The benefits of Quality
The perfect examples of quality are HDFC & HDFC Bank.
Boring businesses, rock solid. In a environment where other banks including
private banks are struggling in terms of growing book and maintaining asset
quality, these guys are doing both. Especially HDFC Bank, growing advances and
deposits at a rapid 20% clip since forever, negligible GNPA and absent NNPA,
adequate provisioning, best in class NIMs of 4% plus, these guys are amazing.
In the portfolio too, understandably, they have performed well. I took in HDFC
in mid Feb this year when markets were at 5500 levels, markets have delivered a
YTD return absolute of minus 6% (today close Nifty 5197) whilst the stock is
flat, which means I have an alpha of 6%!! Similarly, HDFC bank invested in end
Feb 12 when mkts were 5400 odd levels, YTD return of markets -4% whilst the
stock has given return of 13%, which in itself is awesome for a 5 month period.
Alpha generation is a staggering 17% for less than half a year! Stellar. Wish
my portfolio was jus these two stocks! Ah well, if wishes were horses, I would
have the world’s largest stable!
In other things, though markets look boring at this
juncture, the stage is being formed for upward trajectory. At least I do not
see things worsening. Look at recent macro numbers – IIP good, Inflation not so
bad and softening, trade deficit narrowing, Rupee strengthening and oil under
check. Valuations are reasonably decent. Investors would do a favor to
themselves by building a sensible and quality portfolio right now. Bulls ahoy!
Happy Investing…
