NOTCH UP THE HEAT OF YOUR PORTFOLIO!

By Ruma Dubey

The oppressive summer heat is here and we have not even entered the most intense period of heat – May. The feeling of being smothered, the incessant trickle of sweat and the constant need to have water drives one insane. Silk clothes are tucked well into the depth of the cupboards while white and pastel colour cottons are in. Deep fried food is out and lighter meals with more salads and fruits are in. Sunscreen is swathed liberally, sunglasses are perched on the nose like filmstars and umbrellas are out for protection from the blistering afternoon heat.

Just as we change our clothes, food and general lifestyle to suit the needs of summer, it is a good idea to even relook at some of the stocks. Like summer clothes, there are surely summer stocks or should we say, ‘hot stocks’ to beat this heat? If monsoon is the season to buy pesticide and agriculture stocks, and winter is the season to buy almost everything, given the festive season, what stock does one buy in summer?

This buying is on pure logical sense. These are no ‘tips’. Look around and feel the heat. Apply the mind as to what would you reach out for when mercury rises and all answers will be at hand. Those which you buy and consume for summer are the stocks to buy for summer. The demand for ‘summer’ goods takes off now in summer but we see a reflection of these sales by end of second quarter in the books of the companies.

Naturally, the biggest winner in summer – air-conditioner companies like Voltas, Blue Star, Fedders Lloyd, Videocon, Whirlpool, Godrej, Symphony etc. And also fan companies like Bajaj Electricals, which is the market leader, despite rising competition from cheaper China products. North India consumes 50% of the air coolers in India and Symphony is the market leader in this segment. 

 In India, we all are familiar with the sporadic power situation. We in Mumbai might be amongst the very fortunate few to not experience power cuts on a daily basis, but rest of India is not so pampered. And in this heat, what is the use of an AC or a fan or a fridge or air cooler without power? Therein comes the need for keeping gensets and invertors.  The power backup market in India is growing at an annual rate of 15-20%, varying within the three different segments – generators, UPS and inverters. Major players like Kirloskar Oil Engines, Mahindra-Powerol, Cummins India, Greaves Cotton, Ashok Leyland, Eicher will rake in the moolah in this heat. But this sector faces stiff competition from low-quality but cheaper Chinese products.

The sweltering heat raises the need to constantly reach out for something cold, something to quench your thirst. Naturally, this is the peak season for ice cream maker Vadilal Industries, Kwality and for water companies like Nestle, UB and Tata Global which sells water under the Himalaya brand. None of the aerated water companies like Coca Cola or Pepsi or Parle are listed. So next best choice are the fruit juice companies like Dabur which owns the ‘Real’ brand.

Refrigerators will also see an uptake heralding good times for most of the listed white good companies. The summer will also see an offtake in sales of soaps, deodorants, skin care products, shampoos, talcum powders. This means good business for FMCG companies. The FMCG stocks as such have been rallying as they have hiked prices due to the rise in price of vegetable and edible. Thus higher sales volume and higher prices could drive the numbers. Big Bazaar is also expected to do brisk business as people tend to hang out in malls to beat the heat. And the only place to see brisk business will be Big Bazaar.

Many will also go out on holidays, so travel companies like Cox & Kings, Thomas Cook, International Travel House, Mahindra Holiday, will do good business. Airline companies and mid range hotels are also likely to do some brisk business. For travel companies, these summer months are the peak holiday season, beginning in April and stretching to July in some markets in North India. These months account for nearly 65% of the holiday bookings of the entire financial year. Jubilant Foods or Dominos does well all year round but in summer, with schools and colleges closed, sales are expected to pick up.

The heat is on and this is the best season for most of these companies. So will you beat the heat with just an aircon or by also buying into these ‘summer’ stocks?