Top 5 Stocks for Long Term Investment (May 2018)
- May 25, 2018
- 3 min read
I have taken the time and put in the effort to calculate the fundamental value of the top 50 stock of the Indian stock market. I chose the large cap stocks because more than 65% of the market capital is employed in these stocks. So these are some the most robust stocks that can keep your investment safe through all weathers of the economic cycle.
Let’s begin!
At number 5, my recommendation is Bajaj Auto Ltd.
This stock is trading at around Rs. 2760, as on today. The fundamental value of this stock is around Rs. 4200. That calls for a growth space of nearly 50%. The PE and PB of the stock is 19.03 and 3.93 respectively, while that of the sector is 30 and 4.17. All of these in unison indicate an under-priced Bajaj Auto stock. The fundamentals of the stock are strong as the margins are stable and the CFROI is a staggering 19.76% over a discount rate of 2.73%. The stock will experience and steady appreciation, and move in tandem with the market.
At number 4, I suggest you to consider Infosys.
Now, we all India is an IT giant, and one of the bigger spokes in the wheel is Infosys. The stock is trading at Rs.1230, while its fundamental value is at Rs.1900. That gives you a space of over 40% for price appreciation. The stock has a PE and a PB of 16.69 and 3.97, while that of the sector is 20.92 and 4.89, both suggesting under-valuation. The asset turn is stable and the margins are consistently rising. The CFROI is at 8.55% over a discount of 3.27%, suggesting a good steady growth.
At number 3, you should definitely look at Lupin Ltd.
Lupin is trading for around Rs. 745, while its fundamental valuation is around Rs. 1350. There is over an 80% growth space available for this stock to appreciate in the long term. But the relative valuation shows Lupin to be an over-valued stock. The PE of the stock is at 132.3 while that of the sector is 26. I personally fell that this shows the amount of confidence people have on the earning potential of Lupin. The PB ratio of the stock is at 2.44 while that of the sector is at 3.59. The reason I find it to be a very attractive long term investment option is because of it return on the cash flow. It has a staggering 17% cash flow return on investment, while only being discounted at 4%. In addition to this the management is very good as the asset turns is stable and the margins are rising. The stock is inbound for some heavy growth over the years.
At number 2, we have Indiabulls Housing Finance.
With Rs. 470 billion in capitalization, this stock is a racing bullet for long term yields. The stock is trading at Rs. 1172, while its fundamental valuation is Rs.2200. This stock is bound to grow by nearly 96%. The PE ration of the stock is 12.54 while the sector PE is at 56.24, suggesting a thorough undervaluation. The leverage and return on asset are both stable. The CFROI is at 19.91% over a discount of 5.21%. This stock is a definite value investment.
And the number 1 company, according to my analysis is HCL Technologies.
This industry and the company is synonymous with Indian success. And the stock is definitely living up to its investor expectations. In my opinion, this is the most well managed company in the Nifty50. The stock is trading for Rs.916, while the fundamental valuation is at Rs.1700, giving a growth space of nearly 90%. The PE and PB ratios of the stock is 13.44 and 3.24, respectively, making it clear that the stock is under-valued as of now. With vacillating sales growth, stable asset turns and a stable margin, this stock has an enviable fundamental value. Add to this a CFROI of 24.67% over a discount of 3%, this stock is a must for all investors looking to reap money in the long term.
And with that I rest my case for the top 5 large cap stock pick for the long term.
I hope my analysis helps you find value in your investments.
Do feel free to reach out if you have any query.
I also publish weekly videos on investment management on my YouTube Channel - Insignia Investments.
Happy Investing!
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