The Strange Case of Gujarat NRE Coke

I have had a long investment truck with this company. In 2007, I have bought the shares of Gujarat NRE Coke for as low as Rs. 30 a share and then sold it for Rs. 58, then I have bought them for Rs. 61 and sold them for Rs. 63, and three months of my selling the stock at Rs. 63, I have seen it zoom to Rs. 180!

Anyway, about two months ago, when the markets were falling (they are falling still!), I bought 250 shares at Rs. 38 a share (total investment: Rs. 9500) and last month, I got a bonus issue to the tune of 2 shares for every 5 shares held (2:5), which increased my holding to 350 shares. The present price is Rs. 24 at which my investment of 350 shares would be worth Rs. 8400. So, even though my investment is down about Rs. 1100, I haven't made a real loss because in bullish market conditions, if I can sell the stock at Rs. 60 a share even after a year, I could still take a nice profit. At Rs. 60 a share, my investment would be worth Rs. 21000, which is over 110% profit in a year. Ideally speaking, even if I can get a 110% in two years time, I'm still doing pretty well.

The bull run in the Indian markets of the last three years had made people forget the reality of life. Old timers in the stock markets have always believed that one should buy a company's stock with the express objective of doubling it within the next five years and this gain includes benefits gained from tax-free dividends as well. Doubling it within five years would still generate 20% return over a year, which is pretty good historically.

I hope you folks liked my assessment and experience of Gujarat NRE Coke. By the way, I forgot to tell you that it is also one of the biggest coke producers in the world. I know that one important reason for the price decline is the global slump and the second reason is the fact that the Chinese demand is slowing down, which would impact mining companies as well. However, I have observed Gujarat NRE Coke grow in the last 2-3 years and I am sure the company would continue to do better with the passage of time.