Wednesday, November 19, 2014
Yesterday I received lot of queries about SKM Egg Products , seeking the reasons for lower circuit in this stock. To avoid repeating replies , I believe it is better to reply through a general posting below ...
In my option , there is mainly two reasons for Yesterday’s lower circuit
# An inevitable correction after a sharp run up. During the past few weeks SKM appreciated substantially and it reached a stage were a correction and consolidation is must for its further movement. Whatever be the quality of a company ,no stock will turn as multi bagger in one stretch if the movement is genuine and not manipulated. ( For example ,before reaching Rs.300 level from Rs.12 , Arrow coated closed in lower circuits at multiple times) . These are price points where weak hands and short term players are exiting and new investors getting chances to enter in.
# I know , you may raise your eyebrows for a posting like this and ask why this separate posting is necessary if I feel there is nothing special in this correction.Yes , there is something special .Some section of investors are speculating on a possible negative impact on company due to Japanese recession and a bird flue case reported in Netherlands . The recession in Japan is not a new news and they are reporting negative growth in last six months . But SKM reported its best ever business during this period which indicating least impact on its business.Management’s efforts to expand business to various countries will reduce dependency of any one or two countries and help to de-risk in the case of geographic concentration. The bird flue case reported from Netherland seems as an isolated one and I believe this will not negatively affect SKM in any way but may be some positive impact . Netherland is the largest exporter of poultry products to global markets. Any restriction of export of poultry products from Netherlands may result in sharp spike in product prices in global markets and this may even give windfall gains for companies exporting products from unaffected countries.
This is my few words in the current situation.As retail investors , we are always in search of ‘multi baggers’ and many multi baggers slipped from our hands in the past only because of our tendency to make some quick bucks by trading with our holdings. To avoid such temptations one should learn more and more about the company in which we have investment and try to generate strong conviction rather than looking into trading screen each and every minute.Some readers even requested to indicate ‘ where this correction will end ?’ . I don’t think anyone can give an accurate answer for this and it is purely depends on supply –demand equations. But I strongly believe , this is one stock one can hold with a long term view without bothering much about corrections which is healthy and unavoidable in any market.
Disc: Since I am holding the shares of SKM , my views may be biased . Suggesting to take investment decisions only after own due diligence .
Posted by VALUEPICK at 4:30 AM