Time for Tata-fication of your portfolio?
Subscribe to enjoy similar stories. The makers of Titanic were certain the ship wouldn't sink. In World War II, Germany was certain it wouldn't lose.
In 2007, traders at Lehman were certain the bank couldn't go bust. More recently, the campaign managers of Joe Biden were certain that Trump wouldn't win. Unfortunately, stock markets also proclaim false certainties from time to time.
And unsuspecting investors get trapped. One such certainty that investors often swear by is that buying the stocks of well-known or reputed companies in any proportion, at any time, is never a bad idea. For instance, a news report recently pointed out that a bunch of Tata group stocks are trading lower compared to 52-week highs.
It, therefore, advised investors to consider this a golden opportunity to load up on Tata stocks from the group “as much as they want". Now, there is no doubt that the Tata group enjoys reputation that few other corporate groups across the world do. Plus, there are several other factors that offers the Tata companies an edge.
The listed businesses under the group have a reasonably long track record of fundamental soundness. Also, they have largely been minority shareholder friendly. So, isn't a correction in valuations an icing on the cake? 'Where is the false certainty?' you make ask.
The problem is that valuations often far exceed the economic potential and earnings growth prospects. So, stock prices do not move in sync with volatility in the economy. Also, steep valuations either follow good earnings or precede a slowdown.
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