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India Equity Research Reports, IPO and Stock News
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India Market Strategy ------------------------------------------------------------------------------------------
Stocks of safety
● Several uncertainties now roil the markets—sovereign debt
concerns, rising probability of a recession in the US, anaemic
growth in China and spiralling inflation in some emerging markets.
We believe we are closer to the beginning than the end of this
uncertainty.
● We, therefore, used CS HOLT's eCap framework to find stocks of
high-quality companies that have delivered healthy returns in both
good and bad times, and removed stocks with high export
exposure.
● The top ten that qualified are ITC, HUL, Sun Pharma, Hero
Honda, Siemens India, Asian Paints, Lupin, Dabur, Colgate and
Zee .
● This portfolio outperformed MSCI India by 45% from the January
2008 peak to the March 2009 trough —less de-rating
and lower EPS cuts. It has already outperformed the
broader markets by 26% since the November 2010 peak, but
should continue doing so.
10 Stocks to hold in times of uncertainty
There are several uncertainties that now roil the markets—sovereign
debt concerns in major EU economies and the impact they may have
on the banking system, the rising probability of a recession in the US,
anaemic growth in China and spiralling inflation in some emerging
markets. Outcomes are difficult to forecast, given that possible
decisions by policymakers are no longer straightforward.
This is very different from the 2008 crisis—with backs to the wall, it
was easier to forecast which way the monetary/fiscal policy was
headed. It is no longer the case. Policy uncertainties exist across
major economies: the US, the EU and China are undergoing serious
internal debates on the way forward. Political choices are likely to
drive decision-making versus the purely economic drivers in 2008.
This is over and above the slowdown concerns in the domestic market.
We have, therefore, attempted to identify stocks of high-quality
companies that have delivered healthy returns in both good and bad
times. We used CS HOLT’s eCap framework to filter out the best
quality names (do please revert if you need more details on this
framework). We then ran the 20 top-rated liquid stocks in this
framework through another filter of export exposure. From January
2008 to March 2009, when MSCI India fell 64%, this portfolio would
have outperformed by 45% despite starting at similar multiples (Figure
2)—they saw less de-rating, and also saw forward earnings rise.
Some of this outperformance is behind us (26% since November
2010), as the valuation gap currently is already higher (Figure 3), but
we still consider these good investments.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Market Strategy ------------------------------------------------------------------------------------------
Stocks of safety
● Several uncertainties now roil the markets—sovereign debt
concerns, rising probability of a recession in the US, anaemic
growth in China and spiralling inflation in some emerging markets.
We believe we are closer to the beginning than the end of this
uncertainty.
● We, therefore, used CS HOLT's eCap framework to find stocks of
high-quality companies that have delivered healthy returns in both
good and bad times, and removed stocks with high export
exposure.
● The top ten that qualified are ITC, HUL, Sun Pharma, Hero
Honda, Siemens India, Asian Paints, Lupin, Dabur, Colgate and
Zee .
● This portfolio outperformed MSCI India by 45% from the January
2008 peak to the March 2009 trough —less de-rating
and lower EPS cuts. It has already outperformed the
broader markets by 26% since the November 2010 peak, but
should continue doing so.
10 Stocks to hold in times of uncertainty
There are several uncertainties that now roil the markets—sovereign
debt concerns in major EU economies and the impact they may have
on the banking system, the rising probability of a recession in the US,
anaemic growth in China and spiralling inflation in some emerging
markets. Outcomes are difficult to forecast, given that possible
decisions by policymakers are no longer straightforward.
This is very different from the 2008 crisis—with backs to the wall, it
was easier to forecast which way the monetary/fiscal policy was
headed. It is no longer the case. Policy uncertainties exist across
major economies: the US, the EU and China are undergoing serious
internal debates on the way forward. Political choices are likely to
drive decision-making versus the purely economic drivers in 2008.
This is over and above the slowdown concerns in the domestic market.
We have, therefore, attempted to identify stocks of high-quality
companies that have delivered healthy returns in both good and bad
times. We used CS HOLT’s eCap framework to filter out the best
quality names (do please revert if you need more details on this
framework). We then ran the 20 top-rated liquid stocks in this
framework through another filter of export exposure. From January
2008 to March 2009, when MSCI India fell 64%, this portfolio would
have outperformed by 45% despite starting at similar multiples (Figure
2)—they saw less de-rating, and also saw forward earnings rise.
Some of this outperformance is behind us (26% since November
2010), as the valuation gap currently is already higher (Figure 3), but
we still consider these good investments.
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