“Be fearful when others are greedy and greedy when others are fearful.” - Warren Buffet
Due to the current pandemic and uncertainty surrounding the future of the global economy, markets have crashed. The BSE Sensex has already seen a 30% drop YTD, with many companies shedding out more than 50% of their value in the period.
If you think that you have enough liquidity during this situation and have some cash to spare, it may be a golden opportunity to enter the market as a long-term investor. Today I am going to be providing the top 5 stocks to invest in right now, with a mix of dividend, growth and safety over the long-term horizon. Primarily, I believe that the market will continue to slip, as conditions in the US get worse. However, you can start buying at every dip in the market. This will allow you to accumulate a reasonable amount of shares while also maintaining your average investment price.
1. Tata Consultancy Services (TCS) - Current Market Price(CMP) Rs.1659
TCS is currently trading at Rs 1714, down almost 21% from the start of the year. The company currently has a market capitalization of 6 lakh crore, which makes it India's second largest firm by market cap. Additionally, the company has a healthy balance sheet with a cash reserve of Rs 12,000 crore. This ensures that TCS will not be heavily affected due to the current economic slowdown. Furthermore, TCS has been showing a promising growth rate with revenue growing 1.5x in the last 5 years. This is great news for an investor because it shows that the company is still improving on its economies of scale and will continue to see productivity growth.
Finally, the shareholding pattern of TCS is truly phenomenal. Out of the 28% of shares available to the public, around 24% is owned by mutual funds, FIIs and other financial institutions. This strong shareholding pattern is another good sign in terms of the strength of this company. In my opinion, this company is worth more than 6 lakh crore and will continue to provide slow and steady returns over the long run.
2. HDFC Life Insurance Company- Current Market Price(CMP) Rs.422
HDFC Life has been a fantastic stock ever since its IPO in late 2017. Year to Date the stock has fallen sharply from Rs 620 to Rs 425 a 30% drop in the share price. The market has been bullish in the consumer insurance sector ever since it emerged. As the Indian population becomes more urbanized, the culture of vehicle, life and medical insurance is bound to grow. Due to this, even after such steep falls in prices the HDFC Standard life stock still trades at P/E ratio of 64.
Looking at the company's balance sheet it non-current investments have grown exponentially, which in an insurance firm shows how the company is managing to expand on its services and sell more of its products every year. This growth story is also reflected through the firm's profit loss account, which shows a steady and sustainable growth in both revenue and net-profit. The company's net profit has increased 1.5x over the last 5 years.
Finally off the 34% of shares available to the public, around 25% are under the control of mutual fund, FIIs and other insurance companies. Coming from the HDFC group of companies, the efficiency and growth prospects for this company are very attractive, and hence for the long term, it is a good buy.
3.Larsen and Toubro - Current Market Price(CMP) Rs.783
Larsen and Toubro (L&T) is the largest infrastructure company in India with business interests in heavy engineering, specialized government projects (e.g rockets and military equipment) and construction. This 82 year old conglomerate has become one of the most well-known and trusted brands in India with subsidiaries in finance, software and mutual-funds. As India continues to develop in terms of business, justice, education and healthcare, infrastructure will be a key requirement for each of these segments and I predict that L&T will be at the forefront of this growth.
Coming to the numbers, L&T is currently trading at a book value of Rs 491, with a strong portfolio of current assets(cash,inventory,investments etc. ) of Rs 166,000 crore. This shows that the company would be more likely to survive through situations like these, where liquidity is low. Looking at the firm's profit and loss statement, it is comforting to see a steady rate of growth of the company's earning per share (EPS) currently at Rs 64.
Apart from the numbers, L&T is a 100% professionally run company, meaning that this company has no promoter and all of its shares are available to the public. Out of the public ownership, around 54% of the company is owned by institutions such as mutual funds (19%), Foreign Portfolios(18%) and insurance companies (18%).
Looking at the growth in its sector over the next 10 years, I believe that L&T will provide strong returns through dividends, bonuses and all in all organic growth.
4. Central Depository Services Limited (CDSL) - Current Market Price(CMP) Rs.209
CDSL is an Indian securities deposit, whose main function is to electronically store financial certificates, proof of holdings and securities in order to verify and conduct transactions. CDSL stores information from multiple securities, such as mutual funds, debentures, equities, Government securities and treasury bills. Additionally, last year the Ministry of Human Resource Development (MHRD) has urged educational institutions to increase the availability of online certificates, diplomas and mark-sheets, through CDSL. As we know, India's financial, education and justice system is still heavily reliant on physical documentation; however, this concept is bound to change with the integration of technology in some public and private sectors of the economy. CDSL, in a duopoly with NSDL is bound to grow as digitization will increase the volume of data and services offered by the firm.
Coming to the fundamental side of this company, CDSL is essentially debt-free and with strong promoters like BSE Ltd, the chances of this stock falling to 0 are quite low. Furthermore, CDSL's net profit has been showing consistent growth with profit more than doubling in the last 5 years. In terms of the shareholding of this company, it is primarily run by BSE Ltd, however the firm only has a 20% holding in CDSL. Among the 80% public shareholding approximately 43.5% is owned by financial institutions, with HDFC Bank (7%), Canara Bank (5.7%) and LIC (4%) having significant holdings.
I believe that this company is a safe bet for the long-term with a constant horizon for growth and it may even provide strong dividend returns like its parent company if it remains profit-making.
5. Ambuja Cements - Current Market Price(CMP) Rs.152
Ambuja Cements is one of the leading cement companies in India through profit and market capitalisation. It is owned by LafargeHolcim a Swiss multinational manufacturer of building materials and is the largest producer of cement, globally. India has now become the second largest producer of cement, making the industry not only large domestically, but also internationally recognized. Ambuja Cements is also one of the leading sustainability and CSR drivers in India, trying to reduce their carbon footprint and give back to the community. This shows the investor that the company is intending to work with integrity and not cheat its shareholders or clients.
Coming to the numbers, even during bleak cement demand due to a poor 2019 for infrastructure, the company had a mild change in total cement sales (0.9%) and in-fact still gave a consistent growth in EBIT of 32%. Additionally, in comparison to its peers like Ultratech Cements, Ambuja Cements is in very little debt, and is trading at a book value of Rs. 150 already. In terms of the public shareholding, off the 36% available, approximately 29% is held by mutual funds, foreign portfolio investors and insurance companies. Credible shareholders include LIC of India, the Government of Singapore and the HDFC trustee company.
By the end of 2020, the company is planning to start production in its Marwar-Mundwa plant which will increase Ambuja's cement porduction capacity from 27 million tonnes to 32 million tonnes. Additionally looking at India's path of becoming a global producer and consumer of cement, and with Ambuja Cement's backing and integrity driven business, I believe this company will continue to grow over the long-run.