@Donald: Pratyush also has data only from 2000 onwards. Was Nestle unlisted for some time? I am using NSE data which shows a stock ticker for NESTLE between 2000 and 2003, and then again for NESTLEIND between 2010 to current.
@Shan: I dont use Excel sheets - I store the stock prices in a Database format (SQLite), and use a statistical programming language for computation. I can share the data if you want… Its about 400MB uncompressed. All stock prices from 2000 onwards for NSE.
I am attaching partial results that ranks the perennials in increasing order of max(DrawDown). Let me know if you want a longer list.
Probably someone from a financial background will do a better job of describing a drawdown, but it involves computing the percentage by which the cumulative return at any point falls below the maximum cumulative return seen so far.
Initial tests with both drawdown and semi-variance show that they do a bad job of identifying stock prices that drift down slowly. I haven’t tried Gamma/Omega yet.
results.csv (2.8 KB)
Thanks Random Walker. The analysis reminded me of Prof Bakshi’s What happens when you don’t buy quality.Further, almost all of the stocks figures in Motilal Oswal’s annual wealth creation study. TCS also doesn’t come in this?
10+ years of NSE stock price data
I uploaded NSE data athttps://dl.dropboxusercontent.com/u/1436352/bhav.7z
It contains a CSV file that you can import into Excel. The compressed file is 64MB (200+ MB uncompressed). I recommend PeaZip (http://www.peazip.org/) to extract the file. WinRAR, 7-zip or PowerArchiver also works.
@Ashwin : Thanks. TCS was listed only in 2004. I filtered away all companies that were listed after 2003. I wanted to capture at-least one full cycle for the results to be somewhat meaningful, even if I erred on the side of caution. There are a lot of really good companies which got listed after 2003, but I cant glean their long term behavior from stock prices alone. Like Donald mentioned, especially to analyze perennials it would have been good to have 20 to 30 years of data, to see how they weathered the worst that the markets threw at them.
Excellent links!
**
Hello Random Walker… I would like to give a vote of appreciation for your efforts.
I understand u are looking for 20 yrs historical data. Just so happens there is a site which has that dataset along with other relevant information.
Hope it helps.
10+ data **
athttps://dl.dropboxusercontent.com/u/1436352/bhav.7z Link: https://dl.dropboxusercontent.com/u/1436352/bhav.7z (http://www.peazip.org/ Link: http://www.peazip.org/ )
@Ashwin: Took a closer look at TCS and other software companies (Infy, Wipro). They behave more like cyclicals, falling sharply in 2008. So they wouldn’t really come in the perennial category (steady stocks). They also don’t fall into fast wealth creators where other have a higher stock price CAGR.
The Motilal report ranked TCS high by wealth created in terms of market-cap, not in relative gains. I disagree with their quantitative analysis:
@ Random Walker,
Thanks. You could be right. Further, I did not suggest TCS should be part of perennials. TCS from 2004 to date gave a return of around 11x-12x in 10 years including dividends. Not bad in my books. A query: which one of the company (now trading at Rs 100) will give higher return in the next 10 years.
a. Company A with ROCE of 90+, ROA 37+, ROE of 50 but growth will be 12% CAGR for the next 10 years. Dividend payout shall be 50%.
b. Company B with ROCE of 45+, ROA 18, ROE of 30 but growing at 20% CAGR for the next 10 years.Dividend payout shall be 25%.
@Ashwin: Sorry! I dont have a background in finance and find it hard going reading balance sheets. Neither do I have much insight into the ratios you mention. I have some tech background and made a start just looking at stock prices, and their analysis.
Its becoming increasingly clear that I am ignoring company fundamentals at my own peril. So I have started reading Pat Dorsey, Peter Lynch recently.
I also bought TCS in the IPO and sold out only recently. I was just trying to explain why TCS didnt figure in my list above. The list of perennials are not even the best performing, but just the most stable price-wise. No offense was intended, and I apologize if it appeared otherwise.
@ Random Walker,
Please don’t be apologetic. I also dunno what would be the returns (assuming all other things being equal) for the two businesses I mentioned. Thanks for the good work.
Perennials (From 1995 to 2014)
Thanks to the reference from Vishnu, I was able to try over a much larger time period.
Unlike my previous NSE data, this only has a single price per month for each stock. So volatility that happened within a month is lost. The best stocks (with lowest drawdowns) include ITC, Nestle, Hero Moto, Britannia, etc. Results attached!
results.csv (718 Bytes)
@Ashwin: Interesting puzzle. Without measures like P/B or P/E, it is not well defined. But assuming one is able to buy both companies at book value, ROE and Div payout ratio, define what growth would be. In the case of the puzzle, ROE of 50% and Div payout of 50% force growth rates of 25%/year.
Here is an excel sheet attached that you can play around with:
Let me know if you think I made a mistake somewhere.
Cheers,
-Prasanna
@ Prasanna,
Thanks. The two companies are A: MPS Ltd (even Crisil Ltd has similar attributes) and B: Amara Raja Batteries. 
Now, we know the P/E multiples. Forget about what you know beforehand about the businesses. The best businesses to own are the ones which can add incremental capital and return at a good rate (“If you pause for a second, the company will drown in cash.” - Charlie Munger). Just plainly looking at return ratios might not help. If B can absorb more capital than A (Asset turnover is higher than A), I guess company A will give less return than B simply as adding Rs 100 in getting over Rs 135 is better than adding Rs 25 and getting Rs 50. Compounding this over a long period of time, business B should return more than business A.
I’m not sure. Is my understanding correct? Is there any business that has high RoIIC and grows at a good pace? Mayur maybe?
P.S: Crisil, MPS & Accelya Kale all have impressive return ratios but can they absorb incremental capital at that same rate?
@Ashwin: I guess we are diverting the aim of the thread. But I will bite just a little bit further.
In your example, assuming both are bought at book value, A is actually better off since it can buy back its own stock or just give that money back to you as dividends which you can then use to buy more of the stock.
Always pays to be asset light and growth is not really a necessity for superior stock performance - theoretically. But practically yes, market likes a co when it can grow quickly to be a large cap and get more coverage.
Again in practice, as Donald points out about the A+ businesses, like Crisil, MPS, (or Facebook), that are super asset light and just don’t need capital to deliver growth. These end up consistently growing the ROE so the static ROE model does not capture the true picture.
am attaching a table used by Prashan Jain of HDFC in most of his presentations. While he uses forward p/e. using historical PE will give a similar conclusion. I use a variation of this and also look at the 50 DMA of the PE ratio. If at the time of taking a position in large caps or nifty index BEES, I increase the qty if the current p/e ratio is below the 50 DMA.
Below is the table and prashant’s commentary on it.
This is in March 2014.
S&P BSE SENSEX currently trades at a PE of ~14.4x** one-year forward earnings. Earnings downgrade cycle is over and earnings estimates are witnessing upgrades. Thus, apart from growth in P/E multiples, even earnings may surprise on upside. The key to sound investing is to invest at low P/Es. Past data suggests that investments in equities made in low P/E markets (say a P/E below 15 - highlighted in Green) have done well over 3-5 years; on the other hand in high P/E markets (say a P/E of more than 20 - highlighted in Tan), investors should be cautious.
@ Ashwin, @Prasanna
I would really like to learn from your discussion, though I don’t understand it fully. I have some basic doubts:
If company A has high ROCE, doesn’t that mean it can take in more debt and grow assets to speed up growth rate. Would such a company do better during an economic uptick?
I have heard asset-light is good, but what if you had high RoA? Or are high RoA’s unsustainable? Aren’t there occasions when asset-light is bad? Like if you lose your job, wouldn’t it be nice to own a house. 
Could someone explain which return ratio is more relevant, and when to use which…
@ Random Walker,
1. Not necessarily. Accelya Kale has ROCE of over 125% but I'm not sure if can take additional incremental capital. Only if it can take in more capital, and return a higher rate, it is worthwhile. The way I look at it is very heuristic. I look at high ROCE (business economics is good), high Return on incremental invested capital (RoIIC; ability to add incremental capital and give high returns), low dividend payout ratio (why do I want dividend and pay DDT when my company has high ROIC?) and high market share (makes sure that we don't get into very niche segment where further room for growth is capped).
I posted this table in another thread and reposting here:
| RoIC |
Growth Rate |
Market Size Opportunity |
Market Share |
Dividend Payout |
|
|---|---|---|---|---|---|
| Accelya Kale |
119% |
12% |
Not Sure |
Decreasing? | 123% |
| Swaraj Engines |
69% |
27% | High | Flat | 74% |
| VST Tillers |
45% |
21% |
High |
Increasing |
16% |
| Ajanta Pharma |
67% |
30% | High | Increasing? (Rank 39 from 40) |
18% |
| Mayur Uni |
74% |
18% | Medium high?/Monopoly? |
21% |
|
| Astral Poly |
43% |
30% | High/Monopoly? |
5% |
|
| Amara Raja |
46% |
18% |
Medium/Duopoly |
Increasing |
15% |
Now going by the table also we can't just buy. This is what makes investment so interesting and dynamic. The RoIIC is negative for Accelya Kale and the company is doling out huge dividend as they can't allocate high incremental capital.
2. I feel high ROA and asset light business in a way point to the same thing. I feel what I posted about MPS (very asset light; low growth) Vs Amara Raja (not so asset light; higher growth) holds true. The ability to add incremental capital and return high RoIIC is more important than just high ROCE.
Investing should be looked as if it is a motion picture and not as a still photograph. Amara Raja is in a midst of capex. Already it is eating into Exide market share and going forward, market share is set to improve. It's ROA might be low (as it is incurring capex) but after 1-2 years, the ROA will go up as deprecation expense will go down. And of course, always being asset light is not good.
3. Return on incremental invested capital (RoIIC) is good return to track. ("If a business earns eighteen percent on capital over twenty or thirty years, even if you pay an expensive looking price, youâll end up with one hell of a result." - Charlie Munger. )
With all said and done, I feel investing is never easy as I've posted. It is simple though! ;)
P.S: We are venturing out of the thread subject area. I feel these discussions may be continued in the Business Value Drivers thread.
Thanks for the insights. I should really hunker down, and learn the basics before I can add to the discussion. I seem to hit a mental block each time I reach the part of a book that discusses the analysis of annual reports. Will push through…
I used to have the same view as what you have listed: A good company should be able to consume lots of capital and provide high rates of return on the capital, as captured by donald’s EVA model.The EVA model is mostly applicable to companies which are “processor” types.
However one has to know when not to apply that model - to companies like MCX, Accelya, MPS, Facebook, etc. This has been talked about succinctly in the thread on A+ companies. If Accelya suddenly finds another client and grows 3X, no calculations on ROIC would come to explain it. And even then it would make sense for Accelya to pay out all its income as dividends. ROIC is just infinite and it doesn’t need capital at all. The question in such cases would be the likelihood to generate profits and grow out of thin air (no investments).
If both are available at book value, and both can generate similar growth, it is always better to buy A+ companies - that don’t really consume capital.
