Don’t look at timing the market: experts name 10 fundamental stocks for 1-year horizon

Benchmark indices have fallen more than 20 percent from their respective record highs registered in January effectively placing the Indian market in a bear phase.

So is the time right for value buying or is the market expected to fall more?

The first thing which one should understand is not to be under an illusion that they can time the market. Yes, the way this can be done is to deploy cash in markets in a staggered way.

“In this sharp decline, we are suggesting our clients begin their investments in quality stocks with 20-25 percent of their investment corpus designated for the equity asset class and infuse their capital slowly in the next 2-3 installments whereas traders should still remain cautious as market volatility will remain an intact cause of coronavirus crisis,” Amit Gupta, Co-Founder, and CEO, TradingBells told Moneycontrol.

“Traders should adopt “Hit and Run guerrilla Trades” which means they should not take overnight positions, should respect the intraday trend and square up their positions in a day itself,” he said.

The next question is how can one look at picking stocks? There will be a lot of beaten-down stocks that might be looking attractive from a price perspective, but are all of them a good buy? History, suggest otherwise.

The idea is to invest in stocks that have strong fundamentals because most of the decline is largely due to external factors. To start with, investors should analyze the core business of the company, balance sheet, profit, and loss statement, and valuations such as EPS, PE, ROCE as all these factors indicate the health of the company.

“Though there are many strategies to invest or select stocks, one should have a mix of value and growth stocks while constructing a portfolio,” Arun Kumar, Market Strategist at Reliance Securities told Moneycontrol.

“One can select stocks where the fundamental growth is consistent and the long-term business prospects are fairly decent. Also, many high dividend-yielding stocks are available at relatively cheap valuations which can also add value in the long run,” he said.

We spoke to various experts on fundamentally strong stocks which investors can look at for the next 1-year:
Expert: Amit Gupta, Co-Founder, and CEO, TradingBells

Kotak Mahindra Bank:

Kotak Mahindra Bank has good profit growth of 20.63 percent over the past 5 years. It has shown consistent growth since inception.

It is the third-largest bank in terms of market capitalization. The stock has corrected 50 percent from its last two years' move and recovered swiftly from there.

HDFC AMC:
The company is virtually debt-free and has a good return on equity record of 37.88 percent in the last 3 years. The company has been maintaining a healthy dividend payout of 48.09 percent and sales growth of 11.67 percent.

On a technical chart, the counter has corrected more than 61% from its peak and has shown smart recovery from its Fibonacci retracement golden ratio of 61.8% marked at 2249 and manage to close at 2686.

If the stock manages to sustain above 2550 level then it may head towards 2860, 3238 levels in the near-term.

IRCTC:
IRCTC enjoys the monopoly business practices in catering, watering, and e-ticketing for Indian railways. Increasing uses of the internet with improving consumption patterns of Indian consumers make the catering and water business more growing and fruitful.

The company is virtually debt-free and has a good ROE track record of 28.55 percent and a healthy dividend payout of 41.76 percent in the past 3 years.

The counter is also fairly valued to its value and has corrected more than 60 percent from its peak. A move above 1314 will take the rally towards 1314- 1474 mark in the near-term.

Asian Paints:
For paint companies, the fall in crude oil prices will be beneficial as crude oil derivatives are used as inputs for paints. Given that the entire benefit is unlikely to be passed on to the end consumer, there will be an expansion in margins. Asian Paints and Berger Paints should be major beneficiaries.

Larsen & Toubro Infotech:
The Company offers an extensive range of IT services like application development, maintenance and outsourcing, enterprise solutions, infrastructure management services, testing, digital solutions and platform-based solutions to clients in diverse industries.

The company has an ROE track record of 34.09 percent of the past 3 years and virtually debt-free.

Expert: Ritesh Asher – Chief Strategy Officer (CSO) at KIFS Trade Capital

State Bank of India:

SBI is the largest public sector bank in terms of deposits, advances, customers, and banking outlets fostering the nation’s 2.6 trillion-dollar economy.

Strong pipeline of recoveries up to 70 percent in 2020, healthy growth in the retail loan business is increasing. House loans grew by 17 percent, auto loans grew by 8.32 percent, and other P-segment loans grew by 5.06 percent. Steady asset quality makes SBI bank a good bet to buy.

Bajaj Finance:
New customer acquisition continued to be strong at 2.46mn, with total franchise came in at 40.38mn, over 24 percent growth on a YoY basis. Cross-sell franchise stood at 23.48mn, and the Asset under management (AUM) grew 35 percent on a YoY basis to Rs. 145,092cr.

Given the challenging macro conditions company’s profit before tax grew 36.9 percent YoY, while the net profit surged 61 percent YoY largely attributable to the lower tax rate. Also, the stock is available at a discount price.

Wipro:
Wipro is a leading information technology, consulting and business process services company. The company had a dedicated workforce of over 180,000 serving clients across 6 continents.

If we consider the company’s half-yearly performance it registered a 4 percent YoY hike in sales, which was accompanied by the company’s cost optimization strategy and strong client relationships that will help the company gain lost ground in the long-term.

HDFC Bank:
HDFC Bank has maintained a large stable asset quality with GNPAs between 0.9-1.4% over FY15-FY19. Over the last 10 quarters, the bank has seen NIMs sustain in the range of 4.2-4.3%.

Going forward, as and when the system-wide credit demand strengthens, the bank would be in a position to unlock NIMs by redeploying excess liquidity towards higher-yielding loan assets.

In the near term, while NIM could be under marginal pressure, operating leverage and lower credit costs would prop up RoA.

Jubilant FoodWorks:
The company has shown 3-years average revenue growth 13 percent while the 3-years average profit growth at 19 percent.

The net worth of the company almost doubled in 4 years from FY15 to FY19. The company’s 100 restaurant expansion strategy and split-store strategy with an increase in same-store sales growth (SSSG) look promising for further adding to the company’s net profits.

The corporate tax cut will also add up on the company’s favor and the debt to equity ratio remains NIL all this factor indicates healthy fundamentals of the company.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.