Vakrangee: Anatomy of Stock Valuation
(5 pages of text)
A star fund manager at Principal First had been managing the company’s information technology fund for the previous six years. Under his management, the fund had consistently outperformed the market, delivering a five-year compounded annual growth rate of 28 per cent. The exceptional performance of the fund was due to an overexposed position in Vakrangee Limited, a mid-tier information technology company. The fund manager bought the stock in early October 2017 at ₹240. By January 2018, the stock reached a high of ₹500. However, the fund manager did not liquidate his position because he believed that there was still more value in the company. At the end of January 2018, the stock plummeted, as did its net asset value, and the fund manager wondered where he had gone wrong in his analysis.
This case is suitable for graduate- and executive-level courses focusing on corporate valuation or security analysis and portfolio management. This case may also be taught in behavioural investing or advanced topics in corporate finance courses. The case gives students an opportunity to discuss the different methods of business valuation and the importance of assumptions made by investors at both the retail and institutional levels, during the valuation process. After working through the case and assignment questions, students will be able to
- understand valuation methodologies such as DCF and relative valuation;
- understand the qualitative parameters affecting the value of a stock;
- understand the importance of assumptions made for valuation purposes; and
- compare and contrast the different methods of qualitative analysis of stocks.
Information, Media & Telecommunications
India, Medium, 2018
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