Great work and thanks for sharing your thought process.
I think most of us invested in Suzlon now have concerns on the valuations given the upper circuit it is hitting on almost every day basis!
In my personal view, in the short run (3-9 months) valuations can get in to extreme zones disconnected from the fundamentals. 4 broad a reasons for this could could be
- Stock is part of a broad narrative promising high growth
- Broad bull run in the market which results in most of us relaxing our strict valuation guidelines or throwing caution to wind and piling in the stock due to narrative and FOMO
- Operators playing with the stock
- Stock entering momentum category for traders to pile in which results in more momentum in the stock price which brings in even more traders and this becomes a self re-inforcing loop
Sometimes, these causes can play out in tandem which I think is happening right now in Suzlon.
During the covid bull run, I sold off many of stocks on concerns of overvaluation and then painfully saw them becoming multi baggers. It is this learning that has helped me stay invested this time through this over valuation zone.
Of course in the long run earning potential and price will converge…but we are here to make money and that may not necessarily always happen by sticking to our fundamental theories (especially for short 3-9 months time frame in a bull market).
Just my thoughts. Invested at lower levels and hence the risk of price crash does not worry too much at this stage and helps stay calm on valuation concerns in short run. No recommendations.
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