5 Best Stock to Invest for Long Term in 2023: If you’re looking for the best stocks to invest in India for the long term, look no further! Here are five of the most attractive options, based on their strong fundamentals, growth potential, and stability.
Follow are the 5 Best Stock to Invest for Long Term in 2023:
1. State Bank of India (SBI) – Banking Sector
Valuation and Growth Potential: The State Bank of India (SBI) stands out as an attractive long-term investment due to its remarkably low valuation. As of now, SBI’s price-to-earnings (PE) ratio is 9.46, while the sector average is significantly higher at 17.33. Similarly, its price-to-book (PB) ratio is 1.42 compared to the sector’s 2.35. This indicates that SBI is trading at a substantial discount from both PE and PB perspectives, making it an attractive investment opportunity.
Profitability: SBI has exhibited impressive profitability growth. Operating profit has surged by nearly 98% year-on-year, outperforming other major banks like HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Axis Bank. Additionally, SBI has witnessed a remarkable 178% year-on-year increase in net profit, outpacing its peers.
Asset Quality: SBI’s asset quality has been consistently improving, with net non-performing assets (NPAs) declining from 1% to 0.71%. This suggests that the bank is effectively managing its bad loans, contributing to its overall stability and growth potential.
Risks: The main risk associated with SBI is its exposure to sectors such as infrastructure and agriculture, which historically have generated bad loans. However, the Indian government has intervened in the past to recapitalize public sector banks, including SBI, in case of bad loan accumulation. This government support mitigates some of the risks associated with SBI’s asset quality. This stock is the Best Stock to Invest for Long Term in Banking sector.
2. Mahindra and Mahindra – Auto Sector
Valuation and Growth Potential: Mahindra and Mahindra (M&M) is a compelling long-term investment option, particularly in the auto sector. Its PE ratio of 18.12 is attractive when compared to the sector’s PE ratio of 64. The PB ratio of 2.78 also indicates that M&M is undervalued in comparison to its sector average of 6.21.
Profitability: M&M’s auto business has exhibited significant growth, with profits more than tripling in just one year. This growth is primarily driven by the robust performance of its SUV segment, where it holds a prominent market share.
Industry Trends: The Indian consumer trend towards SUVs is contributing to M&M’s growth, with high demand exceeding production capacity. This trend is supported by data showing that Indians are increasingly prioritizing SUV purchases over homes, leading to strong growth prospects for the SUV market.
Risks: One potential risk for M&M is its diversified business portfolio, including technology and financial services. While the auto sector is performing well, other segments, such as IT services, have faced challenges. This is one of the Best Stock to Invest for Long Term.
3. Tata Consultancy Services (TCS) – IT Sector
Fundamental Strength: TCS is a standout player in the IT sector, known for its robust fundamentals. It consistently ranks first in various key performance metrics, including net profit margin, return on equity, and return on capital employed.
Cash Generation: TCS has a strong track record of generating substantial cash flow, with operating cash flow exceeding 41,000 crores. Furthermore, the company allocates 91% of its cash back to shareholders through dividends and buybacks, emphasizing its commitment to shareholder value.
Customer Base: TCS boasts a customer base of over 600 million, with significant market share in large deals. This customer diversity and long-term contracts make TCS less susceptible to industry headwinds.
Risks: Like the entire IT industry, TCS faces risks related to currency fluctuations. A stronger Indian rupee and a weaker US dollar can impact profit margins. However, TCS has strategies in place to manage these risks effectively. This stock is one of the Best Stock to Invest for Long Term in IT sector.
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4. Abbott India Limited – Pharma Sector
Strong Fundamentals: Abbott India Limited stands out in the pharma sector with robust fundamentals. It leads in net profit margin, return on equity, return on investment, and return on assets.
Stability: Abbott India Limited has consistently grown its revenues and profits year after year, showcasing stability and potential for continued growth.
Beta: The stock’s low beta of 0.15 indicates a lower sensitivity to market fluctuations, enhancing its stability and appeal as a long-term investment.
Risks: As with the entire pharma industry, currency fluctuations can impact profitability. Additionally, regulatory changes and patent expirations can pose risks to pharma companies. This stock is one of the Best Stock to Invest for Long Term in Pharma Sector.
5. ITC Limited – FMCG Sector
Diverse Revenue Streams: ITC operates in various sectors, including FMCG, hotels, agriculture, and paperboard. While this diversification can be seen as a drawback, it also offers investors exposure to multiple industries.
Cigarette Business: ITC’s cigarette business continues to generate substantial revenue and profit, providing stability to its overall business.
FMCG Growth: ITC’s FMCG business, featuring brands like Ashirvad, Sunfeast, and Bingo, has exhibited consistent growth in both revenue and profitability.
Demerger Potential: ITC’s demerger of its hotel business, while met with mixed reactions, may ultimately unlock value for shareholders.
Risks: The main risk with ITC is its diversified business model, which may not align with all investors’ preferences. Additionally, government policies on cigarette duties can impact its revenue. This stock is one of the Best Stock to Invest for Long Term in FMCG sector.
In conclusion, these were the Best Stock to Invest for Long Term investment. However, it’s essential to conduct thorough research and consider your investment goals and risk tolerance before making any investment decisions. Stock markets are inherently volatile, and diversification within your portfolio is often a prudent strategy
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