I liked this statement. I have seen that, when large cap / blue chips with long history of proven management capabilities trade at discount to their long term P/E or P/B, generally the valuations revert to the mean over a period of 3-5 years. It takes some time and tests investor patience, but eventually it happens.
Many investors (including me) spend lot of time in finding negatives about such large cap stocks and often hesitate to invest or invest 50% or 60% of full amounts, often to find ourselves wrong after 3 to 5 years.
We can check this ourself by looking at stock price charts of ITC, BAJAJ AUTO, COAL INDIA in the recent past 5 years.
Having said this, it is also necessary to book profits after those 3-5 years, once the undervaluation is converted to overvaluation.
I may be wrong in my analysis.
Disclosure : Invested in Kotak Bank.
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