Nifty Auto and Nifty Media were among the worst performing sectors in 2019. The price destruction in these stocks has been so severe, investors could take a risk for a sharp rebound in some of the stocks from the sector.
Returns from media and auto stocks
|1-year returns||2-year returns||3-year returns|
The 2-year returns for both media and auto stocks have been terrible. However, as economic recovery gathers momentum, some of these stocks could well make a comeback.
Media stocks: Low on valuations
Take the case of media stocks. Companies that are in the newspaper and radio business have seen their shares fall heavily. Jagran Prakashan and DB Corp are some examples. However, we have seen newsprint prices fall, which should benefit a company like Jagran and DB Corp. As and when economic recovery takes place and advertisement spends improve, we would once again see a dramatic recovery in these stocks. DB Corp and Jagran are also available at good dividend yields and have proven to be investor friendly companies. Jagran right now is engaged in a buyback of shares and the dividend yield is near 6 per cent.
Both Jagran Prakashan and DB Corp are trading at very attractive price to earning ratios and price to book.
Auto stocks could be good long-term bets
If you are a long term investor, beaten down auto stocks could also be a good bet. Stick to quality names like HeroMoto Corp and Mahindra and Mahindra. One is the largest two wheeler manufacturer in the world, while the other is the largest tractor manufacturer in the world. In fact, HeroMoto Corp offers a dividend yield of nearly 3.56 per cent. One would need to continue buying into good quality names, so as to ensure good dividend yields.
Time to start chasing laggards
It maybe a good time to start chasing the laggards, even as the markets hit a new historic peak. Investors have constantly been chasing the bluechip companies like HDFC, HDFC Bank, Reliance Industries and ICICI Bank. These stocks have hit 52-week highs and have also pushed the indices also to record highs However, there could be a limit to how far the rally in these stocks could go. It would therefore be more prudent to look at stocks that have been beaten down, and also offer good dividend yield. One sector, which offers good dividend yield would be the oil and gas space and the mining space. GAIL, ONGC and Hindustan Zinc are the few names that could be bought into for their dividend yields.