Mean reversion is much more prevalent than people give credit for. In past few months, some mean reversions have affected my portfolio positively: Amara Raja Batteries, Cochin Shipyard, Nesco, ITC, Atul auto, HDFC twins, etc. Also, there are a number of companies where mean reversion hasn’t played out yet: Kaveri seeds, Avanti Feeds, Alembic Pharma, Manappuram Finance.
The good thing with this diversified approach is that some ideas are always working and some ideas are not. As long as my underwriting logic is correct, mean reversion will happen at some point of time.
There are two more companies where I have been building positions in the past month – Godfrey Phillips and Chamanlal Setia. Both are again mean reversion plays, I will add them to the model portfolio and explain my rationale once I have built my position.
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