infosys stock, why buy it if you don't believe in it

I have long back compared Infosys with TCS, and I said I was not going to buy into these stocks as there was too much to predict. 

Then I noted in Feb 2017 on how founding shareholders have the right to ask questions of the board on corporate governance matters. I also wondered how the remuneration committee, audit committee, and board could behave in the manner they did. In April 2017, I wondered how an investor in Infosys could make 35% return; and then I wondered whether it was probable. Then in June 2017, I noted how the managers were taking desperate measures what with their take on the risk factors filed in their 20 F.

In my view, the Infosys board and its managers have become a laughing stock. They first list the founding shareholders (they call them activist shareholders) as a risk factor impeding the company's growth. Later they tell the media that the founding shareholders are their well-wishers. And now they blame the founder for the mess that they themselves have created both for the business and its shareholders. 

Any shareholder has the right to ask questions about the way the company is run. When it is from a significant shareholder, there is much weight. And when it is from Mr. Murthy, the board is better off dealing with it as a top priority. 

None of Mr. Murthy's questions have been answered; and the board has the audacity to blame him for all the shit that has been going on. The CEO resigns, and takes on a role of executive vice-chairman. The board blames Mr. Murthy. Even while the shit is falling down, there is some comic sense. 

There are questions of the former CFO severance compensation; the former general counsel and chief compliance officer severance compensation; the Panaya deal; the (former) CEO compensation; and finally, because of all this, of the corporate governance itself. As a former CFO, Mr. Pai puts it, the board has failed in its duties. 

Well, there are many who have been talking good of both the board and managers and putting Mr. Murthy down in the process. They are entitled to their opinions. Yet, transparency is the key for any business organization if it has a long enduring story to tell. Otherwise, the story has to end either slowly or rather abruptly. This is the choice every business manager has to make.

Also, what do you expect from someone who does not even have skin in the game as they say? All shares owned are free; 44,886 free shares: not a penny, well almost, put in from pocket to buy shares of the business you believe in. The CEO also has (unvested) restricted stock units. So the number of free shares are much higher. But hey, they are free.

For those who defend by saying that those shares are a part of the compensation, here's the question: If cash was given instead of stocks, would the CEO have spent that cash and bought stocks? It is ridiculous to see the chairman of the board having virtually no stake in the business. Of course, Infosys is not an exception. Yet, I would have no faith in people who do not put where their mouth is. The logic is simple: if the business fails, they do not lose anything. In fact, they might even gain by hefty severance pay.

Infosys stock fell nearly 10% today after the CEO's resignation. The equity is available for Rs.2120 b now. The analysts are all over talking about how it is either a cheap or an uncertain stock depending upon whose opinions we hear. A 10% fall in a stock is not a big deal for an investor having faith in the business and its execution. So it should really not matter if there is conviction that the growth is visible and business model is sustainable. 

If due to the CEO's exit the execution is going to be an issue, then the investor will have to weigh in, and sell the stock when the price is more appropriate. There will be some opportunities in the near future for such action although a big blown price rise may not be there.

The shareholder-board-CEO saga is not new. It has been going on for sometime. So, the investor who is skeptical of the business execution should not have bought the stock at all, or having bought it, should have sold it when the stock price hit some higher levels, which the stock did in the recent past. Equity buying is not meant for short term gigs. Have the intention to participate in the long term performance, or don't just buy stocks. 

If the idea is to trade and speculate, short term is game. In fact, Infosys is just ripe for such action. I don't believe that the returns are going to be great by owning the Infosys stock. May be just about the market index; or slightly higher if lucky. I do like to trade in it though. Speculating with some insignificant cash is both fun and thrilling. The returns are also going to be insignificant. And on top of it, I get some comical scenes like the one going on right now. 

Of course, I noted in Feb 2017 that stock buybacks are good only when the company has excess cash and the stock price is lower than its intrinsic value. Is the stock price still cheap?