The Hindu Business Line : The three who took on the bear and had a tale to tell

BL Research Bureau In a year where the bellwether indices were unmercifully battered, were there any stocks at all that withstood the bear onslaught?

You’d be surprised to know that a handful not only bore the onslaught, but also delivered stellar returns.

Hindustan Unilever, Hero Honda Motors, Glaxo Smithkline Pharma and Godrej Consumer Products were the stocks to hold in the year 2008, notching up gains ranging from 7-18 per cent for the year.

Others such as Colgate Palmolive, Procter & Gamble Hygiene and Zandu Pharma too managed to contain declines to less than 4 per cent for the year.

However, these were rare cases indeed, as only 1 in every 100 NSE-listed stocks managed positive returns this year.

Respected for cash

What made a Hindustan Unilever or a Hero Honda stand out when market favourites such as Reliance Industries or Larsen & Toubro were thrashed by bears? For one, their cash coffers. When it came to stock valuations, cash was king in a year marked by tight credit and vanishing liquidity. The companies that made it to the gainers list have traditionally held huge cash on their books, thus providing comfort that the company was shielded from rising interest rates and could easily bankroll any expansion plans. Two, the gainers were all liberal dividend payers. Investors sought out high dividend yield stocks, so that they could rake in returns by way of dividends, even if there were only limited capital gains to be made.

Three, while sectors such as IT – also rich in cash, fell prey to earnings concerns, FMCG and pharma were viewed as defensive bets that could still deliver on growth, because of resilient demand and pricing power.

FMCG companies, for instance, managed to hike selling prices to pass on input costs to consumers, without their growth suffering. Hero Honda, despite being in the interest-sensitive auto space, was rewarded for delivering growth in a difficult year. The company managed to hold on to its volumes of a year ago aided by new launches or model variants, even as other two-wheeler players such as Bajaj or TVS witnessed a decline in volumes. This translated in to a strong 47 per cent growth in Hero Honda’s September half-year ended net profits compared to similar numbers a year ago.

Speculative gains

While the above stocks had a business-related explanation for their stellar performance, there was the usual set of stocks that soared on the strength of speculation alone. Small-cap names such as Glory Polyfilms, Sah Petroleums and Vintage Cards shone with returns of over 40 per cent for the year.