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HUL Outperformed NTPC 20 Times Between 2010 and 2020
Apr 1, 2020

Back in 2017, I wrote about how HUL shareholders had endured a 13-year coma.

Yes, that was the fate of HUL's shares. It literally delivered nothing between 1997 and 2009.

What's worse was that even a PSU utility like NTPC beat HUL's returns for five years at a stretch.

Yes, HUL was a FMCG company with high capital efficiency and strong brands. But it had taken debt to fund mergers and acquisitions like that of Lakme and Modern Foods.

In comparison, the cash flows were drying up. So, the company turned hyper-competitive in pricing.

Its strong brands did little to endear HUL to investors. (Remember, Kodak and Nokia have had such fates too!)

Meanwhile, NTPC was a super-efficient steady cash flow company with no debt on it's books. The government ownership had limited impact on the business.

So, the moats that NTPC enjoyed over HUL were:

  • No debt
  • Growing cash flows

Little wonder then, these differences in fundamentals had a direct impact on respective stock prices.

Things reversed starting 2009.

The exact same moats that NTPC enjoyed came handy for HUL. NTPC went heavy on capex, HUL did not.

Eventually, the shareholders of HUL had no room for regret over next decade.

Data source: Ace Equity

This Chart Of The Day was published in The 5 Minute WrapUp - One Stock that is All Charged Up for the Post Coronavirus Rebound

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