Why I liked Wabag
Valuation seemed quite favorable. Further, the probability of a significant downside was on the lower side (not zero though).Why I don't like Wabag
I do not see it as a long-term stock and wouldn't like to hold it during a down cycle. Here's why:There are usually 2 reasons for undervaluation when a stock is undervalued (there can be other reasons too but for the sake of this discussion I’ll focus on the following):
- Concerns at an industry/sector level: everyone performs poor
- Concerns about a particular stock: a specific company performs poorly while peers are doing okay
If it’s the first one, often management can’t be singled out.
If it’s the second reason then I like to be cautious. In the case of Wabag, I have concerns about the management’s decision-making and vision during the last down cycle. I think the comparison below expresses what I mean:
I was getting into Wabag with a rationale to exit in 2-3 years. Midway, I realized that I’ll not be able to exit in time due to personal commitments. So, I decided to stick with Ion Ex.
My complete set of actions was: Bought Wabag → Sold Wabag → Add Ion Ex. (Last addition on 09/08/23) .
Disclaimer: I am not a SEBI registered advisor or analyst. This is my personal view and not a recommendation. I am often wrong and do change my views without being able to inform anyone.