Heard on the Street - November 12, 2008

Old Fox takes a liking to long-term stories

Even as he continues to hammer the daylights out of most stocks by going short on them, the Old Fox of Dalal Street is also selectively identifying long-term investment stories. According to circles close to the Fox, he has started nibbling at shares of FMCG companies. At the same time, he is said to be doubling his short positions on stocks which he feels are still overvalued.

One mid-cap company in his line of fire is Educomp Solutions. The stock is down over 50% from its record highs seen in January this year. But even that may appear to be respectable, considering that some of the much-hyped IPOs in the broking and real estate sectors are down 80-85% from their peaks. Not long ago, Educomp was among the favourites in the Pink Panther’s portfolio.

In fact, it is said that Panther was the driving force behind the spectacular rise in the stock price over the past couple of years, with some help from ‘friendly’ circles as well. With the overall market in a downtrend, it looks unlikely that Panther would be keen to support to the stock. Meanwhile, the Fox is of the view that Educomp is undeserving of the valuations that it is commanding right now.

Also, the Fox seems to delight in punishing companies, where ‘friendly circles’ take a greater interest in their stock than is required. The Fox is said to have outsized gains from his raids on Suzlon and Unitech, and he seems convinced that Educomp is ripe for the picking.

Frantic layoffs, faster denials too

With the market showing no signs of revival yet, a large number of broking firms are frantically trying to trim costs through whatever means they can. Kotak Bank is reported to have axed between 200 and 250 employees, mostly at the junior levels, across various divisions. This was, however, denied by the firm. “We deny the development,” said an e-mail response from Kotak Bank.

Enam Securities is heard to have reduced headcount in its investment banking division. This too was denied by a senior official in the firm. Meanwhile, a prominent domestic broking house, which was supposed to lease office space at a prominent address in Lower Parel, has changed its plans, and instead decided to take up 40,000 square feet at Sion.

Source: EconomicTimes