Back in 2011, I used to be a Research Head of a Regional broking House, we were a small team of 5 (from them we 3 still work together at turtle), over the period I have learned to be extremely honest and to the point rather than to be Diplomatic, so we used to research on Stocks, Commodity, Derivative, IPO’s, etc, IPO has been always one of the most attractive parts for a retail investor back that time and still today, we made research report on most of the IPO’s and people took our recommendation seriously.
In January 2011, came an IPO which was a local company IPO where I knew the person and the company (won’t name because of compliance reasons), as our normal routine team we made a research report on it, the company had the worst numbers I can ever witness and the worst was Debt to Equity Ratio for more than 5:1, and no way on the earth this stock could create wealth for my investors, as simple the rating went to “NEGATIVE” and the report was made with utter honesty and no bias of knowing that company, after the research was completed our team member Jigna Patel (who was part of Turtle core Team, now shifted to USA) asked, should she circulate it? and I without a single thought told YES, we flashed the Email, SMS, and Recommendation to nearly Thousands of investors and hundreds of trading terminals.
After 5 min, I got a call from my boss, what you have done? why I have done it, and he was sounding extremely worried and not happy, and after some minutes I was told that the promoter of the company may come to shoot me with a pistol, and I was like man, you must be kidding! But actually, he was coming, there was a small meet which happened and I was told to be underground, I was underground for 2 days.
After 2 days, things got settled, and the IPO got listed, the stock went doubled and most of the investors on the street thought I was wrong on my research but the stock got listed with erasing almost all profits!
Moral of the Story:
As a Fund Manager or advisor, you have to be utterly honest with whats the fact than the emotions you carry while researching a stock
When everyone says it is good, but when the fact says it’s bad, it’s bad!
A bad company can give you profits, but a great company only can make you Wealthy!
Debt is something that cannot be ignored, it’s something to be worried about!