Investing in Industry Leaders – does it work?


I just had a thought how a retail investor who cannot do in depth fundamental analysis on businesses, would have fared if he/she had just invested their money in industry leaders 10 years back and just let if grow till date.

I decided to work on this, but did not want to make much of analysis or data mining – just wanted to keep it simple.

So, I did the following:
– Selected key set of sectors – through there were a lot, I decided to consolidate sub-sectors and chose only a handful of sectors
– Picked up the top company by market cap as of today – a few could be an exception because of difficulty in getting info
– Did not consider any bonus, splits and dividends – and just wanted to make a price to price comparison
– Prices are the BSE closing Prices on these dates

Sector Company Price on 27 Sep 2003 Price on 27 Sep 2013 Absolute Returns %
Auto 2W Hero Moto 283.90 2,048.20 621.45%
Auto Heavy Tata Motors 56.56 339.85 500.87%
Banks Public SBI 409.10 1,641.70 301.30%
Banks Private HDFC Bank 54.35 609.75 1021.90%
Cement ACC 196.55 1,100.65 459.98%
Chemicals Pidilite 14.95 253.35 1594.65%
Engg&CG L&T 52.52 817.45 1456.45%
FMCG ITC 27.31 348.90 1177.55%
Hospitals Apollo 78.58 943.45 1100.62%
Housing HDFC 100.06 782.70 682.23%
Media Zee 57.05 237.90 317.00%
Mining Sesa Goa 4.03 182.90 4438.46%
NBFC Shriram Trpt 15.15 574.10 3689.44%
Oil & Gas Reliance 212.90 840.20 294.65%
Pharma Sun Pharma 23.44 589.75 2416.00%
Power Tata Power 17.45 81.65 367.91%
Software Infosys 568.23 3,006.40 429.08%
Steel Tata Steel 156.64 287.85 83.77%
Telecom Bharti Airtel 37.78 325.10 760.51%

Looks like just by investing in the industry leader – like putting money in an index fund, investors could have created a lot of wealth.

So, in my opinion, this could still be a strategy for retail investors to park their money at this time (as we are not in any bubble scenario) in the industry leaders by market cap and leave it for next 10 years.

Any thoughts?

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