Unique Stocks For Unique Returns

Do unique stocks that are the only ones listed from the industry deliver exceptional returns over the long term? Yogesh Supekar and Karan Bhojwani find that there is something unique about the returns given by such unique stocks. Read on...

- Yogesh Supekar And Karan Bhojwani

When it comes to equity markets, portfolio management and wealth creation go hand-in-hand. Sound portfolio management is the real mantra for creating wealth in equity market consistently. While portfolio management is a sophisticated process, it can be simplified into two core concepts; first, how are assets allocated among different asset classes, and second, how individual securities are selected. In this cover story, we will touch upon the second part of portfolio management, i.e., how one can generate market beating returns by adopting a unique way of selecting stocks .

Indeed, how individual securities are selected matters ultimately to the overall portfolio performance. Security selection dictates how individual portfolio returns match to what the market offers. HNI investors and asset manager deploy various techniques to exploit inefficiencies in the markets in order to maximise the returns. At any given point of time, millions of investors are attempting to beat markets and adopt myriad techniques to do so.

We thought it will be interesting to test if an investor who adopts a unique portfolio strategy of concentration that involves including only those stocks in portfolio that do not have any listed peers would beat the markets.

Superficially, the idea of investing in those stocks that are the only listed entities sounds interesting, but does it really deliver superior returns? We think so.

The market beating returns of the unique portfolio is seen if one holds on to the bunch of stocks for the long term. The short-term performance is not disappointing either.