Category Archives: Reliance Industries

Reliance Industries is now poised to embark on one of three distinct patterns:

• Higher
• Flat
• Lower

To move higher,  Reliance would need to do something it has never done before.  It would need to break above a fundamental range in the price that has been well established since 2006.

To trade flat would be the most ideal scenario for current stockholders, provided that it doesn’t decline significantly before flat lining as was the case from 2008-2017.

Finally, there is the prospect of Reliance going lower before establishing a new range or returning to the prior overvalued level. 

If precedence matters, then value investors would take heed of the possibility of falling to the prior lows before getting involved with the stock.  After all, the company has managed to replicated the same run up in price on a relative basis from 2005 to 2008 as it has from 2015 to 2020 (see below).

Notice that in the chart above, Reliance increased 4.62x in the period from 2005-2008.  Additionally, the stock increased 4.57x from 2015 to 2020.

The question becomes, is it possible that the shares can be obtained at substantially lower levels?  Are there alternatives to Reliance that are being overlooked?  We believe the answer is yes.

Regarding the prospects of Reliance going higher than the most recent peak, it is a possible but the valuation and precedent are not in a new investor’s favor. 

Can the stock trade flat? At the moment, the stock is trading flat.  The question becomes how long will it have to trade at such a level before to returns to new highs. After the 2008 peak, the stock did not break out to a new high until 2017 or nearly 9 years later.

Will the stock trade lower? Already down nearly -17% from the peak, some would say this is a long-term value accumulation opportunity.  However, the precedent is for the stock suggests watching closely and waiting. The same investors who bought in the 2005-2015 bull run are the same investors who sold/held during the 2015-2020 bull run.  This means that it is reasonable to expect a similar outcome.

At minimum, Reliance is not undervalued at the current price.