High-fly­ing High-Fly­ing PE-Rich Stocks May Not be Worth Your Time

The Economic Times - - Companies: Pursuit Of Profit -

It is tempt­ing to buy high-fly­ing multi­na­tional or do­mes­tic stocks at sky-high val­u­a­tions. They have good fi­nan­cial and div­i­dend track record and the strong global link­ages guar­an­tee good ex­port vol­umes in­su­lat­ing them from do­mes­tic slow­down fears. But the fact that they have been ris­ing con­tin­u­ously de­spite su­per-rich val­u­a­tions could also mean some­thing else. Des­per­ate fund man­agers try­ing out NAV man­age­ment and in­vestors pil­ing into just any story about growth with lit­tle re­gard for sober investing. Shares of Ju­bi­lant FoodWorks, Bosch, Honey­well Au­to­ma­tion, GSK Pharma and oth­ers have risen up to 26% in past two months. These stocks al­ready com­mand a price-to-earn­ings mul­ti­ple of 40-50 times. What’s more, the rise has been ac­com­pa­nied by ex­tremely av­er­age trad­ing vol­umes (see table). One rea­son for the surge could be an at­tempt to play the delist­ing theme though no an­nounce­ments have been made as yet. In­vestors hold­ing these shares or want­ing to buy may need to be a bit care­ful.

—Biswa­jit Baruah Ju­bi­lant FoodWorks Bosch GSK Phar­ma­ceu­ti­cals Honey­well Au­to­ma­tion P&G Hy­giene & Health Sym­phony WABCO In­dia Fag Bear­ings In­dia P/E 12 Mth Fwd (` Crore) % Chg Since 1 Mar ’16 12 Mth Avg Del % Vol 12 Mth Avg Vol 12M Del

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