Update on Our Hindustan Unilever vs SAIL Bet - Views on News from Equitymaster

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The Equitymaster Research Digest

Update on Our Hindustan Unilever vs SAIL Bet
Jan 13, 2017

When a colleague informed me yesterday that SAIL was trading at a 52-week high, I thought what better time to revisit our 16-month old experiment.

What's better - a good company or a good investment?

We are betting on latter. And in a turnaround of sorts, we have nosed ahead, albeit only slightly.

While HUL, our candidate for a good company is down 9%, SAIL, our good investment, is down 5%.

Here's the backstory.

Our argument was, and is, simple. Valuations matter. A lot.

You can invest in the best companies in India and still have an awful experience. On the other hand, you can invest in the worst companies in India and have a wonderful experience. That's because the price of an asset is a big determinant of risk.

Given the turnaround in SAIL's stock price, our odds of winning have gone up. But we don't expect to abandon the theory even if we lose.

We won't throw in the towel based on just one contest. The real test is the strategy's performance over a large number of trades.

And besides, no one can be right ten times out of ten. Even if you got just six out of ten trades right, you'd still have a great track record.

Let the hares and the Goliaths (the best companies trading at expensive valuations) compete with the tortoises and the Davids (the worst companies trading at attractive valuations).

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