At one time in the not-too-distant-past, Cera Sanitaryware was the crown jewel stock in the portfolio of Dolly Khanna a.k.a Rajiv Khanna.
Dolly held a treasure trove of 146,308 shares of Cera and it lorded over all the other stocks in the illustrious portfolio.
In April 2015, my radar flashed the red alert that Dolly has sold off all/ the majority of her holding in Cera.
I then had a dark sense of foreboding that Cera would be in for some heavy-duty turbulence.
Then, Vijay Kedia also hinted darkly that he is not buying Cera but is instead reducing his holding. “I am now buying ‘safe’ stocks” Kedia said, implying that Cera is an “unsafe” stock owing to its extravagant valuations.
That should have sent alarm bells clanging and I ought to have taken proactive steps. However, as is my wont, I stood there gaping with a befuddled look on my face, not sure of what to do.
Yesterday, when the Q4FY15 results were announced during market hours, the Cera Sanitaryware counter was buzzing with activity with excited punters jostling each other for a better look at the results. Within seconds, the counter had a deserted look. The stock slumped a mammoth 18%, resulting in heavy losses. The punters were walking around with a shell-shocked and dazed look on their faces. The carnage continued today as well.
Worse, the contagion and fear against “high P/E” stocks spread to the Symphony counter with that stock plunging a mammoth 20%.
Almost every other stock registered huge losses yesterday and today.
This is the second time that Dolly Khanna has escaped by the skin of her teeth. Hawkins was one of her all-time favourite stocks. However, when she saw that the stock was not able to get its act together, she dumped the stock. She was perfectly on time because soon thereafter, Hawkins reported poor Q3FY15 results and the stock went tumbling down a massive 18%. It has still not recovered. Any weakness in the Q4FY15 results will send the stock plunging down further.
Now, everyone is waiting with bated breath at the fate of the other “High P/E” stocks like Page Industries and Eicher Motors. These stocks are also quoting at exorbitant valuations. Even the slightest slippage in performance will expose them to disproportionate punishment.
Vijay Kedia is probably right in his advice that the time is ripe for us to avoid high P/E stocks and to find “Safe Stocks” to invest in.