India Equity Strategy - Holdcos For Portfolio Diversification: HDFC Securities
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HDFC Securities Research Report
Investing in the stocks of holding companies can be a very efficient and inexpensive way of gaining exposure to the stocks of India’s reputable growing business houses.
It can generate consistent returns with a margin of safety over a long period of time, as well as portfolio diversity. To make it even more lucrative, market cycle or business group-specific corporate events can trigger scenarios with disproportionately greater returns.
According to evidence from the western world, in evolved markets with diverse shareholdings, like the U.S. and UK, holdco discounts are extremely low (in certain cases holdcos even trade at a premium to underlying asset values).
While Indian holdco stocks are majorly owned by promoters and typically trade at a discount of 30-90%, their global counterparts trade at a lower discount level of 10-25%.
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