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The 'Rock Solid' stocks in market meltdown - Views on News from Equitymaster
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  • Aug 29, 2011

    The 'Rock Solid' stocks in market meltdown

    The past one month was easily the worst month for Indian stocks since the recovery from the post 2008 lows. Perched nicely near the 19k mark, the benchmark BSE-Sensex fell by about 14% during the period. In fact, had it not been for the swift recovery today, the picture would have looked even worse.

    The corrections of this sort are indeed painful. They erode a lot of shareholder wealth. But as it is said, every cloud does have a silver lining. And the silver lining during corrections comes in the form of the fact that such events help us judge the true character of a stock.

    What happens during the bull market is that investors are quite euphoric and hence, most of the times even a bad quality stock goes up in price. But as mentioned earlier, the true test comes when there is a significant shake out in the market.

    If the stock under consideration does not fall with the broader market or even witnesses a price rise, then the stock is certainly worth a second look. However, if it suffers a significant price fall, then perhaps there is some issue with the fundamentals.

    Armed with this information, we went out to check the stocks that lost the least or may be even rose during the past one month. The table given below lists the 10 stocks from the BSE A group that performed the best in the month gone by.

    Top gainers of the month: BSA 'A' group
    Name Price on 26th July 2011 Price on29th Aug 2011* % change (one month) % change (1 year)
    Sensex 18,898 16,344 -13.5% -9.7%
    Chambal Fertilisers 89 102 14.6% 48.4%
    Guj Mineral Dev Corp 162 177 9.3% 46.9%
    Bajaj Auto 1,449 1,573 8.6% 13.2%
    Hero Motocorp 1,825 1,980 8.5% 8.0%
    Ultratech Cement 1,000 1,060 6.0% 15.8%
    Apollo Hospitals 510 536 5.1% 30.5%
    Asian Paints 3,137 3,278 4.5% 18.2%
    Idea Cellular 93 97 4.3% 36.1%
    Nestle 4,272 4,391 2.8% 46.8%
    RCF 78 79 1.3% -4.6%
    Source: Equitymaster; *Not the closing price

    As can be seen from the above table, all the ten stocks that have performed the best during the meltdown of the past one month have also managed to beat the benchmark index over the last one year period. In other words, it isn't that these stocks have performed well only in the last month but they seem to be of strong fundamentals and hence, have managed to beat the index over a larger duration of one year.

    Those who have been following stock markets for quite some years now need not be told that quite a few names out there are the bluest of blue chips. These companies have strong balance sheets, have grown at a robust pace over the past few years and their business models come equipped with strong competitive advantages.

    Thus, while the above table may certainly not be the be all and end all of stock selection, it nevertheless forms an important starting point for building a portfolio of stocks that is market beating over the long term.



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    Sep 7, 2011

    pleaselet meknow.

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