Time To Switch To Laggards In 2020

The year 2019, has been about chasing quality. A handful of stocks has taken the Sensex to near 42,000 points. The largest contributors have been bluechip heavyweights including Reliance Industries, HDFC, HDFC Bank and ICICI Bank.

These stocks price to earnings multiples have expanded significantly and investors have to start realizing that there is now a heavy price to pay for these companies. At some stage, the above mentioned stocks would have to take a breather.

Look for the laggards

The stocks that have underperformed the markets in 2019, could be real winners should the benchmark indices not even rally from here. A few of the stocks that have underperformed including good quality monopoly businesses like ONGC and GAIL. These stocks are also attractive for their dividend yield, which could be anywhere between 5 to 6 per cent.

GAIL in the last few days has already started showing some movement. Others set of stocks from the small cap space could be the media stocks. There is still tremendous value in stocks like TV Today Network and Jagran Prakashan, which are both leaders in their spaces.

Again, dividend yields could really be attractive here. It is also likely that small and midcap stocks could outperform, given the way select largecaps like Reliance, HDFC Bank, HDFC and ICICI Bank have gained.

At the moment there is no point in endlessly buying into stocks that have already gained. The mantra to make money is to buy low and sell high. At the moment the laggards, which are leaders in their space are still quoting at attractive valuations. Here could lie the real value. Investors with a long-term perspective in mind are sure to benefit from some of these stocks. The economy at the moment is not in good shape and it make take another few quarters to recover. Until then, you could buy and hold some of the underperforming stocks, which could perform.