
May 16, 2017

  • 'Smart money' now backing our Megatrend pick
  • Damodaran's next book
  • Hidden Treasure team's trip to Chandigarh

I agree - harping on the importance of not losing money may sound a bit clichéd.

But ask anyone who was heavily invested in Satyam Computers on 7 January 2009. The stock crashed 80% by the end of the day's session. Institutions sold 180 million shares of the IT blue chip. Meanwhile, the small investor was still coming to terms with his losses.

Ramalinga Raju's take on riding a tiger certainly did not sound dull or boring to him that day. It knocked the daylights out of not just Satyam's shareholders but every investor who had put blind trust in blue-chip stocks.

Unfortunately, such lessons are quickly forgotten. And by the next bull run, they're dull and boring again.

Satyam was not a one-off case. Several large companies misrepresented facts to investors.

It is up to investors to decide whether to be swayed by size and growth. Or to prefer quality of business and management.

Which brings us to the stock of one of the fastest-growing private sector banks of the past four years. Yes Bank.

The bank grew its loan book at a compounded annual rate of 30% between FY13 and FY17. This was while the banking sector, as a whole, struggled to lend.

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