Its known to the kid next door (a keen stamp collector) that its a good deal if a stamp which was worth five triangular stamps (in the network) is now available for just 2 ! In business language, its called “timing your buy” when the price is lower than the target or true value.
So why is it that the cash rich investors (retail corporate likewise) are not doing this when corporate valuations have been eroded to half their values.Surely there must be cash rich investors, who would have been scanning companies before the global meltdown. Why are they not picking up these targets with potential to deliver, at “dirt-cheap-rates”?I usually get two answers:
a) That the usual investors are no longer playing in the market as they have cash commitments to fulfill- meaning the BIG multinational investors who have seen the worst of this crash
b.Sentiment- And I have a tough time understanding this (as I have never been an active investor). My friend tells me that most investors are scared with the bloodbath and think its safe to assume that the bourse fall will continue for some more time to come.
But look at it from my point of view- if i was sitting on cash had been tracking the market really well before the crash- i would have a definite point of view about some stocks. I would have definitely invested in some companies for a medium term investment. And looks like at least Malvinder Singh is doing just that with his financial services venture- Religare.
If i was someone holding money in US $ i would have been happier, coz with the depreciated rupee and eroded valuations my Indian target co. – would have cost me almost zilch. So I wonder what the few cash rich investors are thinking/doing? Is it that they:
– Always relied on the now failed investment banks to handle their portfolios- and are just not too sure right now.
– Want to have a huge war chest to bail themselves out- if the recession hits them also
– Have their targets in sight and are hoping (backed with some insights) that the valuations of the targets would fall further.
What do u think?