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Stock Analysis, IPO, Mutual Funds, Bonds & More

Good businesses facing tough times could be value buys for long term

These business tend to tide over temporary unfavourable phases.

, ET Bureau|
May 17, 2019, 08.27 AM IST
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When short-term events trigger a fall in the share price of good businesses, it makes sense to enhance exposure to such stocks.
In the past few years, valuation of stocks have been a key hurdle in spotting interesting ideas. Besides this, there has been no secular earnings growth in recent years. Only a small investible universe of large-sized companies have been able to bring some stability to investor portfolios. But in this universe also valuation is a concern. One way to deal with such a situation is to look at good businesses with proven financial performance, but which are going through bad times, temporarily.

When short-term events trigger a fall in the share price of good businesses, it makes sense to enhance exposure to such stocks. Even if such companies are trading at slightly expensive valuations than their historical averages, it makes sense to be invested in these counters. A key reason being in the long-term (at least three years) such businesses, which have survived long cycles, tend to tide over temporary unfavourable phases.

Based on relatively attractive valuation — current price-toearnings multiple trading below five-year average price to P/E — and high prospects of stable and sustained earnings, ET Intelligence Group culled out a couple of good businesses from the BSE 100 index which are going through a bad phase.

Good biz snip 1

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