Do Stock Market Traders Ride Motorcycles?

On 3rd July of this year, Hero MotoCorp launched the Harley X440 at a great price. The Eicher Motors share price (parent company of Royal Enfield motorcycles) dropped -6.3%; a fairly significant one day drop. On 5th July, Bajaj Auto launched the Triumph Speed 400 at a price which seemed even more bang for buck. The Eicher share price again fell by -2.6%. Over the next five days, the Eicher share would go on declining, losing a massive -12.6% compared to the start of the decline.

This short essay is not about share prices. I'm not an equity expert and won't pretend to be one. But having spent a couple of decades in the auto industry, working with Bajaj Auto and Royal Enfield (among others), I understand a few things about motorcycles, customers and brands. So, I was intrigued, and started following stock market 'pundits' on the why & what.

To my amusement, I found one pundit claiming that Royal Enfield was under attack because of the launch of 'cruisers' by the competitors. Wait a minute...cruisers?? I looked around, and all I could see were two beautiful 'roadsters' from Harley & Triumph, which were as different from the Royal Enfields as chalk & cheese.

Another pundit claimed that the competitors had higher performance specs than the Royal Enfields, and hence would decimate the latter. Hmmm...I wondered if the said pundit had ever ridden a motorcycle? I wondered if the pundit knew the difference between a long-stroke engine and a short-stroke engine, which brand favoured which, why, and what it meant for the end consumer in terms of experience? I wondered if he knew the bliss of effortless cruising, where the journey is the destination and the specs become incidental, irrespective of the brand?

Before I get lost daydreaming about a weekend ride with my buddies, what is important to question is how much (or how little) our bulls & bears understand the products and brands whose fortunes they impact with the press of a button. Royal Enfield, like Bajaj Auto, is a world class organisation that develops products and experiences that have been curated over decades of consumer understanding, and a genuine love for what they do. These are companies which regularly top market cap ranking tables and metrics of profitability on a global scale. They are leaders in design, innovation and frugal engineering. They are companies that make India proud.

Since 10th July, the Eicher (Royal Enfield) share price has been recovering and is back to half of its pre-decline level. But the issue here is not about a particular brand, or a share, or even a category. What happened to Royal Enfield last week, may very well happen to its competitors tomorrow. In fact, these kinds of vagaries happen across segments, be it automobiles, FMCG, telecom and so on.

One really wonders who benefits in these wild fluctuations of sentiment, and how much logic is ever used? And most importantly, how does the average investor view a company's worth? Does he/she get swept away in the momentary hype, or does he/she pause to consider the intrinsic value of a business that has been built over years? The answer to this question is fundamental, as all of us are consumers and influencers in our own way, and we all help shape the destiny of a nation.

So, sentiment or logic?