This report highlights potential rerating stock ideas providing an attractive wealth creation opportunity with a calculative risk. We recommend to Buy these Holding companies with a potential upside of 50%+ over next 2-3 years horizon
With evolvement of equity markets over the decades, several products were introduced to provide passive investment opportunities to investors, such as index funds, ETFs, mutual funds, REITs, etc. However, ownership in such funds comes at the cost of maintenance and execution charges.
One well-thought approach of passive investment, which not only provides direct exposure to equity markets but also eliminates other operational costs, is through investment in holding companies listed on bourses.
Holding company investment acts as a great passive financial instrument, as company’s financial performance is derived from the performance of several portfolio companies, thus diluting the company specific risk.
Looking at the historical price performance, holding companies have a proven track record of
outperformance over the broader market indices. Comparison of Holding Co. index (constituting of coverage holding companies) with SENSEX over past 10 years is shown in the chart below.
This study shows that the Holding Co. index significantly outperformed the benchmark index over a longer investment horizon. Specifically, it was observed that the outperformance accelerates during the boom market, as was evidenced during the periods of 2017-18 and 2023-24 when the index nearly doubled within a span of one-year.
Although the corrections during market downturns were relatively sharp, as was seen during COVID times (2020), accelerated recoveries in subsequent periods provide the necessary cushion over longer investment horizons.
A detailed analysis on value creation by each holding company under coverage, compared to the benchmark index, is shown in the table below.
This study infers that, returns generated by the holding company over varied investment periods, outpaced those reported by the benchmark index. Thus, offering better risk reward opportunities for passive investment over longer horizons.
Click here to download Special Report on Holding Companies – 23 April 2024
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