In July 2013, when Jet Airways announced a stake sale to Etihad, SP Tulsian was very bullish on Spice Jet. He advised investors to buy truck loads of the stock on the basis that Spice Jet would also soon announce a stake sale to a foreign airline. He promised a target price of Rs. 60 within six months, implying an upside of 33% from the then market price of Rs. 45.
Unfortunately, at that time, nobody had foreseen that Air Asia would tie hands with the Tatas and make a foray into India. When the news was announced, the euphoria surrounding Spice Jet evaporated and the stock price slumped. To make matters worse, the soaring aviation fuel price coupled with the sluggish demand meant that losses mounted and the stock price tumbled to a low of Rs. 12.50 in March 2014.
Then when Spice Jet reported record losses for Q4FY2014, SP Tulsian surfaced again and fervently implored investors to dump the stock at Rs. 17.50 on the logic that Air Asia would make life difficult for Spice Jet. Dayanidhi Maran’s loss in the elections also spooked Tulsian.
However, as luck would have it, Spice Jet again outwitted the wily stock picker. The announcement that the company is looking for a strategic investor and/ or is seeking to sell overseas slots to Qatar Airways sent the stock soaring to Rs. 21.10, a fantastic 24% since SP Tulsian’s sell call.
Now, in hindsight, SP Tulsian ought to have foreseen that after the disastrous Q4 results, the management would try to talk up the stock. The time was not opportune for a sell. It was a tactical error.
Personally, I also made the mistake of getting carried away in the Spice Jet stake sale hype. I bought a huge chunk of the stock and then, when the price started sliding, I bought more to average my cost price. The result is that I have an ugly gash of red in my portfolio where there should have been lush green. I am waiting for the euphoria to reach its’ peak before dumping the stock. Hope I get the chance soon.