LIC & Goldman Sachs backed Amtek Auto destroyed 80% of Investors Wealth in a Month

We all feel safe in stocks which are backed by strong Institutions and get good sleep while owning them believing nothing too bad will happen there. We assume that these institutions that pay huge salaries to hire best in class research analysts have done thorough analysis before putting money into the stock and we can safely follow them. Well in investing world nothing is safe and especially in Stocks where all the analysis is on paper while the actual show is run by the management / promoter. While following Institutions is relatively better than doing personal analysis (if you are not a very seasoned analyst), following them blindly and committing all or major portion of your capital to one single stock could bring you disaster.

Amtek Auto is one such example which is backed by some renowned institutions such as LIC & Goldman Sachs. As on 30th June 2015 LIC held more than 8.4 million shares while Goldman Sachs had 4.2 million shares of the company. Together Institutions held over 15% of the company as on 30th June 2015. 

Amtek Auto Institutional Holding
Amtek Auto has been in the limelight recently as the stock had fallen over 80% in one month since August 2015. The reason is still not out in public domain but the rumors are that the company is having some serious cash flow issue and has defaulted on interest payment to banks. General retail investors are at the mercy of promoters and management as by the time the actual issue is out in public domain the game is over.  Insiders are out while retail investors are stuck and have no choice but to take huge loss or wait forever to see their stock price back on the ticker board.

Further Read: Debt not the only concern for Amtek Auto

Amtek Auto hit 52 week high of Rs. 266 and as on 4th Sep 2015 the stock is trading at roughly 30 bucks. LIC and Goldman Sachs lost roughly 300 crores since the stock hit 52 week high, a huge sum, but very small relative to the portfolio of LIC & Goldman Sachs (Not even 0.1%). 

Amtek Auto 1 year Share Price chart

Investing in Stock is like playing with fire and if proper protection is not taken it can burn your hand. Diversification is the key to survival until and unless you are at the driving seat. If you are holding the stock of a Company which is managed by you then it’s a different story but as long as your sole motive is to invest in shares and make return, diversification is your lifeline. Imagine if you had put your entire money in Amtek Auto, you would have lost your entire capital but a 5% allocation wouldn’t have thrown you out of the game. 80% loss on 5% of your portfolio brings you down by only 4% which can easily be recovered by the residual 95% of your portfolio.

Update as on 22nd Sep 2015: Amtek Auto Defaults on 800 crores Bond Payment

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