Funnycontrol | Quarterly results and Bulla na jana unicorn

Retail investors have also burnt their fingers in many a unicorn IPO. (Photo by Mark Glancy via Pexels)

In the Harry Potter series, if you’re a wizard, you go straight through the Kings Cross Station pillar to platform 9 3/4th to catch the Hogwarts Express. But if you’re a muggle, you smash right into it. Any retail investor who has invested by believing in the magic of quarterly results has crashed his portfolio into reality in similar fashion.

It’s quarterly results' season now, or as Indian share market uncles would tell you, “Dhando nu time”. It’s that time of the year when analysts “analyse” three months of a company’s performance to predict the next 30 years of its share price. Such predictions usually last till the next quarter. Especially when those quarters are being consumed at the Bar Stock Exchange.

Now if you know your history (unlike most Twitter finfluencers), you know that Nazis predicted that the Third Reich would last for 1,000 years. But it folded in four years once America got involved. So any analysts who fancies the accuracy of their predictions while ignoring the mood of the American Central Banker, should he raise interest rates suddenly, is likely to end up hunkering in their bunkers…or behind their Bloomberg terminal.

The legendary ex-CEO of GE, Jack Welch, championed achieving better quarterly results at any price to keep the stock price going. His autobiography was called Straight from the Gut. But unfortunately, that’s also where his approach to quarterly results hit General Electric as it now finds itself outside the Dow Jones while its stock price has been heading to Davy Jones’s Locker.

Unfortunately, most Indian retail investors think by betting on quarterly reports they can become the second Warren Buffet. These geniuses will tell themselves: “This company’s sales have fallen 2 percent in Q2 over Q1, so I should short it with put options” failing to realize it’s an air-conditioner manufacturer whose sales will naturally plunge after summer and the only thing getting shorted is your early retirement plan.

These same retail investors have also burnt their fingers in many a unicorn IPO, thinking that post-listing gains are as guaranteed as the uncle who tells you how waking up early will solve all your life’s problems. Most of them (including the uncles) are now left singing Rabbi’s “Bulla ki jana unicorn”.

Any established operator will tell you that the big guns in the know have already taken their positions well in advance of the quarterly results. And while they will be celebrating their profits over quarters of Glen Fiddich, the over-smart retail investor will be left smarting over quarters of Royal Challenge. A general rule of thumb is one should analyse at least three quarters of a company’s quarterly results before arriving at any sort of investment decision. But Indian parents don’t even let their children wait for 3 quarters to finalize the lifetime investment of marriage after the first meeting.

I hope the readers of Funnycontrol will do better and pay heed to my advice…only to forget it by the next quarter.