High price stocks outperform the Sensex

Retail investors have always shunned away from investing in high price shares. The reason for not preferring to go for high price shares could be because of the capacity of small retail investors to go in only for small size investments.

If the portfolio size is small, maintaining a diversified portfolio with high price shares becomes difficult. Also one of the other reasons for not going ahead with investing in high price shares is that retail investors believe that stock price has already inched up, and there is less probability that the stock prices may move further northwards.

This part of the myth stands vindicated by the performance of high price stocks, if we consider the past one year's performance. Several of the quality high price stocks have outperformed the benchmark index in the past one year.

The Sensex gained nearly 20 per cent in one year; whereas, the average return for six stocks trading above Rs 10,000 each one year-ago, stands nearly at 30 per cent.

MRF was the best performer in the lot as the stock rallied 68 per cent. MRF gained from Rs 35,000 per share to Rs 59,000 per share in one year. Other major gainers in the category were Eicher Motors, Shree Cement and Page Industries, gaining nearly 30 per cent each.

Two stocks with prices higher than Rs 10,000, that could not beat the benchmark index are Bosch and 3M India.

The list of stocks that enter the club of stocks priced higher than Rs 5000 per share, stands impressive with names such as Borosil Glass, Maruti Suzuki, ISGEC Heavy Engineering, TTK prestige and Disa India. These stocks have given returns anywhere between 29 per cent and 122 per cent in past one year.

The key lesson for any individual investor here, is to identify and analyse the stock on its merit rather than simply focusing on the stock price alone.

The growth potential underlying the stocks and the price at which the growth is available are the key to sound investments.