New Season New Story

     
ICICI Securities has just declared a bountiful for the jewellery sector based in part on normal monsoon for India. 

But how legitimate are the claims of ICICI? 

On the same day as the story appeared, there was a small story of a bit of a flood problem in some parts of India. Only that bit part was understated. The flood problem was in half the country and it was a full blown flood fury with the IMD warning that the situation is about to worsen. With several parts of the country receiving deficient rains, including Gujarat one of the biggest spenders, and half the country wrecked by floods it certainly can't be called a normal monsoon other than by the brokerage houses intent on selling their next big story.

Apart from the quantity of rainfall, the timing of rainfall matters substantially. Rains before or much after the sowing season can wreck havoc with the crops and consequently the consumption story.

With the forecast of normal rains in May 2016, brokerage houses, including ICICI, rushed to get their clients interested and consequently invested in the consumption story predicting that good rains would boost consumer demand for consumer durables, two-wheeler and FMCG products. With rains wrecking havoc in half the country, none of the brokerages or fund houses have any explanation to investors stuck in the consumption story. All have conveniently moved on to the next in-thing. 


Time will tell whether the consumption story raked in profits for companies or their investors, but it sure did rake in funds and bonuses at the brokerages and mutual funds. Till then it's time for a new story.

Fickle appetites

 

When Shake Shack soared to $52.49 on 30^th January, 2015 it was considered somewhat of a revolution and a cult figure. With the Washington Post, even hailing it as the next “new restaurant empire” giving McDonald’s enough reasons to be afraid. 

18 months down the line, it seems the King doesn’t look appetizing enough. With after-hours price of $37.05, SHAK is down almost 29% from its listing high and 60% down from its lifetime high of $92.86. Au contraire, MCD has outperformed SHAK by almost 38% over the past 18 months. 

SHAK's PE of 122 causes investor anguish at a relatively slower growth rate. MCD, on the other hand, with a PE of 22 is relatively immune from such high expectations. 

Like investor preferences, appetites can be quite fickle.

Source: Google Finance