The oldest scams are the best

The oldest scams are the best. They have a lot going for them - greed is as old as time and the proportion of idiots in the population is a constant. Given all this, a man would be better off trusting a time tested scam rather than trying to make a better one.

When I was in college, we had a lecture from Harshad Mehta, then newly released from prison. He walked us through how he managed to push stocks to 20 and 50 times the price he bought them at. The secret was simple. The plan was his, the subtext here is mine. Pick stocks with good financials. This means good cash flows, rising incomes, increasing OPMs, strong EPS growth, etc. Filter them to find ones with little news around them and little investor awareness. Buy as much as you can. End phase 1.

Phase 2. Bring the news out bit by bit. Support with technicals. Each time the market thinks the stock is fully valued, add a dimension - unlisted subsidiaries, land bank, export prospects, acquisitions, etc etc.

Phase 3. Nary a day goes by when the stock is not written about. Investor mania takes over. Human tendency is to look at the past and project it into the infinite future. A stock no one bought at 200 has no sellers at 10000. Except the man who did all the buying at 200.

Phase 4. Only the fools are stuck with the stock. It starts falling under the weight of its expectations, finally resting at the point the combination of its financials and desperate hope can support it.

Addendum. If a company is merely a vehicle for operators to do this in conjunction with management, then even the financials can be manufactured to suit.

Why am I so irritated? The signs are all over the market again and stocks whose names I recognize from the late nineties are back in flavor. A search on google for Vikas WSP and tracking it through its many iterations is a fun exercise I'll leave for you.