Nifty Fifty

In the United States, the term Nifty Fifty was an informal designation for fifty popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks, or "Blue-chip" stocks. These fifty stocks are credited by historians with propelling the bull market of the early 1970s, while their subsequent crash and underperformance through the early 1980s are an example of what may occur following a period during which many investors, influenced by a positive market sentiment, ignore fundamental stock valuation metrics.[1] Most have since recovered and are solid performers, although a few are now defunct or otherwise worthless. Howard Marks (investor) reports that about half of the Nifty Fifty "compiled respectable returns for 25 years, even when measured from their pre-crash highs, suggesting that very high valuations can be fundamentally justified."[1]

For other uses, see Nifty Fifty (disambiguation).

Characteristics

The stocks were often described as "one-decision", as they were viewed as extremely stable, even over long periods of time.

The most common characteristic by the constituents were solid earnings growth for which these stocks were assigned extraordinary high price–earnings ratios. Fifty times earnings, far above the long-term market average, was common.

NYSE Nifty Fifty constituents
Note: There is no official version of companies composing the list.[1]

U.S. bear market of the 1970s

The long bear market of the 1970s which began with the 1973–74 stock market crash and lasted until 1982 caused valuations of the nifty fifty to fall to low levels along with the rest of the market, with most of these stocks under-performing the broader market averages. A notable exception was Wal-Mart, the best performing stock on the list, with a 29.65% compounded annualized return over a 29-year period.[1]

Because of the under-performance of most of the nifty fifty list, it is often cited as an example of unrealistic investor expectations for growth stocks.

References
  1. Fesenmaier, Jeff; Smith, Gary. "The Nifty-Fifty Re-Revisited". Retrieved 2012-02-05.
This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.