Why Investors Are Ignoring High PE Ratio?

Big Financial advisors are reporting about people who want to stay with big, reputed companies, which are running well and able to clear all of their debts without any trouble.

When do you think this flip will happen where investors are considering stocks with a PE multiple of 60 and ignoring a value stock with just PE in multiples of 6? Are you asking your clients to do the same? What’s your opinion on not buying Britannia or a Titan but investing in BHEL or NMDC for the matter?

In a typical market, it plays out well in certain phases of the market, where investors make money. Another scenario is a broad-based bull market, where there is a much higher risk as there could be a turnaround story from the next phase only.

New Trends Of Stock Investing

The trends of standard investors which we are analyzing for the last few days have been ferocious but the risk appetite has yet to come back. Investors want to save a higher portion of their portfolio by investing in bigger reputed firms, the business which are performing well even in these hard times and which are debt-free or with zero debt issue.

So, in general, if you look out for getting into something which seems cheap, it is not the market rule anymore. This value buying or comparative numbers etc is not something that can give you comfort anymore. Yes, in this so broad world, there might be some companies with strong nice support or financial backup or visibility even in such hard times. It’s something one must look at.

Which Sectors Will Tide Over The Pandemic?

Investors are showing interest in a large variety of the FMCG sector especially. Unlike auto sectors where trading is happening at blankets of multiple in PE ratio. Each and every other FMCG company is showing a different story and is quoting at multiples variations differently. Within FMCG, where are you finding the most comfort to buy afresh?

Some companies have delivered unrealistic good volume growth even in this hard time. For instance, Britannia has a 24% volume growth, Marico has reported a reasonably good volume of growth too. Of course with some disappointments like Dabur.

If the trend shows up in growth volume for the month of May-June in comparison to the growth in April-May and if it seems like a larger growth in the coming time, people would go for these overpriced FMCG companies rather than going for something that looks cheap.

In the given market situation, investors may like to go with HUL, Nestle, Marico. Britannia could be on the list too but this entire inter-corporate deposit issue caused some discomfort even after reporting good numbers.

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