Wednesday, October 8, 2008


Given all the turmoil in global Equity Markets, I thought I would look at some stocks that until recently were popular holdings of Foreign Institutional Investors, Traders, Hedge Funds and the investing public.

US STOCKSUntil recently Fertilizer stocks were skyrocketing ( Potash & Mosaic), as fertilizer demand and food grain prices rose sharply. You had to buy coal stocks(Peabody Energy), as Chinese demand was growing exponentially and crude oil prices were going to $200. The bankers/finance people and their BlackBerries (RIM)were taking over the world, as were the Apple iPhone & iPod. And last but not the least you had to own Goldman Sachs- the one firm that could survive and thrive no matter how bad things got.

INDIAN EQUITIES Punter favourites like Jaiprakash Associates ( which rallied despite no significant change in its fundamentals) are now back to square one. Real Estate Developers like HDIL and DLF have crashed over 73% from their 52week highs - These were a must own at one stage, as India needed housing, and surging property prices appeared to have no effect on end user & investor demand. Anil Ambani's Reliance Industrial Infrastructure ( and other group companies like Reliance Power) tanked- as irrational valuations were pricing in projects to be executed years down the line. ICICI BANK is down over 65% from its 52week highs!! MTM losses from its International operations and solvency fears are driving the stock price still lower. Analysts had prevoiusly valued the sum of parts valuation of its Asset Management + Insurance + Banking businesses at well above the current stock price.

MORAL OF THE STORY : Avoid investing in the most popular sectors, without doing your own research first, and do check that valuations leave you with an adequate ''margin of safety''. Markets have the tendency to overshoot both on the upside and the downside, so buying stocks that are expensive market favourites is never advisable.

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