Best stocks to invest in 2020 (IT Innovation, FMEG, AMC)

Articles > Submitted by raja on 4/24/2020 | Views: 927

Based on strict parameters related with financial numbers, management and future potentials, below are some of the best stocks/shares to invest in 2020 in India. In this post, we have covered IT Innovation, FMEG and AMC sectors.

Table of Contents

    In continuation with my previous articles on best companies to invest in FMCG, Retail, Chemical and Pharma sector, I am going to list companies in AMC, IT and FMEG  sectors in this post. Below are my criteria to filter these stocks.

    These filters ensures that company have 

    1. No corporate governance issue
    2. High promoters holding
    3. Preferably foreign promoters holding or high % of FII holding
    4. Nil or very less debt
    5. Dividend paying company
    6. > 20% RoCE, the higher, the better
    7. No pledge of promoters shares
    8. Comparatively Less equity capital
    9. Low equity capital
    10. Consistent EPS growth
    11. Consistent cash flow
    12. Consistent tax payer

    Of course, long runway of growth are also important. However, if a company fits into above parameters, we can assume that promoters are dynamic and visionary enough to take care of remaining things. Below companies fits into my criteria for investment.

    Information Technology Innovation

    When we talk about Information technology, now it's not time to talk about normal IT work but its all about innovation, robotics, automation, internet of things, data analytics, industry 4.0 where these IT companies are decreasing human dependencies, analysing hardwares and forecasting wear and tears, automating many time consuming process, decreasing the maintenance costs, increasing the productivity etc.

    L&T Technology Services Ltd. (LTTS)

    LTTS is a global leader in Engineering and R&D(ER&D) services. It has almost 472 patents for 51 of the global top 100 ER&D spenders. It caters its services into Transporation, Telecommunication, Consumer electronics, Medical services, Plant Engineering, Industrial products, Semiconductors, Media & Entertainment, Oil & Gas sectors and provide Software products, hardwares & platforms. It has almost 90% repeat business that shows the credibility of the company. On top of all these, its a subsidiary of Larsen & Tubro group that is known to almost every Indian.

    Price 1159 Face value 2
    Reputed Management and Adhering to good Corporate governance Yes, no CG issue found High promoter holding
    Foreign promoter?
    74.74%
    No
    P/E 15.44 Dividend yield 1.81%
    Pledged shares No Debt to Equity 0.00
    RoCE 41.42% PEG ratio 0.10
    Cash flow -14cr in 2014 to 737cr in 2019 Equity capital 21 cr.
    EPS growth 0cr in 2013 to 75.36 cr in 2019 Deferring taxes? No

    Sales has grown @15% in last 5 years and stock price @29% in last 1 year. My personal opinion is this is going to be very big company in a decades to come. It is working on all promising areas where future lies on. Automation, robotics, industry 4.0 etc. all these are going to be reality in future and a must for any company to succeed and survice.

    Honeywell Automation India Ltd.

    Honeywell is a leader in providing integrated automation, software solutions, process solution and building solutions. It has products portfolio in environmental and combusion controls, sensing controls, and provides engineering services in the field of automation and control to the global clients.

    Price 27586 Face value 10
    Reputed Management and Adhering to good Corporate governance Yes, no CG issue found High promoter holding
    Foreign promoter?
    75%
    Yes
    P/E 52.50 Dividend yield 0.16%
    Pledged shares No Debt to Equity 0.04
    RoCE 35.44% PEG ratio 1.59
    Cash flow 69cr in 2007 to 309cr in 2019 Equity capital 8.84 cr.
    EPS growth 71.63cr in 2007 to 525.31 cr in 2019 Deferring taxes? No

    It's sale has grown @12% in last 10 years and stock price @26%. It is one and only company of it's kind listed in Indian share market that is leader is its segment, it caters to. It serves to almost all sectors that is going to be in huge demand in near future because of automation, less human dependncies, cost effectiveness etc.

    3M India Ltd.

    3M India caters to both business and consumers segments in health care, safety, graphics, energy, industrial etc. Some of its commonly known brands are Scotch, Scotch Brite, Command etc.

    Price 18779 Face value 10
    Reputed Management and Adhering to good Corporate governance Yes, no CG issue found High promoter holding
    Foreign promoter?
    75%
    Yes
    P/E 52.50 Dividend yield 0%
    Pledged shares No Debt to Equity 0.02
    RoCE 29.16% PEG ratio 1.41
    Cash flow 469cr in 2007 to 267cr in 2019 Equity capital 11.27 cr.
    EPS growth 60.25cr in 2007 to 268.93 cr in 2019 Deferring taxes? No

    It's sale has grown @14% and stock price @23% in last 10 years.

    Fast Moving Electricals Goods (FMEG)

    FMEG products reprsents the basic need of consumer in modern society such as goods or products that are used in bedrooms, kitchens, drawing room etc. like Refrigerators, TV, Washing machine, Iron, Tubes, Fans etc.

    Polycab India Ltd.

    Polycab is one of the largest manufacture of various types of wires and cables and other white good products. It caters to Cables and wires, lighting & luminaires, appliances, switchgear, solar, pumps, uPVC fittings, EPC, Fans, Switches etc.

    Price 763.30 Face value 10
    Reputed Management and Adhering to good Corporate governance Yes, no CG issue found High promoter holding
    Foreign promoter?
    68.60%
    No
    P/E 16.62 Dividend yield 0.94%
    Pledged shares No Debt to Equity 0.04
    RoCE 27.78% PEG ratio 0.40
    Cash flow 310cr in 2014 to 1230cr in 2019 Equity capital 141 cr.
    EPS growth 12.65cr in 2014 to 46.50cr in 2019 Deferring taxes? No

    It is one of the recently listed company and its sales have grown @14% in last 5 years and stock price @16% in last 1 year.

    Havells India Ltd.

    Havells is a FMEG company that owns many prestigious brands like Havells, Lloyd, Crabtree, Standard. It has exclusive Havells Galaxy showrooms as well. It caters to both Industrial and Consumer businesses in cables, motors, heavy duty fans, switchgear, solar, professional lightings, fans, lighting, appliances, switches, water heater, cables, air cooler, pump, personal grooming, water purifier etc.

    Price 53.055 Face value 1
    Reputed Management and Adhering to good Corporate governance Yes, no CG issue found High promoter holding
    Foreign promoter?
    59.52%
    No
    P/E 43.89 Dividend yield 0.85%
    Pledged shares No Debt to Equity 0.00
    RoCE 28.55% PEG ratio 3.70
    Cash flow -24cr in 2008 to 501cr in 2019 Equity capital 63 cr.
    EPS growth 2.74cr in 2008 to 12.10cr in 2019 Deferring taxes? No

    It's sales has grown @7% in last 10 years and stock price @23%. It is one of the most trusted brand among consumer and industrial segments. It is a proven compounder of last decade.

    Assets Management Companies (AMC)

    AMCs are firm that invests pooled funds from clients into different investments like stocks, bonds, real estate, debts etc. to give returns back to the clients.

    HDFC AMC

    HDFC AMC is one of the oldest AMCs and becaue of HDFC brand, it is considered one of the safest company to invest in. It caters into different types of mutual funds like equity, debt, money markets etc.

    As it comes from the HDFC group, so it has very good network of distribution channels through HDFC bank, and HDFC braches. The trustable brand of HDFC also help it get investors easily.

    Price 2591 Face value 5
    Reputed Management and Adhering to good Corporate governance Yes, no CG issue found High promoter holding
    Foreign promoter?
    79.67%
    Yes (26.91)
    P/E 42.79 Dividend yield 0.93%
    Pledged shares No Debt to Equity 0.00
    RoCE 51.64% PEG ratio -
    Cash flow 215cr in 2010 to 894cr in 2019 Equity capital 106.29 cr.
    EPS growth - Deferring taxes? No

    Saleas has grown @11% in last 3 years and stock price @60% in last 1 year.

    NOTE: Though due to the coronavirus outbreak, there will be impact on the AMCs however these impact will be temporary in nature (in my view). For long term, this should be a very good investment.

    Nippon Life India Asset Management Ltd. (Ex Reliance Mutual)

    Erstwhile, Reliance Mutual fund has been acquired by Nippon Life, a Japan based company haveing diverse experience of managing trillions of dollars for last several decadeds. This is going to be very good for both Nippon and its investors. Nippon can use its credibility to bring money to India for investment and can manage them.

    Price 263 Face value 10
    Reputed Management and Adhering to good Corporate governance Yes, no CG issue found High promoter holding
    Foreign promoter?
    75.93%
    Yes 
    P/E 29.56 Dividend yield 2.28%
    Pledged shares No Debt to Equity 0.00
    RoCE 28.19% PEG ratio 3.26
    Cash flow -34cr in 2015 to 293cr in 2019 Equity capital 612 cr.
    EPS growth - Deferring taxes? No

    Saleas has grown @15% in last 5 years and stock price @29% in last 1 year. My view is that this company can become a dark horse of the investment, as it is completely managed by Nippon (Foreign promoters). It's valuation is also cheaper than HDFC AMC, however HDFC AMC has very good distribution channel where Nippon AMC is lacking. Hope the technology will play its role.

    Disclaimer: Numbers are as it is taken from screener.in. One can assume human error while typing. These information has been provided for information only. It should not be treated as recommendations. These companies pass my filter criteria explained above so I like these companies and may invest in future.

    Disclaimer: I am not SEBI registered, this post is for educational purpose.

    Website disclaimer: The views, opinions, investment advices (if any) expressed by author on Sharefunda.com are their own and not that of the website or its management. Users are advised to contact certified financial advisor before making investment decisions.

    Submitted by raja on Friday, April 24, 2020

    Wait for opportunity and grab with all hands like Eagle.

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