D. Muthukrishnan Says Share Price Remaining Range-Bound For Growing Businesses Brings Great 'Accumulation' Opportunities

Value investor D. Muthukrishnan states that companies that grow without showing for it in terms of increased share price, generally offer “great opportunity for investing”.

What Happened? The Chennai-based certified financial planner (CFP) who regularly tweets about his investment takeaways, tweeted on Monday speaking about the values of long-term holding in value investing.

For those wondering, value investing is a strategy which involves finding stocks that are undervalued in terms of market price, as compared to their intrinsic value. The strategy, hailed by the likes of Warren Buffet hails metrics like price-to-earnings (P/E), return on equity (ROE), and dividend yield carry significant value while picking stocks to build a portfolio on.

Muthukrishnan who also runs a financial advisory firm notes that often times, the period in which certain stocks remain range-bound in terms of share price “last for few years.”

“In bear markets, we think the bull market would never come. In bull markets, we think it would last forever. Cycle prevails,” the prominent investor notes in a subsequent tweet.

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Long-term cyclical stock: A key example of a long-term cyclical stock that eventually turned huge profits is ITC. ITC's financial performance has been a rollercoaster course of two halves over the past decade.

The company performed strongly in the first half of the decade, with a 16-22% CAGR in revenue and net profit (PAT). However, in the subsequent five years, the growth declined to one-third.

That said, in 2022 the company’s stock rallied over 50%, hitting a new 52-week high in the month of November. Come 2023, the company’s stock has maintained momentum. This has been due to demand recovery over time, a better margin outlook in the cigarette business, as well as healthy sales in the FMCG business.

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Posted In: Consumer Cyclical StocksD. Muthukrishnanlong term holdingValue Investing