The single greatest edge an investor can have is a long-term orientation – Seth Klarman
Investors often want to invest in the long term so that their money grows with time. But identifying which stock will deliver good results, which underlying company will have a sustainable business model has always been an issue.
Another question that may arise in your mind is how long exactly is long term?
It can be subjective. As an investor, you should look at the fundamentals of the company and think which stock will give you good returns in a substantial amount of time.
In this article, we will look at some of the stocks that can be considered for long-term investment.
[stocks-data title= “Stocks Data Comparison” stockcodes=”Kotak-Mahindra-bank-ltd:Asian-paints-ltd:Bajaj-finserv-ltd:pidilite-industries-ltd:tata-consultancy-services-ltd:infosys-ltd:sun-pharmaceutical-industries-ltd:maruti-suzuki-india-ltd:titan-company-ltd”]
In this article
- 9 Best Stocks to Consider Investing for Long Term
- 1. Kotak Mahindra Bank
- 2. Asian Paint
- 3. Bajaj Finserv
- 4. Pidilite Industries
- 5. Tata Consultancy Services
- 6. Infosys
- 7.Sun Pharmaceutical Industries Ltd
- 8.Maruti Suzuki India Ltd.
- 9. Titan Company Limited
- What Factors Should You Look At?
9 Best Stocks to Consider Investing for Long Term
Kotak Mahindra bank has earned its position in the top banks in India, though being much younger than many other banks. Kotak Mahindra has delivered phenomenal growth, starting from its inception in 2003.
This bank is the third largest bank in terms of market capitalization after HDFC and ICICI.
If we consider bank performance parameters such as capital adequacy ratio, non-performing asset, etc. Kotak Mahindra Bank is way ahead of the minimum benchmark required.
The bank has also ventured into the digital space by launching its digital wing called ‘Kotak 811’, which has been a huge success. Kotak had merged with ING Vyasaya Bank to realize synergies of operation. Also, this has enabled to enrich a bouquet of financial products offering and lower cost of operation.
The bank has experienced growth from all the business fronts, which seem sustainable. It has increased its market penetration multifold and is poised to make double-digit growth.
|Current Market Price||1386||Market CAP (Rs. Crores)||264555|
|P/E||38.03||EPS (Trailing 12 Months)||36.44|
|Industry P/E||37.96||10-year CAGR of PAT||28%|
2. Asian Paint
Asian Paints Limited is India’s largest and Asia’s fourth-largest paint manufacturing, along with selling and distribution. The company has also ventured into the home décor segment with its new product portfolio in bathroom fittings.
The company has its business spreading across the globe, now it operates in more than 65 countries. It has 26 manufacturing units around the world. What makes this company attractive is the brand value and brand equity it carries.
Asian paint had been debt free and its entire operation has been funded by equity.
The return on equity parameter has been fabulous at 27.5%. The company also pays a healthy dividend to its shareholder. Asian paints has diversified its paint division vastly.
These offerings have let Asian paints to capture a huge market share, the second in the competitor list has half the market share than Asian paints.
|Current Market Price||1456||Market CAP (Rs. Crores)||139735|
|P/E||64.46||EPS (Trailing 12 Months)||22.60|
|Industry P/E||62.86||10-year CAGR of PAT||21.92%|
Bajaj Finserv Ltd has provided brilliant returns in recent years.
ln 2010 the stock was traded at Rs. 350. Today, the value of the stock is Rs. 7500. Just imagine the returns a stock investor in 2010 would have fetched by now.
Phenomenal, isn’t it?
Bajaj finserv is in the business of providing credit or loan for appliances, automobiles, etc. The company has been successful because of the innovative credit or loan product it offers to the customer, making the shopping experience hassle-free.
Also, read: Personal Loans in India 2019: Benefits, Process, Features and More
Bajaj Finserv has recently been an integral part of almost all brick and mortar shops, e-commerce, etc. The sole power it derives its business is through its reach to the customer.
The business model seems sustainable and is poised to make larger business given India’s growing economy and disposable income.
The capital adequacy ratio and other parameters linked to NBFC (Non-Banking Financial Companies) are above the benchmark.
|Current Market Price||7620||Market CAP (Rs. Crores)||121261|
|P/E||39.55||EPS (Trailing 12 Months)||192.65|
|Industry P/E||39.64||5-year CAGR of PAT||11.72%|
Pidilite Industries Limited is the manufacturer of the famous product ‘Fevicol’. They are the market leaders in the adhesive segment.
The brand value and brand equity associated with Fevicol is very high and hence, there are only a few substitutes in the market.
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Pidilte also produces products like sealants, waterproofing solutions, industrial resin, construction chemicals, etc. The company continuously innovates its product offering, which makes its business model sustainable.
One of the major strength of Pidilite Industries is its distribution channel. Its distribution in the rural market is amongst the best in the country.
Return on equity for Pidilite has been healthy and it hovers around 27.2%. The stock has moved from Rs. 50 in 2009 to Rs. 1,296 in 2019. The company has no debt.
|Current Market Price||1296||Market CAP (Rs. Crores)||65630|
|P/E||70.29||EPS (Trailing 12 Months)||18.38|
|Industry P/E||46.26||10-year CAGR of PAT||24.10%|
Tata Consultancy Services Limited is the largest IT sector company in India. It had recently crossed $ 100 bn market value. Also, in recent years it has consistently delivered double-digit growth. It is the largest contributor to the Tata Son Group of business.
A long term investor might question investing in the TCS stock, as some may say that the company has reached its saturation stage.
But the company has delivered double-digit growth since 2014 and continues to have strong fundamentals.
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The world is moving towards digitalization, advanced computing, technology-oriented strategies, etc. This has fueled the demand for information technology services.
Also, this demand is in recursive nature, hence it is bound to re-occur with the more sophisticated requirement.
|Current Market Price||2131||Market CAP (Rs. Crores)||800177|
|P/E||25.43||EPS (Trailing 12 Months)||83.87|
|Industry P/E||23.68||10-year CAGR of PAT||22.27%|
Infosys Limited is the second largest Information Technology firm.
Infosys derives 60% of its revenue from the US, another 37% from rest of the world and just 3% from India. In the Indian context, with a push to digitalization, many small IT firms have erupted to eat up market share.
These sectors might generate great returns for investors in the coming years
With recent past incidents of management issues, this company is strongly thriving back to gain more market share.
We all know that demand for technology-oriented services is increasing and this IT firm stands a pretty good chance of grabbing opportunities and increasing its bottom line.
|Current Market Price||723||Market CAP (Rs. Crores)||315724|
|P/E||20.49||EPS (Trailing 12 Months)||35.32|
|Industry P/E||23.68||10-year CAGR of PAT||15.32%|
Sun Pharmaceutical Industries Limited is a pharmaceutical company which also derives the majority of its revenue from the US.
With the recent incident of a halt in manufacturing of drugs due to non-compliance of USFDA norms, this stock has seen a lot of volatility this year.
Sun Pharma has recently shifted from generic pharmaceutical to the specialty segment.
These products were delayed due to compliance standards by the USA. Now, most of its drugs have cleared the compliance norms and are all set to be launched in the market.
Also, read: Sun Pharma share: the sector leading bluechip company
Sun Pharma is also aiming to grow its domestic business by aiming specialty drugs in cardiology, CNS and gastroenterology.
Its generic drug portfolio for the domestic market has 18% market share, which this company plans to leverage and increase by introducing more technical complexity.
|Current Market Price||462||Market CAP (Rs. Crores)||110921|
|P/E||33.48||EPS (Trailing 12 Months)||13.81|
|Industry P/E||29.79||10-year CAGR of PAT||10%|
This company has given good results over the years with a healthy profit margin. The introduction of NEXA, a segment for the premium car was well accepted by the market.
Though last year had not been very good for Maruti, due to revenue not meeting the target sales figure, the company is now striving to sell more by delivering innovation both in terms of passenger comfort and technology.
Maruti has signaled the launch of new versions of cars as well as new models complying to regulatory and safety norms.
|Current Market Price||7459||Market CAP (Rs. Crores)||225308|
|P/E||29.70||EPS (Trailing 12 Months)||255.69|
|Industry P/E||25.64||10-year CAGR of PAT||17.31%|
Titan Company Limited is a subsidiary of the Tata group. Titan is the fifth largest integrated watch manufacturer in the world.
We are all well aware of its product ‘Sonata’, which is one of the most reputed watch brands.
This brand also came up with FastTrack, one of the most popular and trending watch brand. Titan also launched ‘Tanishq’, India’s most trusted and leading jewelry brand.
This company has no debt recorded in its book. Also, the return on equity has been on the higher side of the company.
|Current Market Price||1122||Market CAP (Rs. Crores)||99627|
|P/E||57.28||EPS (Trailing 12 Months)||15.38|
|Industry P/E||84.81||10-year CAGR of PAT||27%|
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What Factors Should You Look At?
Investors should make quantitative as well as qualitative study for the underlying company of the stock. Below are some of the most critical factors for selecting stocks for long term investments.
You will have to check the company’s financial statement, find out whether there are issues or not. Also, operating income, profitability, leverage and liquidity ratios must be judged.
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2. Business Model
You need to see whether the business model of the company is sustainable to future events and disturbances (if it occurs).
3. Management of the Company and Competitive Advantage
You need to study the factors that are responsible for providing a competitive edge to the company in present and whether these factors will help in the future.
Let’s look at the top 10 stocks that are well suited for long term investment.
Disclaimer: The views expressed in this post are that of the author and not those of Groww