Warren Buffett, in his latest letter, talks with heart-felt anguish about the ‘50 Billion dollar losses’ that Berkeshire Hathaway suffered owing to his (Buffett’s) “thumb sucking”, i.e. the failure to take advantage of the several opportunities that came his way.
All of us are victims of this syndrome at some stage or the other.
Daljeet Kohli is no exception.
Ajanta Pharma counts as one of Daljeet’s block-buster discoveries. He first recommended a buy in June 2011 when the stock was available at a throwaway price of Rs. 96 (adjusted for split and bonus). Even when the stock became a 10-bagger, Daljeet was bullish about the stock and confidently recommended a buy. However, thereafter, in October 2014, when Ajanta Pharma surged to Rs. 1893, Daljeet surprisingly lost his nerve and recommended a ‘sell’.
Today, Ajanta Pharma is at Rs. 3113 and is still looking good. Raamdeo Agrawal has called it a “dark horse” stock.
With the benefit of hindsight, we can say that a seasoned professional like Daljeet Kohli ought to have known better than to recommend a ‘sell’ of a stellar stock that is on a strong growth trajectory – and that too in the midst of a raging bull market!
Daljeet committed the same tactical error in Shilpa Medicare.
He was among the first to realize the super-potential of Shilpa Medicare. In a brilliant piece written in March 2014, when Shilpa was at Rs. 348, Daljeet recommended a “strong buy” on the basis that there are “multiple triggers ahead”. The “US story is still to start” he added prophetically.
However, surprisingly, when Shilpa played out as per plan and surged to Rs. 557, Daljeet lost his nerve and downgraded the target price to Rs. 473. Fortunately, he did not advice a ‘sell’ and instead recommended a ‘hold’.
Today, Shilpa Medicare is at Rs. 977. The news that the US FDA has inspected its facility as a precursor to approval has sent the stock into orbit.
Yet another example is Kajaria Ceramics. In August 2014, when the stock was at Rs. 626, Daljeet steeply downgraded the target price to Rs. 482 and recommended a “sell“.
Today, Kajaria Ceramics is at Rs. 767.
The important lesson to learn from these episodes is that if you are fortunate to have a winning stock in your portfolio, you must hang on to it, come rain or shine.
Basant Maheshwari rightly said “Selling a stock to buy it back later on a slight dip isn’t the optimum way to get rich but is surely a nice way to get rid of stocks that will make an investor rich”.
Akash Prakash of Amansa Capital offered the same advice: “The fact that a top-quality stock is looking expensive in the short-term is no reason to sell it”.
Warren Buffett, after recounting his own “monumentally stupid mistakes“, advised that one should not regret these mistakes but use it as a learning opportunity. “it’s a good idea to review past mistakes before committing new ones” Warren added tongue-in-cheek.