Himachal Futurustic started the year 1999 at 37. Ended at 675. In 2000, it peaked at 2578 before correcting nearly 75% of the move.
Since it was a relatively unknown stock (before the Richard Packer story broke), very few Investors were positioned in the stock.
Both Volumes and Price exploded in 1999 and upto the peak. The entire fall from the peak happened in just one month, April of 2000 when it lost 50% to end at 833.
Starting towards the end of May, it started its journey back up and by the end of June was back above 1500. From the low of May to the High of June, that was a move of 160%
I was at that point consulting with a broker and had a inside view of the client trades / interactions. Like HFCL, much of the tech stocks were making a incredible bounce and was there a rush to buy these.
I remember one particular client who was one of the biggest client for the broker. He was a large landowner in Pavgada (Karnataka). This was also a time Badla was in full flow
For those who don't know about Badla, think about current day futures but one with much lower margin constraints and no marked to market payments on daily basis (was Weekly)
This guy took a large leveraged position in HFCL and Global Tele in June / July of 2000. For the next few months, stocks went nowhere, so wait he did adding more positions on the way
After reamaining steady, in Februrary of 2001 the stock dropped like a stone - 46% down in the month and price back to 600's.
The client had two choices, cut the loss and move on or average and hope that the stock recovers back as it had done the last time around. He choose to average.
March of 2001 was even bloodier, stock dropped 75% and closed the month at 159. The client was cooked. I don't remember when he cut the position, but he did that post March
What I remember most was the 2 months when he used to send Cash to our office for the margins and payments. If you have ever purchased a 25 kilo packet of Tamrid or 50 kilo packet of Jaggery, you know the shape.
I didn't know how he managed to bring that much cash in such a short tenure, but he didn't default. It was only later I would come to know that he had sold off his lands at literal fire sale prices to rake up the cash required.
Incidents like those are burnt in my mind and it amazes me when people with little skin in the game advise others on social media about missing out on stocks that are bouncing back up after falling 80% or more
Very few infotech stocks survived the crash of 2000. Infosys and Wipro being the notable exceptions. Even there only Infy has reclaimed the high of 2000.
Stocks are Risky. Buy & Hold is good as long as you know where the driver of returns. Most of the time, even highly paid Analysts don't have a clue, let alone naive investors
In 2017, you could have made a ton of money if you were in small cap stocks. In 2018, you could have saved yourself plenty of misery by being in Nifty. This year, its Quality that has been the savior.
Nothing though lasts for ever and if you cannot stick with one you deeply understand, its doubtful whether you will make enough money to move the needle.
Don't play a game where you don't have a edge. It will ultimately destroy you (mentally more than financially most of the times). #RandomThoughts /*End*/
