Buy Blue Chips–You will never Lose Money–10 Blue Chips with zero return for a decade.

When I entered the market in 2004-2007 heard following things

• Pharma is a defensive sector will not give a lot of returns.
• FMCG are slow moving stocks best meant for retired investors who own from 1970-1990.
• Real Estate Stocks have lot of hidden Land Value , India needs Infrastructure so look at Infra and Cap Goods– Why buy Paints, Home Building Materials etc.
• Buy Blue Chip Large Companies – Reliance, Telco, Tisco, ONGC, BHEL , L&T , SBIN etc

Pharma, FMCG did not do well in the rally of 2005-2007. Real Estate, Infra, Cap goods were multi-baggers. In the Bear Market or low Economic Growth Phase of 2009-2013 – Pharma, FMCG did really well. Seeing a similar clean move in a lot of Large Quality Companies. Its become a Consensus – Buy Quality Companies – You will Never Lose Money. High ROCE , High ROIC, Sustainable Cash Flows and etc.  ( Back in 2007 flavor was High ROE , SOTP )

Everyone has forgotten the old Blue Chips some of them were even considered top Quality Companies a decade back.

Nobody knows what will be the fate of Quality companies 5-10 years out. Lot of them quote at 8-10x Sales and 50-100 times PE. A joke is people will be using Paints to paint the floor and windows also soon.

The last such big Consensus was Large Blue Chips in Infra , Oil and Gas, Capital Goods,Telecom etc in 2007, Pharma in 2015, Smallcaps in 2017. Next few years did not end well. Will some of the Quality Companies go through same fate by 2022-2025 ? 

Lets look at Some of the Blue Chip Companies which are now at almost zero return even after 8-14 years.

Nifty has doubled from 6000 in 2008 to 12000 but a lot of companies which were part of Nifty then are still lower than 2008.

Can they be interesting again or its End of the World. Like for example Reliance did nothing for 10 years but post that a 3x in 2 years.

Not considering dividends.

1) Bharti Airtel

Still below 2008 highs. 3rd largest weight in Nifty in 2008. 12 years of zero return.

But now it looks pretty interesting for a long term breakout.

2) GAIL India

10% higher than 2008 highs.

3) Grasim

Came back to 2008 highs after a good rally in 2017. Looks bottomed out at 650-700. Could this be the turning point for a long term entry.

4) Hero MotoCorp

HERO MOTOCORP --- Back to major support.
Highs of 2011-2014 and bottoms of 2015-2018.
Stoploss of 2200. Trend reversal if crosses
2500-2550

Trend Reversal if crosses 2500-2550. If you believe in this blue chip a stoploss at 2200.

5) Indian Oil Corporation

Back to the highs of 2006/2008 and also of 2010/2015/2016 and bottoms of 2018-2020. A contra bet or end of the world. Stoploss better be kept at 90 if you believe in it.

6) ITC Limited

The Quality favorite of last bear market. Went 4x from lows of 2009. Was 3x the highs of 2008 in 2011. Largest weight in the Nifty in 2012-2013.

Back to the lows of 2012-2016. Without considering
dividends its almost zero return now for 6-8 years now

Contra Bet or end of the world?

7) Larsen & Toubro

30-50 bagger in 2003-2007 and now just 30% in the next 12 years !!

8) NTPC Limited

4th largest weight in Nifty in 2008.

Down 50% from the highs of 2007.

Not far from the lows made in 2006-2016.

A good contra bet with div yield ?

9) ONGC

Down 50% from highs of 2007-2008 and 60% from highs of 2014

ONGC - Back to the lows of 2006/2008

End of the World or a Contra Bet ? . Stoploss at 90.

10) SBIN

SBI - 10-20% higher than 2008 highs but struggling
at highs of 2010-2018.
Can 2020-2022 be the rally of SBI ?

The reason to look at some of the larger names is what if someone does a move like Reliance Inds. Even BPCL was at zero return from 2003-2014 and then 5x. Hindustan Unilever 10-12 years zero return and then 8x in next 8 years.

Reliance Inds

In 2016-2017 was similarly placed like some of the blue chips now. Then a 3x in next 2-3 years.

Conclusion -

Maybe 5-10 years down the line a lot of Quality Companies will end up giving zero to low single digit returns over a decade. Just like in 2006-2010 everyone thought over 10 years Blue Chips will make money !!

Some of the last 10 year terrible names could surprise in next 5 years. If you have some such ideas mail to nooreshtech@analyseindia.com ( will cover on the blog.)

Personally find Bharti Airtel, SBIN , Grasim very interesting and maybe a smaller trade on PSUs like IOC , NTPC, Gail India and Hero MotoCorp.

Please do your own research and risk management.

 

 

DISCLOSURE Nooresh Merani

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