The individual investor should act consistently as an investor and not as a speculator
This translates into an absolute return of 282 per cent, 238 per cent, 218 per cent, 207 per cent and 197 per cent, respectively. By comparison, the Sensex and the Nifty have gained 27 per cent and 30 per cent, respectively, since 2010 on an absolute basis.
In all, 41 stocks from the BSE 500 Index have outperformed the market in the past five consecutive calendar years, data show. Of these, 17 stocks, including Hatsun Agro Products, Page Industries, Ajanta Pharma, Blue Dart Express, Kajaria Ceramics, La Opala RG and Eicher Motors, have given positive returns in each of the last five calendar years.
Between 2010 and 2015, while Ajanta Pharma zoomed 4,626 per cent, La Opala RG, Kitex Garments, Eicher Motors, Kajaria Ceramics, Cera Sanitaryware, Symphony and Vakrangee have surged 1,000-4,500 per cent.
Explaining the rationale behind the strong returns delivered by the five large-caps, G Chokkalingam, founder and managing director of Equinomics Research & Advisory, says: "There is a fundamental reason why these stocks have done well over the years. Lupin and Asian Paints are considered defensive plays given the nature of their respective businesses. Zee Entertainment is from the media sector where there has been a continuous growth since the past five years. Kotak Mahindra Bank, on the other hand, is one of the most efficient plays in the banking sector and has been able to manage its non-performing assets well over the past few years."
A consistent growth in net profit year after year and buying interest from the overseas investors has led the rally in these stocks, analysts say.
Ajanta Pharma, for instance, has seen its market value appreciate 47 times from Rs 28 (adjusted to bonus and stock split) in December 2010 to Rs 1,337 in December 2015. The returns are despite the stock correcting 20 per cent since hitting a record high of Rs 1,720 a share in August 2015.
The company's net profit surged nine-fold from Rs 34 crore in FY10 to Rs 315 crore in FY15. Foreign institutional investors, too, increased their stake in the company to 7.94 per cent in the September 2015 quarter from a mere 0.02 per cent at the end of December 2010 quarter.
"There has been a change in the way some of these companies / businesses operate over the past five years. This has positively impacted their topline and bottomline. Eicher Motors is a classic example where the company has repositioned its motorcycle - Bullet. So, a lot of these companies found the right strategy, which eventually got translated into stock performance. As a result, these stocks became multi-baggers over the years," says A K Prabhakar, head of research at IDBI Capital.
Ceramic products makers Kajaria Ceramics and Cera Sanitaryware have seen a stellar rise of 1,200 per cent each. These companies have exhibited a strong net profit growth of 38 per cent and 28 per cent compounded annual growth rate, respectively, during FY10-15.
"As regards ceramic companies, the listed players started benefiting when the unregulated market got a hit, as the taxes were rationalised over the years. Once the goods and services tax Bill is implemented, this is one industry where the unorganised players will be hit and the organised players will be at an advantage and corner more market share. I don't see growth in the ceramic business coming down in a hurry with the government focused on low-cost housing. There will be good growth opportunities in the Tier-I and Tier-II cities going ahead. One should utilise any dip to accumulate these stocks," Prabhakar adds.