Flush with Losses
- Rohit Musale, CFA
- Jan 7
- 3 min read
Year 1 - Loss
Year 2 - Loss
Year 3 - Loss
Year 4 - Loss
Year 5 - Loss
Year 6 - Loss
Year 7 - Loss
Year 8 - Loss
But, the stock is up 400% in 5 years.
That's 5x in 5 years.
What "fundamental analysis" are we talking about here ?
This is the EPS table of GMR Airports.
2025 - (0.43)
2024 - (0.93)
2023 - (0.30)
2022 - (1.70)
2021 - (4.64)
2020 - (4.03)
2019 - (5.95)
2018 - (2.27)
8 straight years of consecutive losses.
Market Value > INR 1 Lac Crores.
Attached is the weekly timeframe chart of GMR Airports.
What do they do ?
They build airports.
And now,
the stock has formed Base 1 (Early Stage Base) in a
Confirmed Stage 2 Uptrend (Price > 50 DSMA > 150 DSMA > 200 DSMA)
The relative strength line (the blue line) which I have pointed with the red arrow is also sloping up.
These are technically very healthy signs.
Does that mean I will buy the stock ?
Does this all mean, I missed the whole rally from INR 22 to INR 100 in the past 5 years ?
The answer to the above 2 questions is:
No and no.
If you want to become a professional stock trader, you will have to understand what I have explained below:
If you select enough number of stocks with 8 straight years of consecutive losses,
and you buy them all,
collectively you would end up losing money (or at least the odds of you making money is low).
You can't say that......
"Oh, I could have made money on this stock if I had bought this 5 years ago."
If that was the case, then you would have "also bought" many other stocks with similar looking fundamentals.
Negative EPS for 8 straight years.
Why would you only pick GMR and avoid the other stocks ?
Do you have some magic wand or what ? Or do you have a crystal ball ?
All those stocks collectively would have made you money ?
Think about it.
Fundamental analysis would fail to pick a stock like this.
However, over a series of stocks, fundamental analysis does have value.
This is exactly what William O' Neil figured out back in the 50s and 60s and came up with the CANSLIM system,
to make an argument that,
we cannot ignore the annual and quarterly sales and EPS numbers of a company before making a big commitment.
I am not saying, "don't buy GMR Airports".
I am saying, "I am not interested in it, because it does not fit the CANSLIM system."
I am saying, "if you buy 10 stocks like GMR, collectively, there is a high probability that you won't make money."
(And I am not even talking about trading or investing psychology yet. When you see 3 stocks losing money, would you ride the 4th stock till it goes up 400% or would you get scared and sell too soon?)
The above argument is attributable to poor fundamentals.
If you can understand that, only then,
you have entered the realm of "professional stock market trading".
Till then,
You have no idea how stocks and the market works.
You would always be baffled with the happenings in the market.
So,
Go deep.
Study more.
Go granular.
A superficial knowledge of stocks and market won't serve you.
There is merit to doing fundamental analysis.
Ofcourse, there will always be exceptions,
like GMR Airports.
Flush with Losses.
Regards,
Rohit Musale, CFA
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