Ricoh India has always been a punters’ favourite owing to its frequent delisting proposals. On 17th June 2014, the company announced that the delisting had failed. This caused the stock price to plunge nearly 50%.
While the punters were ruing their luck and the others stood gaping, Ramesh Damani quietly walked up to the counter and scooped up 20,000 shares at the throwaway price of about Rs. 112 per share.
Predictably, after the steep correction, the stock rebounded. On 4th July 2014, Ramesh Damani was again seen at the counter tucking into a further 50,000 shares at about Rs. 133 per share.
As the stock price kept surging on the back of news that the Japanese parent company had great plans for its Indian subsidiary, so did Ramesh Damani’s appetite for the stock. He bought a chunk of 83,851 shares on 11th July 2014 at about Rs. 173 per share and a chunk of 8,678 shares on 22nd August 2014 at about Rs. 226 per share. His total holding had climbed to 1,62,529 shares by then.
Ramesh Damani also decided to share his good fortune with his legion of fans. He broke a long-drawn self-exile from TV and publicly recommended Ricoh on 22nd July 2014.
As the stock price effortlessly kept surging, Ramesh Damani began to get restless. He started offloading his holding. He sold a chunk of 15,000 shares on 14th November 2014 at about Rs. 294 per share and a further lot of 25,259 shares on 13th February 2015 at about Rs. 427 per share.
As of 31st March 2015, Ramesh Damani was left with 1,22,270 shares.
The stock price kept surging and reached an all-time high of Rs. 1072 on 1st July 2015.
This means that in about a year’s time, Ramesh Damani had pocketed a mind-boggling gain of 857% when compared to his first purchase at Rs. 112.
What Ramesh Damani did with his holdings after 31st March 2015 is not known. However, it is a good guess that he would have followed the earlier strategy of gently offloading the stock and booking profits.
It is interesting to compare Ramesh Damani’s style with that of Kenneth Andrade’s IDFC Premier Equity Fund. While Ramesh rushed in the very first day of the bad news and scooped up the first lot of 20,000 shares at Rs. 112, Kenneth Andrade waited for the dust to settle down and bought 41,704 shares on 29th August 2014 at the much higher price of Rs. 270 per share.
Kenneth Andrade also committed the tactical error of waiting till 20th March 2015 to buy a huge chunk of 7,37,025 shares at the princely sum of Rs. 571 per share.
In recent times, the stock has been a nightmare for its investors. It has been on an unending freefall. Today, the stock lost 13%. In just the last month, the stock has lost 40%. The CMP is Rs. 591, which is close to the price that Kenneth paid for the big lot that he bought on 20th March 2015.
Anyway, we can cull out a few lessons from Ramesh Damani’s brilliant strategy:
Lesson No. 1 – Take advantage of a crises situation to load up on a stock:
When everyone else stood around gaping at the 50% fall in price over the failure of the delisting offer, Ramesh moved in and staked his claim.
Lesson No. 2 – Don’t buy your entire quota in one lot. Spread it out:
Today, with the benefit of hindsight, we can say that Ramesh Damani was too cautious in buying a paltry lot of 20,000 shares on the day of the debacle. However, at that time, the disappointed punters were dumping the stock like there was no tomorrow and it was not known where the bottom was.
Lesson No. 3 – Don’t put off future purchases only because the price has shot up:
This is an important lesson because most of us suffer from “price anchoring”. In Ramesh Damani’s case, he bought more and more of the stock as his confidence increased even though the stock price had more than doubled in the short period since his first purchase.
Lesson No. 4 – Don’t be too greedy. If the stock price has shot up too much too fast, book some profits:
This again shows the sagacity of Ramesh Damani’s strategy. He started skimming off the cream as the stock was on the ascent, knowing that a day would come when there would be a reversion to the mean.
Now, we have to wait for an opportunity to apply the lessons learnt from Ramesh Damani’s tryst with Ricoh. Hope that opportunity comes soon!
You have published a half-baked story. Kenneth did not buy 7,37,025 shares in March 2015. What he did was a transfer from Opportunity Fund to Premier Equity Fund. And ultimately who knows as to who is the winner ? It may be a case of Ramesh Damani exiting the counter prematurely. Real story on Ricoh India is still to unfold. Ramesh Damani has acted as a trader and not value investor. When Ricoh India clocks a turnover of Rs.4000 crores with a operating profit of 10%-12% and stock price rockets what will you call him ?
Ricoh management repeatedly announced in several interviews dat they will grow @60% at least till March,2017 and by dat time, their top line will be around 4000 cr.If they can achieve close to their target, applying a nominal P/E of 30 for such hugely growing stock, price is coming 1600 I.e. 3X from the current level..we belive d management coz someone like Damani n Andrade belived them n invested. Then why this panic selling?..may b it is a gr8 opportunity again like d opportunity Damani used to buy @112…
“What Ramesh Damani did with his holdings after 31st March 2015 is not known. However, it is a good guess that he would have followed the earlier strategy of gently offloading the stock and booking profits.” Why is it that this report gets coy at this point? The source that provided u with the earlier bulk deals of RD should have provided u with the subsequent sales as well. How meticulously u reported his deals till Mar 31, 2015…in order for us to take lessons from RD its vital to know all the facts. For example, what assures u that he has sold all his holdings unless u know the facts but do not wish to share them with us?
RD has still shares in ricoh