This is a really interesting discussion b/w proponents of coffee can and mean reversion. A few interesting points:
- Contrary to common perception that quality grows at 20%+, Pidilite and Asian paints have grown their PATs at 13.8% and 14.05% respectively over the last 10-year, and sales at ~11%. This is the exact same growth number reported by ITC.
- 10 years cumulative PAT (FY12-21) of Asian Paints are ~18’440 cr. and Tata steel made 10’341 cr. in last 2 quarters. Market cap of Asian Paints is 2.7 lakh cr. vs 1.3 lakh cr. for tata steel. About a year back, tata steel was valued at ~36’000 cr.
- Hindustan zinc (market cap: 139’203 cr.) has distributed more dividend than Hindustan unilever (market cap: 548’993 cr.) (Motilal 2020 wealth creation).
- Over the last 2 decades, metals have grown faster than consumption and pharma stocks (in terms of sales and profits) (Samit Vartak latest memo)
One thing that is definitely true (and something that I find very counter intuitive) is if we buy a basket of good stocks and forget them, only a couple of them drive overall portfolio returns. Here is an example from our own VP public portfolio.
