It’s easy to say than execute. Let’s say someone bought Sona Comstar (which I think has very good growth prospects) at 790. Does someone average it when it falls to 650. Then what about when it fell to 550 and 450.
Does anyone keeps averaging until the price bottoms out? Let’s say one averages at all the said prices. Wouldn’t the weightage in PF be too high?
And the returns would be negligible if not negative.
Instead if someone has bought a beaten down stock with low valution at cyclical low, there are better chances of one of the two factors (valuation rerating and earnings growth) playing out.
Point to consider is in a PF of 20-25 stocks the odds matter and odds are in favor while buying at reasonable/cheaper valuation with decent growth prospects.
Note: in the first post of this topic I’ve mentioned some examples. One can see that the cos mentioned are one of the best in their industry and some are FII/DII favorite. One can imagine what would happen to other laggards
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