October 23, 2017

Should you exit an investment if the CEO resigns?

We had made it a point to write in our investment thesis “The catalyst in this thesis is Mr. Tapan Jena (CEO) and for whatever reason, if he leaves, we too will exit immediately”.

Little did we know at the time of writing, it will become reality the very same day. At around 5 pm while we were sipping our evening tea feeling happy about the newly added position, AGL made an exchange filing stating Mr. Jena has resigned.

After working on an idea for months being convinced that it is a 3-5 bagger opportunity with hardly any downside risks, you hear such news within hours of buying the stock, what do you do? Whether to stick to the process or chase returns was the dilemma we faced.

We decided to stick to the process and exited the stock very next day. Markets weren’t bothered much about the news and stock opened flat giving us exit at the entry price; all negatives were already factored in at that price.

Over next 18 months, the stock price zoomed 430% to Rs 500. Do we regret it? At times there will be an opportunity cost of sticking to process and we very well understand that. We did what we thought was appropriate at that time. Judging quality of that decision based on outcome may not be the right way, for all you know the stock could have been at 50 today. Though we do wish Mr. Jena had stayed a little longer.

Read more at http://stalwartvalue.com/how-we-caught-dropped-a-5-bagger-story-of-agl

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