The underlying attribute of such investment choices, what Graham meant, was quality.
More than seven decades ago, value investing pioneer Benjamin Graham had said that “invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.”
The underlying attribute of such investment choices, what Graham meant, was quality.
The current equities rout from Tokyo to Toronto hasn’t spared Mumbai. But quality stocks on Dalal Street haven’t collapsed. Credentialed consumer franchises such as Hindustan Unilever (HUL), Titan, Asian Paints and Gillette have only fallen in the range of 0.5 per cent to 1.7 per cent this past week, even as the benchmark Nifty fell 5.3 per cent.
Other popular names in the outperformer club include HDFC Asset Management Company (AMC), Colgate and Avenue Supermarts.
Analysts say the sell-off triggered by the coronavirus panic doesn’t appear to have affected quality stocks that continue to have robust consumer demand, which remains generally steady in the face of transient events.
These high-quality stocks have been outperformers even on a yearly basis. For instance, HDFC AMC has more than doubled in the last year while Avenue Supermarts and Nestle shares have risen 60 per cent and 50 per cent, respectively. By contrast, the Nifty is up only 1.9 per cent on a yearly basis.
ADVERTISEMENT
High-quality stocks come with strong fundamentals and clean governance structures, analysts say.
To be sure, rich valuations are a concern. HUL is currently trading at 70 times its price to earnings (P/E) while Asian Paints is at 64 times.
