Nice Counter Intuitive thought.
However, pls remember that commodity price movements don’t always work out in an exact manner.
I sort of remember, that years ago I invested in both SAIL and Essar Steel, at almost the bottom of the steel cycle (Must have been 2002 or 2003). Essar Steel at Rs. 3 and SAIL at Rs. 7. Before the steel cycle turned, Essar Steel wiped out the minority shareholders, and SAIL went on to become at least a ten bagger. Had the pain continued for a couple of more years, maybe SAIL would also have gone the IISCO way.
This thread was started by Donald based on a conversation with someone who was an expert on Sugar Prices, who predicted around 2 years ago that Sugar Prices would now have a 2-3 bumper year situation. Well, at that time Sugar Prices were around 17 cents a pound, and sure enough, they rose to around 20 cents a pound almost immediately. (Or this thread was started around the time of this bounce). Well, instead of bouncing, prices went down to 10 cents a pound, till the recent bounce back up to 14 cents a pound.
Now, if in 2013 end, you would have invested in Shree Renuka, with the counter intuitive logic above, you would have been staring at total capital loss. Similarly, if you invest in say Oudh Sugar today, and prices fall back, you could be staring at total capital loss. I personally don’t have confidence in predicting that prices won’t fall back from here.
Ultimately, it depends on the kind of investor you are. It depends on your target return (which in my case happens to be post tax high teens over a looong period), your aversion to capital loss, your insistence on margin of safety and so on. That should dictate your choice of stocks.
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