Thematic Study | December 2013
18th ANNUAL WEALTH CREATION STUDY (2008-2013)
Uncommon Profits
Emergence & Endurance
HIGHLIGHTS
Uncommon Profits in companies = Uncommon Wealth Creation in
stock markets.
Successful Emergence of Value Creators is very rare; a strong
corporate-parent in a non-cyclical business significantly increases
the probability.
Endurance of Value Creators is mainly threatened by disruptive
innovation/competition, major regulatory changes, and
capital misallocation.
State-owned companies have become marginalized in Wealth
Creation with their share collapsing from 51% in 2005 to 9% in 2013.
The worst is over for Indian equities; the risk-reward equation is
favorable for long-term investing.
"Over the long term, it's hard for a stock to earn a much better return than the
business which underlies it earns. If the business earns 6% on capital over 40
years and you hold it for that 40 years, you're not going to make much different
than 6% return - even if you originally buy it at a huge discount. Conversely, if a
business earns 18% on capital over 20 or 30 years, even if you pay an expensive
looking price, you'll end up with one hell of a result."
—
Charlie Munger, Vice-Chairman, Berkshire Hathaway
TOP 10 WEALTH CREATORS (2008-2013)
THE BIGGEST
Rank
1
2
3
4
5
6
7
8
9
10
Wealth
Company
Created
(INR b)
TCS
2,284
ITC
1,635
HDFC Bank
872
Infosys
839
Sun Pharma
592
ONGC
567
HDFC
559
Tata Motors
518
Hindustan Unilever
516
Wipro
469
THE FASTEST
Company
TTK Prestige
Eicher Motors
Page Industries
Wockhardt
Grasim Inds
GRUH Finance
GSK Consumer
Supreme Industries
Lupin
Godrej Consumer
5-Year
Price
CAGR (%)
95
59
51
50
50
47
47
45
45
44
THE MOST CONSISTENT
Appeared
Company
in WC
Study (x)
Asian Paints
10
Kotak Mahindra Bank
10
Sun Pharma
10
Hindustan Zinc
10
ITC
10
Axis Bank
10
HDFC Bank
10
M&M
10
Bosch
10
HDFC
10
2004-13
Price
CAGR (%)
36
36
33
32
27
27
26
25
23
22
Raamdeo Agrawal
(Raamdeo@MotilalOswal.com)
/
Shrinath Mithanthaya
(ShrinathM@MotilalOswal.com)
We thank Mr Dhruv Mehta (Dhruv.Mehta@dhruvmehta.in), Investment Consultant, for his invaluable contribution to this report.