‘Don’t judge an investment by its name’

       Name Game

There is an increase in the number of name changes (or even business model changes or announcements suggesting changes in businesses). Look at the Indian market, so many firms changed names to have the word “information technology” or “infotech” or “software” in the name during the 1999-2000 period. Fast forward to 2005-07 and you see a rush for words like “retail” or “infrastructure” or “projects” or “reality” or “properties”. What was happening here? Clearly, companies were trying to cash in on the frenzy prevailing in the market. The investor at large was chasing the “hot” theme and the companies were more than willing to supply with the stock.

Let us look at some examples of changes in company names:

(Source: www.bseindia.com)

There is a story in the “effective dates”. During the manic times of the technology Bull Run in the Indian market, one had come across many “tips” about certain small sized companies. These scrips were strong buys simply because they were considering a foray into technology. The joke doing round was: a stock’s price would go up even if the company considers buying some computers.

In the above examples, the managers changed the names of the companies. When Harshad Mehta took over Mazda Industries, the investors flocked to anything “Mazda”. “Sirf naam hi kaafi hai” (“the name is enough”), became the mantra. William Shakespeare would be turning in his grave for his famous words, “What is there in a name?” He might have referred to normal times and rational people. Manic times could be different.

Going simply by the name is a mental short cut we love to use. Even experts also use acronyms and group things together – it could be sectors, countries, companies, whatever group might the people at large may be interested in.

We have seen so many examples of these: BRIC (Brazil, Russia, India and China) countries (which later became BRICS and then BRIICS to accommodate South Africa and later Indonesia) were the darlings of the markets in 2004 to 2007, and some of these countries once again became the talk of the town – this time for a negative reason and were called “the fragile five” in 2012-13. Between these two periods, we had the PIGS (Portugal, Italy, Greece and Spain) countries. Later Iceland joined this group to make it PIIGS.

Way back in the mid-1990s, investors loved the “Asian tigers”. In came the Information Technology boom and we saw ICE companies (Information Technology, Communication and Entertainment) or TMT companies (Technology, Media and Telecom)

(Excerpt from the chapter: “Parallels and Differences” from Amit Trivedi’s book: “Riding the Roller Coaster – Lessons from financial market cycles we repeatedly forget” published by TV18 Broadcast Ltd, a CNBC Group company)