Wipro's dotcom story: Don't ignore valuations

There are several stock market experts who keep saying that “valuation doesn't matter so long as you are buying fundamentally strong companies and are ready to hold it for long term“. Is it true? Not really. And the long term Wipro chart is the best example of this. As visible from the chart, Wipro stock reached unsustainable levels during the dotcom boom and the investors who bought it at 2000 peak is yet to recover their money, even after holding for more than 16 years.

Wipro has all qualities of a fundamentally strong company, but the villain here was the lofty valuations in 2000.

That is why seasoned value investors like AjitDayal, founder and chairman, Quantum MF insist on paying only “reasonable price“. “There are three basic ingredients to long-term investing -select fundamentally strong companies, paying only reasonable price and waiting patiently,“ he says.