X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Are you invested in any of these stocks? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Feb 27, 2009

    Are you invested in any of these stocks?

    If yes, you would not like to read further. Or probably you would! Well, in the previous article, we had taken a look at stocks that have performed robustly over the last decade. In this article, we shall look at those stocks that have been the top underperformers during the same time frame.

    Underperformers over a period of ten years

    Tata Motors: First on the list is the stock of Tata Motors, which is the only stock to have dropped in value as compared to its price a decade ago. As compared to the Sensex's gain of 171%, the stock of Tata Motors is down by nearly 17% over the last decade.

    Source: CMIE Prowess
    If we look at the adjacent chart, we can notice that the stock has performed very well over a period of ten years. However, the last two years have been difficult for the company. It has gone through a variety of rough patches, foremost being the not so good timed acquisition of Jaguar Land Rover. It may be noted that the company made this acquisition at a time when it was incurring a huge capex (for capacity expansion) as well. In addition to this, Tata Motors ran into land acquisition issues with the West Bengal government, which led to the shifting of the 'Nano' plant. This not only led to a delay in the launch of the car but also cost overruns.

    The current slowdown in CV demand made matters worse for the company as it led to serious cash flow problems. With the demand for vehicles dropping rapidly, especially the commercial vehicle segment (nearly 70% of Tata Motor's revenues), concerns regarding the company's outlook are reflected in its share price movement in the last year.

    Source: CMIE Prowess
    Hindalco Industries: Second in line is Hindalco Industries, the flagship company of the Aditya Birla Group and the industry leader in the aluminium and copper segments. It provided a point to point return of 3% during the period under consideration. This can be very well explained by the fact that the company operates in a commodity business which is cyclical in nature. Moreover the company underwent a change in its business model in 2003 by incorporating the copper business which has lower margins. Furthermore, in 2007 it acquired Novelis to catapult itself into the league of world's top 5 aluminium producers, as an integrated producer with low cost alumina and aluminium facilities combined with high-end rolling capabilities and a global footprint in 12 countries outside India. However, this led the company to dilute its equity and even raise substantial amount of debt to fund the acquisition.

    Source: CMIE Prowess
    Hindustan Unilever: While Hindustan Unilever (HUL) has been the best performing stock in 2008, its performance for a decade has not been as good. HUL has underperformed the market over the last ten years with the stock gaining by only 35%.

    The company has reported a muted compounded annual growth rate of 5% in topline and 8% in profits in the last decade. While the financial performance in the recent years has been robust, HUL witnessed a decline in sales between CY01 to CY04. This was mainly on account of the economic slowdown, which led to low consumption levels, thereby restricting growth. Also the company's operating margins declined from 19.6% in CY02 to 13% in CY08. The reason behind the same has been on account of increasing competition, which further led to higher spending on advertisements. Over the years, HUL has been losing its market share in several key categories, which is an indication of the competition in the marketplace.

    Source: CMIE Prowess
    Ranbaxy Laboratories: With its stock increasing by only 44%, Ranbaxy has been among the worst performers on the index over the last decade. The reasons for the same are manifold. The company did well during the early part of the decade as it generated substantial revenues and profits from the US generics market and considerably improved its standing in the domestic market. By then, it had already started establishing a global footprint and became aggressive in challenging patents of global pharmaceutical majors. It also managed to cross the US$ 1 bn revenue mark in 2004.

    But the major turning point came in 2005 as severe pricing pressure in the US generics market eroded its profits considerably. Since then growing its revenues at a brisk pace has not proven to be easy which has compelled the company to focus more on the emerging markets which generate higher profits. Not only that, the promoters' stake sale to Daiichi Sankyo and the troubles with the US FDA have obviously not gone down well with the investing community. While the company's revenues grew at a CAGR of 16% in the last 8 years, performance at the net profit level has been very volatile. This probably explains why this stock has not done well on the bourses.

    Source: CMIE Prowess
    Tata Steel: Last in the list is India's largest steel company, Tata Steel recording a point to point return of 95%. This translates into a compounded annual growth 7% over the last decade. The company made a major acquisition of Corus in FY07 by leveraging its balance sheet during the bull run of the steel sector. However, little did the company know that after a couple of years, the world will face one of its worst economic crisis. This changed the outlook for Corus as the demand for steel in Europe has slumped creating serious cash flow problems for the company. Moreover, the demand in the domestic market also slowed down thus raising concerns over the company's ability to pay back the debt. This led the stock price of the company to witness a major fall.

     

     

    Equitymaster requests your view! Post a comment on "Are you invested in any of these stocks?". Click here!

      
     

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process) (The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE SENSEX


    Aug 18, 2017 (Close)

    MARKET STATS