Source: ET
In the game of stock picking, the largest local investor, LIC has been a contrarian. It's a bet that has paid off so far in the current bull run.
LIC's mantra is simple: buy shares of operationally sound companies that are caught in unfavourable business cycle and trading at a lower multiple. Based on the latest stock holdings, the state-owned insurer has gained almost Rs 10,000 crore in the past four quarters on back of its contrarian calls on scrips like BHEL and Axis Bank.
In the game of stock picking, the largest local investor, LIC has been a contrarian. It's a bet that has paid off so far in the current bull run.
LIC's mantra is simple: buy shares of operationally sound companies that are caught in unfavourable business cycle and trading at a lower multiple. Based on the latest stock holdings, the state-owned insurer has gained almost Rs 10,000 crore in the past four quarters on back of its contrarian calls on scrips like BHEL and Axis Bank.
In both stocks, LIC raised its stake nearly 4% since December 2013 when
several brokerages gave 'sell' call and even three months ago many were
bearish about the stocks. "The biggest ability of LIC is to relate the
current valuation and current business cycle of the operationally sound
companies. When they find valuation of a stock is discounting current
business cycle excessively, LIC buys the stock," said G Chokkalingam,
Founder, Equinomics Research.
"What works in favour of LIC is the duration of holding period for a
stock. Being an insurance company, it can hold stock for 8-10 years.
However, mutual funds do not have such flexibility as they are under
pressure to outperform the benchmark index on a quarterly basis," he
said.The point LIC started buying BHEL, three out of four analysts covering the stock came out with 'sell' reports. Their reasons: a depleted order book and an
