Stocks for a weak market


Well-Known Member
Last couple of days, market has been feeling quite heavy, and it’s slipped about 2% from the highs.

When market is bullish, any and every stock goes high - and it’s actually the operator stocks that move lot higher. But in weakness, these stocks lose the most - and it’s imperative to pick safe stocks in such a scenario.

In such situations a few common themes always are reliable. High dividend yield is always good in a weak market. Diversified companies are better than those with very narrow focus. And companies with low valuations have some floor under them unlike those that are flying high. Low debt, high book value companies are solid.

And as always, strong fundamentals and event triggers are the best things to look out for.

and in general - solid large caps are a safer bet than small caps and mid caps - especially those that could be crowded with hot money.

If you consider Large caps with low debt, diversified businesses, and reasonable valuations, 3 companies fall in that list - ITC, L&T and Reliance. While Reliance isn’t exactly cheap in historical context, today’s Reliance is a completely different company from a few years back.

All three have excellent fundamentals, and these will only improve with vaccine driven return to normalcy in the economy. ITC’s hotel business, Reliance’s speciality Retail business and L&T’s Metro operations have weighed down on these companies - and the only reason they have still performed well is because of diversified operations and strong balance sheets.

Of these, Reliance is a particular favorite of mine - because it’s Oil and Gas business is also picking up strongly, and the Telecom business has massive edge from IUC regime ending, 5G, etc. While the dispute between Amazon, Reliance and Future may drag on for some more time, it now increasingly looks like this will go Reliance’s way - not just in the courts, but on the ground too.

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