ValuePickr Forum

Lessons Learned from the Reverse multibaggers

Everyone of us someway or other come across an equity which destroyed our wealth .in search of multibagger we hit the wrong equity a Reverse mulitbagger . Due to our own biases and various perception we stick to the stock which at last result an huge loss .This is not the the company is fraud but the management does not care for either minority stack holders or does not have growth mind set .

It is important to avoid companies and management with absence of growth-mindset .Most of these are happy where they are; Prefer to wait for environment advantage as compare to theses select the companies with growth-mindset ,these companies can’t wait - they will find ways to create growth environment for themselves.

MARG Limited is engaged in business of constructions and real estate development business. website : http://www.marggroup.com/marg-karaikalport.php and the companies Punch line is " SPIRIT OF VISIONEERING "

next is Balasore Alloys. The company is engaged in the manufacturing and mining of Ferro alloys. The Company is also engaged in the manufacturing and selling of Ferro Chrome of various grades.

Aban Offshore

Daccan Chronicals

Reliance Power

MMTC

Sector which destroyed most of the wealth is Metal and mining sector Metals/mining sector these lost the worst loser with 124 companies among wealth destroyers. The next one is PSU’s Like SAIL ,NTPC

Wealth distorting also mean missing the opportunity cost and inflation of the capital employed

so one must seek knowledge and well dive in to water to find the gem among the pool of many unsuccessful stories

People love share most promising story they like but we must also share the best opportunity rejection stories and why one has rejected the Most promising looking Like stories

Reason: To learn and share lesson from such entities i have collected a few charts and in due course we can analyse the reasons for those

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We can include Fiberweb India as well in this list

There are tons of such examples and I believe there would be 3 to 4 value destroyers in Indian market for every multi baggers. I Learned valuable lessons from Intense Tech, Premco Global and Sintex plastics which were on downhill after I invested in them. Tide may turn on some, but I see such turn around stories are also very less compared to value destroyers.
Suzlon is another name comes to my mind.then there were many corporate misgovernance and outright corruption stories.

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In general I find only three categories where this happens

  1. High debt

We use debt sparingly. Many managers, it should be noted, will disagree with this policy, arguing that significant debt juices the returns for equity owners. And these more venturesome CEOs will be right most of the time. At rare and unpredictable intervals, however, credit vanishes and debt becomes financially fatal. A Russian-roulette equation – usually win, occasionally die – may make financial sense for someone who gets a piece of a company’s upside but does not share in its downside. But that strategy would be madness for Berkshire. Rational people don’t risk what they have and need for what they don’t have and don’t need. -Buffett

  1. Promoter fraud (from the Satyams of the world to all recent issues)

  2. Regulatory reasons (Noida Toll Bridge for instance)

Yes there are others like capital misallocation (Tata Steel), technological obsolescence and so on but those are rare enough and take a long enough time that management can generally salvage the situation and not cause a complete wipeout that you mention.

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Lot of stocks operated and investor got punished.

Kushal Tradelink, Saanwaria , Vikas Proppant etc

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There is thread on such forensic discussions where these could be put. No need to create a new thread. All are requested to move content there as this thread would be deleted.