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Even bear hugs can’t hold these stocks down

, ET Bureau|
Oct 11, 2018, 08.47 AM IST
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In each of these bear cycles, when the BSE500 index fell more than 10 per cent, these 15 companies outperformed the BSE500 index during each downturn.
ET Intelligence Group: Tired of the falling markets and the sameness of all-pervasive pessimism? Here are some investment ideas that have not failed in the past bear cycles.

About 15 stocks have outperformed the broad index (BSE500) in the past five bearish cycles — November 10, 2010 to December 30, 2011 (-10.2 per cent), March 3, 2015 to February 2, 2016 (-31.1 per cent), September 8, 2016 to December 26, 2016 (-20.9 per cent), January 29, 2018 to March 23, 2018 (-11.9 per cent), and the recent one August 28, 2018 to September 10, 2018 (-14 per cent).

In each of these bear cycles, when the BSE500 index fell more than 10 per cent, these 15 companies outperformed the BSE500 index during each downturn.

These ‘bear-proof ’ stocks (see table) include Schaeffler India, HDFC Bank, PI Industries, Gillette India, and Petronet LNG. Interestingly, these companies have not only outperformed the BSE500 index in each of the five bearish cycles, but they also are expected to show strong earnings growth for the next two years, according to Bloomberg.

stocks to buy snip

PI INDUSTRIES
It is one of the leading companies making products related to the crop-protection industry. The company operates in two segments: agriculture inputs, and contract manufacturing and custom synthesis. A strong domestic product pipeline, scheduled to be launched until FY22, and an order book ($1.15 billion) of custom synthesis and manufacturing (CSM) segment work in its favour. This order book gives sufficiently high revenue visibility for the next three to four years. Also, its strong network of 8,000 dealers and distributors, and 35,000 retailers for its products used in the agriculture industry ensure smooth sales.

HDFC BANK
In the current environment, HDFC Bank stands out for its healthy asset quality, stable margins, consistent performance and high-quality management. Also, the bank’s high share of retail loans and increasing investments in technology are expected to enhance total revenues and market share.

PETRONET LNG
India’s largest regasification company Petronet LNG is expected to benefit from a few factors that would enhance its earnings. First, the company’s much-awaited Kochi-Mangaluru pipeline is expected to be completed by December 2018. This should boost the Kochi terminal’s regasification utilisation. Second, a rise in regasification tariff is expected to boost revenues. Finally, the company’s other terminal at Dahej is likely to remain competitive due to lower operating cost, which prevents customers from shifting to other terminals for regasification contracts.

GILLETTE INDIA
One of the leading razor and oral care brands, Gillette India is benefitting from three key factors. First, the increasing acceptance of its premium razor products is reflected in its gross margin expansion (technically 300 basis points) between FY17 and FY18. Second, compared with peers, it has better presence in offline and online markets. Third, stabilising of its oral care business (oral b brand) should enhance revenue. Analysts point out that to get a clear picture of its operations, investors should look at its performance annually, and not quarterly.

SCHAEFFLER INDIA
The erstwhile Fag Bearings is expected to benefit from vehicles in both the electric and non-electric segments. Factors such as adoption of new emission rules (BS-VI) from 2020, stricter safety standards, and increasing share of automatic and premium cars in the market are expected to boost revenues.

It is estimated that in the developed world, Schaeffler is supplying €100 worth of content per vehicle powered by conventional fuels, while in India is it around €30-40. It expects content per vehicle in the EV segment to expand fourfold by 2030. This shows the potential for revenue growth.
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