An Underperforming Stock

             Imagine Its Mar 2020, the Covid is at its peak, the Market has crushed. Anything and everything that you bought at that point would be a multi-bagger, 50X, 20X & 5X and what not! 

            But Markets are markets and aren't we all supremely lucky! Now Imagine buying a wonderful company that had given stellar returns and had barely fallen in Covid crash. We run our minds and say - Hey this is well known company, its products are great and look it hardly corrected even in such might Market crash-  This should be great company to buy and of course you buy! Bingo, you hit jackpot. 

But no Bingo! 5 Years later, here's how the Stock returns look like - 

A grand return of 1.83% from Covid Lows!

We can as well curse ourselves for not simply doing a RD which might of fetched us a return much higher. Enlighten me! how can a stock perform this bad since Covid! Aren't they all supposed to be 5X higher, at least that's what I am told by everybody. Never mind, that's what I was thinking all along - That Covid was a great time to invest and that I missed the bus and I am not sure If I will get such a time once more 

Naturally we should be curious as what company is this? Remember I told its a wonderful company and here's the list of products the company sells - 

Are you able to guess the Company ? Yes, its our Own - 

No! You got to be joking, are you telling that since Covid, the HUL Stock has given returns of only 1.83%? Seriously? Buy Common stocks for uncommon Profits - They also said this to me! Of Course the profits are uncommon but not in the sense we understood (pun intended) 

Yes we are serious, See it for yourselves - up 13% since Mar 2020, that almost 6 years for a 13% return! 

The Underperformer

The Enlight-ment

Out of nowhere, my partner called and asked me to check WhatsApp. I duly looked and he sent me below-

        And I said - "Wow, You were a big Investor, HUL and all you bought 15 years back itself". In his usual casual demeanor, He said - " Dei Dei, Where did I buy? My broker friend bought and I forgot, Had I known, I would have sold it long back, After all its a good company, How do you expect me to hold good companies for that long time, Haha" 

Just out of curiosity, I looked at the returns of Hindustan Unilever since his purchase and here's the data for our readers - 

Despite recent under performance, He has made decent returns for himself. 

What's the Point

• Equites investing always need to be seen from a long term point of view and its tough to try and time the market. Like buying when there is market crash and assuming its a sure shot success formula. No its not.
• Equities always gives opportunities, We might always feel after a great bull run, we missed the best time but Market runs in cycles and there are always opportunities to buy companies at fair prices. 
• Imagine, having bought only HUL during the Covid, that might have made us feel worser, so always diversify. For small investors, Mutual funds offer great diversification. 
• Do not limit diversification within Equity, Diversify across Asset Classes too.
• Be prepared for under-performance. Other than Debt, all assets give lumpy returns 

The Final Pinch

Before we leave, below is the return of HUL & Gold since 2009 - 

Despite 6 years of poor performance, over long term HUL has beaten Gold by 1.5% higher returns and this is without a ~1.5% dividend that HUL has paid average every year. So the total higher return of HUL vs Gold is 3%. 

So if you still think Gold is everything, Give it a second thought. A Healthy portfolio of stocks will beat Gold hands down over a long period of time.

For any financial Planning queries, please contact Droplet Wealth at invest@dropletwealth.com.