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Finding Diamonds in the Sand

Posted By: Admin

We are always looking up and the sun blinds our eyes, everything looks bright & shiny. However once in a while one must look down as well. To find Diamonds, one must look at the sand below. 

In the investment context while we are caught up in this maze of  stocks that have gone up over the past 12 months.. in fact to record levels, it seems that  all of the stock market is expensive. This is as far from the truth as it can be.

Today we are looking at a hidden gem that has not yet run up as the market has.

Public Sector Undertakings aka PSU are govt run companies that had been the bedrock of our growth  over the 70 plus years of independent India. However since liberalization and rapid privatization, some sheen has been blown away from the PSUs as their performance has lagged their private counterparts. Moreover political interference and government exigencies have prevailed over sound economics in running these enterprises. Net result has been that Investors have abandoned these companies and these companies command a  poor following. 

That’s exactly the reason we believe this must be something one can look at, especially if one has a long runway esp 10 years time frame. Why do we think this is a good idea ?

  1. Many of these PSUs have run their course and now govt is in the process of divesting stake in them to private players and this will increase accountability and performance in them ;
  2. Due to poor patronage in the stock markets these stocks are already at a reasonable discount to stock markets and therefore may be a good contra buy in these times of high stock market indices ;
  3. With government keen on divesting stakes in key PSUs like LIC , Air India etc..this year will be a year of focus for PSUs in terms of performance and returns ;
  4. PSUs have always led the way with high investments in capacity  enhancements that have been good for growth especially in times like these. 

Indicative Fund Performance : 

 

Fund Name

1 year Returns

5 year returns

SBI PSU Fund – G

52.13%

7.49%

Invesco PSU Fund – G

44.62%

8.58%

Source : Moneycontrol.com dated 01 June 2021. 

Keeping these aspects in mind we believe that the time is ripe for investors to start looking at PSU Funds as a tactical investment option in the long term.

Who knows maybe you will find diamonds in the sand if you continue the course. 

Safe Harbor : Please note the above is the individual’s opinion and not those of Finsherpa Investment  Services. All investments in Mutual Funds are subject to Market Risks, investors are requested to read the scheme  related documents before committing investments. There is no guarantee that the objectives of the scheme will be met and that neither the investment principal or the returns therefrom is guaranteed. 

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