Gem shares/Companies

Rajesh Sharm

I read a comment of Amit Deo ji where he has mentioned a word, "Gems". I use to receive several messages in my message box asking which are gem shares. I have not replied anyone till now.

However, knowing growing interests about gem shares in Nepali share market, I thought to write something. For me, the company may be a gem but its shares sometimes could be gem and sometimes not so. Interpretations of gem shares vary person to person, particularly among traders and sometimes among investors too. 

Many people consider shares of high value companies as gems. Mostly, for many investors this applies perfectly. Many friends ask in forums why EPS of X company and Y company is so close but price gap is so big? This is due to perception difference, credibility difference and imagination of big investors is different than traders. They pay for a share price many times more if that company meets credibility criteria of a particular investor. If that is his or her gem company, they go after it even other companies are available at lesser price. As an investor, I pay some more percent in case a company has high standing in its management including vision, growth prospect and culture. I have met a few investors who even overlook present performance of a company if they see its future sounds shinning. However, several others go by present performance of a company. I have met a few who dig background and past performance of a company before investing for long time.  

Traders buy and sell milk and do not raise cow or buffalo. Hence, milk delivering  cow is is a gem company for them. When, they buy 100 NHPC shares at 139 and sell at 190 in a fortnight or so, that is gem share for them. I had once asked a big trader what company is valuable for him. He answered a sick company suffering from treatable disease is a gem company for him. This was strange interpretation. However, following his way of doing things, I bought a diseased  H&B Development bank at Rs 93 and made 40% surprisingly in short span of time. Internationally also Laxmi Mittal made a few billions Sterling pounds by buying sick steel plants. 

Hence, gem companies differ according to the nature of market participant - investor or trader, temperament, risk taking ability and perceptions. They are different for different people. However, in the market, there are blue chip companies and many consider them as gem in a very generalized context.