This will be my last post/analysis on this stock for the foreseeable future. If you have held or are holding Intense Tech. shares and have read my analysis in the past, I’d recommend that you read this post once. (The post is long, so I have tried to make it interesting with analysis )
There are two parts to this post:
1. Third Pump and Dump explained
2. Why I am still holding this stock and am moderately bullish as well
Third Pump & Dump
If you have read Parts 1-8 of my analysis detailed above in this thread, then you already know and understand how the pump and dump was executed. In Part 6 of my analysis, I explained how the stock went through a second pump and dump within the larger one.
The stock has gone through a third pump and dump as well. I thought I’d skip this as this should have been easily decipherable. I will give you some hints and you can figure out the rest. It will be useful to know how stocks are manipulated.
There were three events that helped execute the third one: a) In March 2018, the company announced that the BSNL contract was not only back on track but the scope of the contract as such was enhanced. But we know that nothing significantly changed in FY 19 w.r.t revenues earned b) AKG and UNO bought and sold large quantities of shares amongst themselves a few hours before the announcement c) Kuber India fund bought shares in Jan 18 (when the second pump and dump was executed) and “surprisingly” bailed out one day after the above “BSNL contract resumption” announcement (when retailers were buying in a frenzy), at a 35% loss in a few weeks (now, why would a fund ever do that!!)
The rest can be figured out.
Why I am still holding this stock and am moderately bullish as well
There are two reasons. The first reason is less important for me. The second reason might sound silly and strange, but I give it a lot of importance. My intent is not to influence you in any way to buy or hold or sell this stock, but just to jot down my analysis, given that I have already posted pages of data and logic driven arguments.
The stock is down ~90% from the peak and is back to where it was a few years back. P/E is less than 10. The company has maintained revenues of 55 odd crores for 3 years. A lot of it is AMC driven and these should recur year over year bringing in some certainty to revenues. The downside is limited now unless the books are cooked, which I am assuming is not the case. There is no point bailing out now. My loss in this stock is ~75%. I never averaged this stock nor will do so and continue to hold a large stash of shares. There are better stocks out there to buy instead of averaging. I consider my investment as “tuition-fee” like @james_kerala to gain expertise in the stock market. However, given that most of my capital invested is eroded, I don’t really care anymore. I think stock should stabilize in a few days. This is the less important reason (downside being limited) as to why I am still holding.
The more important reason as to why I am moderately bullish, will need a lot of explanation:
I have immense faith in the manipulativeness of operators, as strange as this may sound. All stocks are heavily controlled by operators in our stock market. Large caps/bluechips impact indices directly that reflect performance of our country as such, so the operators do not bring in too much volatility here. Also, large caps usually have good corporate governance standards and shares are owned by many funds, so blatant manipulation is avoided. When it comes to small/micro/nano caps, the situation is different. For these stocks, investors usually say: “Businesses do well, and so stocks move up”. I disagree. I think: “Operators hold a huge quantity of shares, that’s when businesses do well, and stock moves up”. Operators take the price up of shares and distribute their shares amongst investors. Post distribution, businesses stop doing well, profitability stagnates/comes down, strange issues turn up that starts hampering growth of the company, stock price starts coming down over an extended period of time, investors get tired, fed-up, frustrated, lose faith and panic (exactly in that order) and eventually give back their shares to the operator. That’s when operators accumulate massive quantities of shares. Of course, there are trash stocks that destroy investor-wealth completely, and they even stop quoting on the exchange, and operators involved in those stocks are terribly unscrupulous too. But I am trying to generalize here for the small/micro-cap universe.
Once operators accumulate large quantity of shares, beautiful things begin to happen !! Businesses start doing well, new contracts/markets/sales channels etc. suddenly start showing up, there is a good amount of (paid??) media publicity, products/services get good recognition, and in general positive vibes are created to attract new investors and a bull-run begins. And that is how the cycle of manipulation continues!
We can either sit here and complain continuously that these operators are devious, (which is the truth but complaining is of no consequence actually) or understand what they are upto and ride the bull and bear cycle with them, because manipulation is what the stock market is mostly about. To be fair, a few of the operators (the good ones) do give warning signs (chart reversal patterns) for a fairly long period of time before the eventual drawdown occurs, and unless you understand them, you may be caught off-guard. Good quality stocks have less manipulation, the poor-quality ones have much more. Our stock market is not as matured as developed countries with stringent rules in place to check rampant manipulation and insider trading. But then again, we can complain and fret about it, or figure out how to work around it.
The above analysis is a generalization for small/micro-cap stocks and may or may not work out in practice in this stock. Who knows the future really?
Ask yourself: “Who owns Intense Tech. shares now?” Promoters own a certain chunk. Many retailers have lost faith and sold their shares in disgust. There are no funds invested. It’s just the operator who is silently accumulating. Long story short, I still believe the “accumulate-pump-dump-re-accumulate” theory described in Part 8 of my analysis above. This does not mean that the stock goes up for a few weeks and gets dumped. There could be a slow and sustained up move as well. Or maybe I am overthinking things too much.
Anyway, “operator manipulativeness” is the second reason I am holding on to these shares. Further, like I said, with most of my invested capital destroyed, there is not much to lose anyway. Therefore, I have decided to give this few more months. I will not average or buy these shares, no matter what the price is, but have decided to hold on to my existing shares.
It is really your choice as to what should be done with your investment, but just thought I’d pen down my thoughts.