Many high-priced stocks beat market in past year

The high price of a stock doesn’t seem to be a deterrent for investors. A number of high-priced ones have outpaced the returns of benchmark indices in the past one year.

The average one-year return for six stocks, priced over Rs 10,000 each a year ago, has been nearly 30 per cent. In comparison, the benchmark Sensex on the BSE gained 20 per cent.

MRF, most expensive stock in value terms a year before, has rallied 68 per cent. Shares of the tyre company have gained from Rs 35,299 to Rs 59,184. Other outperformers in the Rs 10,000-plus stock price club are Eicher Motors, Shree Cement and Page Industries. All three have gained around 30 per cent each.

Bosch and 3M India are two stocks in the list that underperformed the benchmarks.

Meanwhile, Borosil Glass (up 122 per cent in the past year), Maruti Suzuki (60 per cent), ISGEC Heavy Engineering (40 per cent), TTK Prestige (33 per cent) and Disa India (29 per cent) have made an entry to the Rs 5,000-plus stock price club, and beaten the benchmark indices.

Market experts say some of these stocks still have good prospects butcould be out of reach of small investors, as they typically have small investment ticket size. “Retail (individual) investors, especially those who are inexperienced or have a small corpus of below Rs 200,000 to invest, prefer buying into stocks with a price below Rs 500. It’s only the experienced or professional investor who doesn’t worry about absolute value but is more concerned about the fundamentals and the company’s growth prospects,” said A K Prabhakar, head of research at IDBI Capital Markets Services. 

The high price of a stock doesn’t, by itself, indicate it is expensive or cheap. Metrics like earnings per share (EPS), price to earnings multiple and price to book ratio are used to judge the valuation.

Stocks with a high price are typically less volatile compared to the rest of the market, due to the higher proportion of institutional holding and investment by informed investors. On the flip side, the trading volumes in these stocks are tepid, which could make buying or selling a large quantity a challenging proposition.