Rather I have a few questions for you, in case you are competent to answer them.
Before I ask those questions, here is what I see of these stocks over the past 10 years…
Source: Yahoo Finance
Here are some assumptions that I can make on these stocks…
- Very obvious, these stocks are at their multi-year lows, thanks to Mr. Market’s bad mood.
- Investors are extremely scared of these businesses, thanks to their string of poor performances over the past few years.
- Investors are also scared of the owner – government – that seems to be in a tearing hurry to sell its stake in these companies to raise petty cash to meet a part of its huge deficit.
- At P/E of less than 10x and P/BV of less than 2x, these businesses are being priced to extinction (almost), despite the spick-and-span balance sheets they’ve had over the past many years. Maybe investors see the future to be extremely bleak for these businesses. Maybe investors see demand and staying power of these businesses diminishing in the future.
- Investors are extremely scared of these businesses just because everyone else is.
Now I have six questions for you – in case any of these companies fall under your circle of competence. Here they are…
- Are these companies really going to die?
- Is the pressure on their respective businesses short term, or do you see these companies fade into oblivion in the future?
- Agreed that the government is a poor capital allocator, but is the concern so big that these businesses are priced to extinction?
- Would you give any weight to their strong balance sheets, product quality, and past track record, despite the P&L concerns surrounding them?
- If you were to do a pre-mortem – going 10 years into the future and looking back from there – would your curse yourself or praise yourself for owning these businesses in your portfolio (in case you own them now or are looking to own them in the near future)?
- Why you would not touch these businesses at these or even lower prices?
Warren Buffett often says, “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”
These stocks are definitely not popular. But should we get interested?
Without offering any recommendations – you know why I’m saying so – let me and other tribesmen know your answers (supported by your own understanding of these businesses) in the Comments section below.
We are all waiting to deploy some cash, while avoiding the mistakes.
Disclaimer: I already own some BHEL and EIL in my portfolio. You don’t need to…simply because your willingness to lose money, your circle of competence, and your time horizon is different than mine.