Wednesday, May 7, 2008

Damn Right, I’ve got the blues

Who hasn’t got them. We all have the blues and the blue chips too.

Pick up any pink newspaper and hear the ultimate gospel about stock investing.

“ Pick bluechips at any price and hold them for the long run” and voila you will get rich. Warren Buffett picked his Coke and American Express and he surely made his money.

But how do u define a bluechip.

Are these the companies which are in the BSE Sensex?
Then you would have had companies like Asian Cables , Hindustan Motors, Scindia Shipping, Premier Auto in your portfolio and if you had held on these stocks, I m not sure that rich is the word that would have been associated with you. Run through the list of BSE Sensex stocks since inception and you will appreciate what I mean.

Are we talking about pedigree MNC companies?
Indian subsidiaries of the Unilevers & Pfizers of the world. The benchmark that I can look at some of the MNC funds that some of the fund houses run. Run through this performance table for the last one year and you will find UTI MNC fund, Birla MNC fund & Kotak MNC fund at Nos 216th ,227th & 228th rank out of 241 funds.

Or are we talking about companies like Infosys, Bharti, Reliance etc.
Prof Bakshi’s post on Infosys that you can read here is a classic example of how the blue chip strategy need not be a sure shot path to success.

The key is not just the company but more importantly the price. There is a wrong price for the right company.

Buy bluechips at the right price and hold on to them is the mantra.

Else listen to Buddy Guy
Damn right, I've got the blues,
People, from my head down to my shoes
Ahh, you damn right, I've got the blues
From my head down to my shoes
Well you know I just can't win, cause I don't have a damn thing to lose


Anonymous said...

Interesting viewpoint, its definitely about price (or say value) too. often forgotten, especially in times of irrational exuberance, when nothing is too costly, and you always believe there's a bigger fool just round the corner, who you can pass the hot brick. but then the music stops, and the hot brick burns your hand.

Ninad Kunder said...

Hi Anonymous

You are right about the "bigger fool" syndrome.

Like they say the trick is to find the sucker in the room and if you cant locate one then you are the sucker.

There is always the right price for the wrong company and the wrong price for the right company.



Rohit Chauhan said...

blue chip at high valuations are riskier than marginal small caps. with small caps, most people know they are speculating and hence they are carefully (generally).
with blue chips, a lot of people get lulled into complacency. assuming that the company is good, they think the stock is good too.

for ex: infosys in 2000. was sellin at 13K. after 8 years, split adjusted it is around 16K. at best 4-5% return including dividends