The roller coaster journey of a Pharma investor

Here’s a story of Ajanta Pharma, a business which created tremendous value for it’s shareholders between 2010 & 2016.

Buying & holding such a stock must be easy. If you are a little late for a 120 bagger party in a stock like Ajanta Pharma, just follow the strategy of buying at 52 week high prices and you should have the next big stock in your portfolio. Just buy and forget. Correct?

The above chart is full of hindsight bias. And I am here to tell you why.

Based on some 900 odd posts I read about the company, across this time period, below are the concerns, investors had with regards to buying or continuing to hold the company’s stock.

As we can see, people were full of concerns about this phenomenal wealth creator. Holding this stock, would have in no way, been easy. At 11-15 PE, in Aug 2012, Mr. Market thought, the re-rating was over. And this might have been a reasonable assumption to make, back then, given all the risks involved in the stocks of a Pharma co. Eventually, the stock hit 40+ PE.

Had the story played out differently, I wouldn’t be writing this post today.

Take-aways from this story:

  • Holding multibaggers (particularly in Pharma) is gut wrenching.
  • Do not invest in any Pharma co. without understanding the risks involved.
  • There will be long spells where you may question your thesis. You may have doubts in your head, making it difficult to hold. You may wonder whether you have invested in the right co. at all. This would be the time to go re-check your facts about the co. If your facts are supporting your thesis. just hang in there.

Barath Mukhi
29-Aug-2020

Author: Barath Mukhi

Concentrated investor in Indian markets

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