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All-Weather Picks

A restricted windfall marked the doom and gloom period on stock markets

Did you lose most of your stocks’ worth in the bear rally starting somewhere around January 2008 to early March 2009? Are you still unhappy, even after a 90 per cent plus gain in BSE Sensex and wish that your stocks would have gained more?

Falling from its peak on January 8, 2009, the BSE Sensex lost 55 per cent till March 09, 2009 to touch its lowest point of 8,160 points. Since then, the market has been on a wonderful rally. At 15,770 points on August 26, 2009, it has already gained 93 per cent.

Exceptions always exist. And there were some stocks that contained their fall in the bear rally, but more than that, they have already doubled their worth in the current bull rally that started from March 09, 2009.

These are investors’ dream stocks and our search revealed 11 of them that fought off all challenges to emerge the quickest winners of them all.

These are lesser-fall-faster-growth stocks, but would they deserve to be called all-weather-picks? After we had a look at the way the underlying businesses are run, we rather would anoint them as such.

And, here they are: The world’s largest tea producer and India’s largest exporter of tea, McLeod Russel is the highest gainer in our list. An investment of Rs 100 on January 08, 2008 would have turned into Rs 210 on August 26, 2009. With the tea consumption demand growing and the production falling due to adverse climatic conditions, the tea prices have gone up resulting in a rally in tea stocks.

Two stocks, Mphasis and LIC Housing Finance have managed to get close to being multibaggers, gaining 95 per cent and 86 per cent. Mphasis, a company in the IT segment, reported net profits of Rs 229 crore for the quarter ended July 31, 2009, up 127 per cent YoY. It will now be acquiring AIG Systems Solutions, the back office arm of American Insurance Group (AIG).

LIC Housing Finance, the fourth largest mortage finance company, grew its net profit by 37 per cent in FY09 compared to FY08.

Maruti Suzuki India would have returned 50 per cent during the whole term. The company, with about half the market share in India, is planning expansion in the current fiscal as the economy picks up. The company has maintained low levels of debt and has a healthy interest coverage ratio.

With the worst performer in our list, Eicher Motors, you would still have gained 11 per cent. This year, the company has planned a capex of Rs 95 crore for its truck and bus business. Last year, the company had entered joint venture with Volvo and is looking to boost its exports through this relationship.

There are two companies which have sugar business at their core - Shree Renuka Sugar and E.I.D Parry. Due to a poor monsoon this year, the sugar prices have also been on rise. While the consumers are suffering from this rise, sugar stocks are touching new highs. EID Parry reported a profit after tax of Rs 692 crore in FY09 compared to a loss of Rs 16.58 crore in the FY08.

For Shree Renuka Sugar as well, the profits have been on a rise for the past two quarters (June - 09 and March - 09).

Increasing its profits for the past three quarters, Dr. Reddy’s Laboratories would have returned Rs 117 for an investment of Rs 100. It reported a net profit of Rs 227.4 crore in June-09 quarter, a net profit margin of 19 per cent. Another pharmaceutical player in our list is Torrent Pharmaceuticals. Its operating profits had grown by 44 per cent in the June 2009 quarter.

Jain Irrigation, the world’s second biggest maker of irrigation equipments reported a net profit of Rs 55.60 crore for the June 2009 quarter, up 88 per cent YoY. The draught might be bad for the agriculture sector, but the company is expecting to double its profits by virtue of the same set of positives. For farmers and other who derive income directly from agriculture activities, this stock might be a worthy hedge.

Fertilizers and pesticides maker Coromandel Fertilizers, a subsidiary of EID Parry, has constantly increased its PAT since FY04, now at Rs 496 crore, 18 times its 2003 profits.

The company contributed more than 40 per cent to the total profits of its parent, EID Parry.

This article first appeared in the September, 2009 issue of Wealth Insight magazine. To subscribe click here.