54% of NSE 500 stocks gave 10x returns in last two decades: Goldman Sachs

Goldman Sachs said in a report that more than half (54 per cent) of the NSE 500 (269 shares) have produced 10-packer returns over the past two decades. According to the investment advisory firm, this is the largest share of multipackers among the 10 markets (versus 30 percent / 20 percent for the emerging market/domestic market averages).

Besides, nearly 40 percent of the BSE 200 stocks have generated more than 20 percent annual returns over the past two decades — twice the proportion for emerging markets — which points to significant opportunities in alpha.

The global investment advisory firm said it analyzed 10 major markets across Emerging Markets/DM, covering 6,700 stocks and examining “10-Baggers” — stocks that have generated at least 10 times total returns over a rolling five-year period over the past two decades.

top performers

The study revealed that Westlife Foodworld, MMTC, Praj Industries, JM Financial, Patanjali Foods, Phoenix Mills, Capri Global Capital, KEI Industries, Delta Corp and Balkrishna Industries generated returns of more than 240 times in five years. consecutive years over the past 20 years. .

In India, the domestic macro environment appears stable given peak inflation/rates and manageable current account. Activity has been improving and recent quarterly earnings have been better than expected, supporting expectations of mid-teens earnings growth over the next couple of years.

“We believe that resilient macroeconomics and an improving microenvironment are conducive to strong medium-term growth, and we recommend investors build exposure in India, focusing on pockets of markets that offer strong future growth prospects,” the company said.

Our large-cap pool basket consists of 25 stocks delivering projected sales growth of 17% and earnings growth of 26% over 2023-2025 (three-year compound annual growth rate), at a rate of 22x 2024 P/E. Among the 25 stocks Forming part of GS India’s large-cap basket of vehicles, Paytm, Zomato, Adani Ports, Page Industries, Samvardhan Motherson and PI Industries, along with trading stocks such as HDFC Bank, ICICI Bank, SBI, Bharti Airtel, Bajaj Finance, M&M and L&T TVS Motor, Titan, UltraTech Cement and Apollo Hospitals.

A mid-cap multi-pack is comprised of 35 stocks that meet at least four of the six multi-bag criteria, generate an 18 percent return on equity and deliver a 20 percent/38 percent 23-25 ​​sales/EPS compound annual growth rate. Among the 35 stocks in GS India’s multi-bag lid basket were Concor, AB Capital, Gujarat Fluorochem, Honeywell Automation, Solar Industries, Oberoi Realty, Jubilant FoodWorks and Sona BLW Precision. Newly listed stocks such as Nykaa, Vedant Fashions, Metro Brands, and Devyani International are also part of its multi-bag list.

India’s total stock market capitalization has increased 12-fold since 2003. The average market capitalization as a percentage of GDP has increased 11 percentage points, from 76 percent in the previous decade (2003-2012) to 87 percent in the last decade (2013-2013). 22), indicating the continuous development of the capital market. She said that the long-term equity returns achieved at the level of the main index were also convincing.

In addition to a proven track record of offering long-term beta through a simple buy-and-hold index strategy, the stock market in India has offered great equity returns and alpha opportunities for emerging market investors. Over the past two decades, about 60 percent of the current BSE 200 stock could have outperformed the benchmark.

Start assessments

“About 70 percent of the stocks in our world traded at either less than 1x LTM (last 12 months) or less than 10x NTM (next 12 months) P/E before eventually becoming multi-bag.”

However, the “low initial valuation” of the multipackers appears to be related to the prevailing broad market valuations. About 60 percent of multipackers broke down during the market crisis periods of 2001-2002 (the dot-com crisis), 2008-2009 (GFC), 2013 (rambling tantrum fears), and 2020 (the shock of COVID-19). This indicates that crises/external shocks or low prevailing market valuations have historically provided good entry points for selecting multiple packaging machines. This also partially explains why the previous decade (2002-12) produced more multipackers than the last decade (2013-22).