The growing appeal of investing in stocks has people on the hunt for good stocks to buy for the future. The reality is that investing is not easy, and even professionals in the field struggle to build a portfolio of the top stocks that can beat the market consistently. Long term investing is a very popular strategy that several smart investors use to grow their money. Long term is typically a duration of 3 years and more, but can differ for each investor. While scouring for good investment in stocks in India, along with the basics like management efficiency and quality, the financials also have to be viewed from the lens of a long-term investment. Read on to learn more about certain aspects that must be considered while looking for the right investment, promising sectors in the economy, and suggestions for good future stocks to buy.
Here’s what to look for in a stock:
Rather than relying on the stock price fluctuations, investors generally observe the fundamentals of a company and try to find strong long-term performance, thus making it a more reliable pick for investing.While these criteria may not be a guarantee of good returns, they’re a good starting point for identifying the assets you prefer, and which future stocks to buy.
Make sure the company is not likely to become obsolete for the foreseeable future and is benefited by long-term trends:
As an investor, you should be able to easily understand how a company is generating profits, and the value it holds. While buying stocks for the long term, ensure that you are investing in a company or sector that will still be relevant in the coming years, thus benefiting from long-term trends.
The company’s returns on capital are and will remain consistently above average:
The viability of a company for long-term investors will be determined by its returns on capital. The ideal company choice would be one that does not rely on a lot of borrowed capital, and generates money that can be redirected without harming the company itself.
The company has a solid track record:
The company’s balance sheet should show a history of good performance and ability to weather tough stretches or recessions. Difficult periods in the economy can show up without warning and wreak havoc on everyone’s finances. So invest in a stable company that has the financial strength to survive the toughest times without resorting to extremely low prices on their stocks, which may force you to sell your stakes.
The company has a long-term approach:
Reliable companies generally have management with long tenures and focus more on long-term results. Moreover, they maintain their relationships with shareholders well, and offer smart share repurchase plans or dividends that grow steadily despite economic inflation.
The company shows profitable growth:
Sustainable growth and value are significant indicators of a company’s value for investors. Having a loyal customer base also helps in generating more returns, thus facilitating better and better performance for the company; having a durable competitive edge in the market helps further a company’s growth and shows their viability for long-term investment.
No investment can provide good returns for certain, and there is no one perfect stock, as the future is always unpredictable. However, diversifying your portfolio can prove to be a reliable approach for growing your wealth over the years.
Sectors and stocks worth looking at:
Here are a few promising sectors and stocks worth considering while searching for future stocks to buy.
Currently there is a higher proportion of banking and financial stocks in the market. This is due to their ability to consistently bring in great returns, making it a wise choice for long-term investment. Over longer tenures, direct equity delivers returns that are higher than inflation-adjusted returns in comparison to other asset classes.
Infrastructure can be considered a good option; currently the Indian government is prioritising development in this sector and making significant investments in highway and road maintenance, urban transport and renewable energy. The steel industry in particular is a solid option for those looking to invest.
With the boom in use and sale of smartphones, technological devices and high internet speed due to an increase in social distancing and working remotely due to COVID-19, the IT sector has become more valuable than ever.
During the pandemic, the pharmaceutical sector has taken the spotlight in 2020, making it one of the primary areas of focus for substantial returns. This should be one sector to keep an eye on for good future stocks to buy.
Stocks to look out for in the near future:
Besides the aforementioned sectors, here are a few handpicked stocks that have shown favourable results
This renowned bank’s success is generally attributed to 50% of the bank’s loan book relying on retail loans.Since the first quarter of FY 20-21, the bank’s net NPA ratio has been less than 0.5% of its advances, and during the July to September quarter, it stood at 0.17% . In the past five fiscal years, the net profit has risen to a CAGR of 16.28%. With businesses in wholesale banking, retail banking and treasury, this is one of the better future stocks to buy in 2021.
Setting milestones in market capitalisation by being the first to reach Rs 10 lakh crore, Rs 11 lakh crore and Rs 12 lakh crore, RIL which has a diverse range of businesses such as textiles, oil and gals, petrochemicals, telecom and media, is a good future stocks to buy for long term.
Kotak Mahindra Bank
Kotak Mahindra Bank, the first NBFC in India to obtain a banking license from RBI, is currently operating in corporate, consumer banking, and commercial banking as well as treasury. With the net NPA ratio having gone from 1.26% of net advances at the end of March 2017 to 0.71% at the end of the previous financial year, this may be a stable stock option.
One of the biggest FMCG companies in India, HUL is an umbrella company for brands like Lifebuoy, Bru Coffee, Clinic Plus, Vim Bar and several others. In the past decade, HUL outperformed Sensex with more than 680% returns as of January 11, 2021, compared to the latter’s 156.31% in the same period. Over the past five fiscal years, its net profit growth at a CAGR of 10.28% makes it a favorable investment option.
As an investor you should research a company thoroughly and make a choice based on sustainable performance for the long-term. The long-term strategy for asset allocation is more crucial than the selection of individual stocks. While researching the best future stocks to buy, ensure that they meet the necessary criteria as well as personal preferences and unique needs. By investing with discipline, reasonable expectations, and patience, you will get the desired returns manifold over time.