I was sitting on a pile of sugar shares, and sugar is doing well. Frankly I think 2010 and 2011 are likely to be bullish for sugar mills profitability will only get better. The retail sugar price is unlikely to come down and this ensures good EPS. Given good eps and buying by institutions sugar shares can only do well…but I sold. And I sold a good south based company which I have been holding for 23 years – on and off trading in it.

The government scared me. Just to please Rahul Gandhi if they can come out with an ordinance on sugar, they can do anything. Like Petrol and LPG the losses will be taken by the shareholders of the companies in the sector.

All those people who thought there will be value unlock in HPCL, BPCL and IOC are still waiting – for the past so many years. So when you do a ‘value investing’ you cannot just look at Price to earning ratio or Price to book value ratios. Makes no sense. Markets could just decide to settle at a higher p/e or a lower p/e. If you go on accumulating and wait for the value unlock, well you could be waiting.

So you need to know what is value. All the value is lost if there is a rogue promoter, or a rogue government which can change the rules. If the rules can change AFTER the game has started you are at the rule makers’ mercy. Mercy of course can be got at a price, but you should know how to fix the price, whom to pay, be flexible on bribing, etc. If you cannot do that you should not be in that business. Look at fertiliser, oil, (now sugar!), mining, aviation companies – whether you will survive, will you make any money, etc. are all decided by the government. Too risky to keep your money in these industries. However if the promoter is willing to share the spoils with you as a shareholder, you are lucky. Being lucky is not enough strategy.

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