Key Excerpts
"Are there no PSU companies that are competitive and efficiently run? And is it right to paint the entire
sector with the same brush when a few of them are run inefficiently?"
"let us look at the performance of PSU shares in the stock market. For the purpose of study and comparison, we have chosen the universe of the S&P BSE PSU Index, and the S&P BSE 200
Index. The former consists of only PSU shares, while the latter is a standard benchmark large and mid-cap index. In our opinion, the comparison is valid because the PSU index is also a large-and mid cap index."
"4 time periods:
(a) 1999-2021 (Long term performance): PSU Index: 10.42% CAGR Vs S&P BSE 200 Index: 14.43%
(b) 1999-2011 (Period when PSU shares did well): PSU Index: 22.01% CAGR Vs S&P BSE 200 Index: 17.85%
(c) 2011-2020 (Period when PSU shares did terribly): PSU Index: -7.58% CAGR Vs S&P BSE 200 Index: 4.82%. Specifically periods of April 2014 to May 2021 were very bad for PSUs.
(d) 2020-2021 (Last year, when PSU shares are slowly regaining their acceptance levels): However, the market is nothing if not a living proof of the principle of reversal to the mean. PSU Index: 54.95% CAGR Vs S&P BSE 200 Index: 58.68%"
"While there is no dispute that the financial performance of the BSE PSU Index components has lagged behind those of the BSE 200 Index in the last few years, it is nowhere as bad as is suggested by the stock market’s reaction to it."
"Also, public sector banks account for about 28% of the weight PSU banks have had a rough time during this period."
"We firmly believe that the best time (by extension, the best price) to buy any share is when the company behind it has been forgotten, or is neglected by the general investment community, provided of course that the company continues to be competitive and does well financially"
"Individual companies, irrespective of their ownership, public sector or otherwise, can be either highly competitive, or inefficiently run. Just as we cannot conclude that all private sector companies are epitomes of efficiency, we similarly cannot conclude that all public sector companies are laden with nothing but inefficiencies and corruption."
Few Example to explain above points
Read More: https://www.o3.am/o3%20PMS%20Newsletters/2021/o3%20PMS%20Newsletter%20-%20June%202021.pdf