It has been four years since we started this comparison exercise. The previous update is here There has been huge difference between the two folio despite the last year correction affecting both of them. As of them it is clear than quality portfolio outperforms in reasonable time frame.While it is easy to jump to conclusions, these need to be judged over longer time periods. In the recent past anything that is quality has been given sky high valuations and they continue to have those valuations despite earnings growth being tepid. We need to see if this would continue in the days the come
However, I am getting convinced now that it is better to target only high quality business even if it is coming at slight high valuations. Reason for this is that, in the quality portfolio only one company (La Opala) under performed and remained flattish on a 4 year period due to PE correction. Rest of the scrips performed very well. To the contrary, in the reasonable price portfolio two scrips (Munjal and Kaveri) lost money and others performed just okay barring few aberrations.
In hindsight, it also is becoming clear that some of the candidates initially chosen were not even high quality to begin with. The high quality tag was given to them based on their ROE (Return to Equity) numbers being high for decent period of time. Just having high ROE does not mean high quality. Market always rewards only those companies that can grow with high ROE. If the company has high ROE but disappointing growth, market punishes them and that is evident in this case. The out performance as of now makes it loud and clear that pure quality with sustainable growth wins.
Starting price has been adjusted based on Bonus/Splits to arrive at returns.
However, I am getting convinced now that it is better to target only high quality business even if it is coming at slight high valuations. Reason for this is that, in the quality portfolio only one company (La Opala) under performed and remained flattish on a 4 year period due to PE correction. Rest of the scrips performed very well. To the contrary, in the reasonable price portfolio two scrips (Munjal and Kaveri) lost money and others performed just okay barring few aberrations.
In hindsight, it also is becoming clear that some of the candidates initially chosen were not even high quality to begin with. The high quality tag was given to them based on their ROE (Return to Equity) numbers being high for decent period of time. Just having high ROE does not mean high quality. Market always rewards only those companies that can grow with high ROE. If the company has high ROE but disappointing growth, market punishes them and that is evident in this case. The out performance as of now makes it loud and clear that pure quality with sustainable growth wins.
Starting price has been adjusted based on Bonus/Splits to arrive at returns.
Portfolio 1
Portfolio Annualised Return - 25%
|
Stock
|
Year 1
|
Year2
|
||||
|
Price
|
PE
|
Invested Amount
|
Price
|
PE
|
Current Value
|
|
|
Jubiliant Foodwords
|
670
|
76
|
10000
|
1320
|
55
|
19701
|
|
Page Industries
|
10743
|
68
|
10000
|
23610
|
66
|
21977
|
|
Symphony
|
954
|
62
|
10000
|
1185
|
64
|
12421
|
|
La Opala
|
205
|
62
|
10000
|
204
|
31
|
9951
|
|
Berger Paints *
|
126
|
53
|
10000
|
300
|
60
|
23810
|
|
Britannia Industries
|
896
|
52
|
10000
|
3108
|
66
|
34688
|
|
Pidilite Industries
|
484
|
50
|
10000
|
1126
|
61
|
23264
|
|
Astral PolyTechnik
|
420
|
46
|
10000
|
1142
|
68
|
27190
|
|
GSK Consumer Healthcare
|
5807
|
45
|
10000
|
7560
|
37
|
13019
|
|
Dabur India
|
239
|
43
|
10000
|
450
|
54
|
18828
|
Portfolio 2
Portfolio Annualised Return - 7%
|
Stock
|
Year 1
|
Year2
|
||||
|
Price
|
PE
|
Amount
|
Price
|
PE
|
Current Value
|
|
|
Munjal Auto Industries
|
56
|
11
|
10000
|
54
|
16
|
9643
|
|
Zensar Technologies
|
120
|
11
|
10000
|
217
|
16
|
18083
|
|
VST Tillers
|
1349
|
13
|
10000
|
1486
|
19
|
11016
|
|
eClerx Services
|
897
|
15
|
10000
|
1004
|
16
|
11193
|
|
Wipro
|
278
|
16
|
10000
|
373
|
20
|
13417
|
|
Swaraj Engines
|
934
|
16
|
10000
|
1344
|
20
|
14390
|
|
VST Industries
|
1912
|
17
|
10000
|
3201
|
22
|
16742
|
|
Kaveri Seed Company
|
782
|
18
|
10000
|
535
|
16
|
6841
|
|
Suven LifeSciences
|
210
|
18
|
10000
|
236
|
20
|
11238
|
|
Tech Mahindra
|
653
|
21
|
10000
|
809
|
18
|
12389
|
