Sampath Reddy of Bajaj Allianz Life Insurance is positive on consumption, private financials, IT and metals sectors.
One does not need 100 stocks to generate wealth but can achieve the same with a handful of stocks. Legendary investor Warren Buffett once said, “Wide diversification is only required when investors do not understand what they are doing.” Hence, investor focus should be on a handful of stocks rather than creating a portfolio which consist of over 50 stocks.
Wealth creation requires patience and research. Returns from the markets are never linear. Hence, portfolio diversification is a must to ensure profitability. Not every stock will emerge a multi-bagger, but chances are that if you placed your bets on the right stocks you will be a happy investor at the end of the year.
With India’s macroeconomic cues slipping, earnings nowhere near the double-digit mark and looming uncertainty around the 2019 general elections, it will not be easy for investors to make money. The best strategy would be to bet on stocks that have declared strong January-March earnings and growth momentum.
Bulk of the market returns in 2017 was largely led by expansion in the price-to-earnings ratio. However, experts said they are seeing signs of a revival in earnings growth, with growth expected to pick up meaningfully in FY19.
“The long-term story for equities still remains intact, especially for those investing in a systematic manner. Going forward, market returns will be led by earnings growth rather than P/E expansion,” Sampath Reddy, Chief Investment Officer at Bajaj Allianz Life Insurance, said.
He is positive on consumption, private financials, IT and metals sectors. “We prefer largecap equities to small/midcap ones, with current valuations at a significant premium in the latter segment.”
Here is a list of 10 buy ideas from different brokerages that can deliver 20-50 percent returns in the next one year:
Mahindra & Mahindra: Buy | Target raised to Rs 1,075 from Rs 960 earlier | LTP: Rs 895.60 | Return: 20%
CLSA maintains a buy rating on M&M post Q4 results but raised its 12-month target price to Rs 1,075 from Rs 960 earlier.
Domestic vehicle manufacturer Mahindra and Mahindra reported a 50 percent year-on-year rise in its net profit for the March quarter to Rs 1,155 crore on Tuesday.
M&M delivered a strong Q4 led by better-than-expected margins. The rural outlook improved on expectations of a normal monsoon and expectations of a big MSP hike.
New MPV launch in FY19 is likely to boost SUV segment volume. CLSA expects strong 18 percent EPS CAGR over next two years, and valuations still remain attractive.
Dish TV: Buy | Target: Rs 100 | LTP: Rs 74.45 | Return: 34%
CLSA maintains a buy rating on Dish TV with a target price of Rs 100. The direct-to-home operator reported a consolidated net profit at Rs 118.21 crore for the fourth quarter ended March 2018.
The company had posted a net loss of Rs 29.49 crore during the January-March quarter a year ago, Dish TV said in a BSE filing.
The management reiterated merger synergy of Rs 500 crore in FY19. CLSA sees 10 percent EBITDA CAGR over FY19-21. The ongoing open offer caps downside risk for the stocks, said the note.
Commenting on the outlook, Dish TV said that it expects the year to be positive as the company expects to outgrow the industry growth rate backed by the launch of new set-top-boxes that would be full HD compliant.
Prestige Estates: Outperform | Target: Rs 396 | LTP: Rs 260.95 | Return: 51%
Macquarie maintains an outperform rating on Prestige Estates with a 12-month target price of Rs 396. The realty firm reported 21 percent increase in its consolidated net profit at Rs 107.1 crore for the fourth quarter of last fiscal on higher sales. Its net profit stood at Rs 88.1 crore in the year-ago period.
The Q4 net profit was in-line with estimates. The pre-sales pick-up aided by new launches said the Macquarie note. The real estate major targets to launch at least one project in affordable housing.
Prestige Estates remains one of the preferred picks in real estate space, said the note.
Escorts: Buy | Target: Rs 1,150 | LTP: Rs 933.80 | Return: 23%
HSBC maintains a buy rating on Escorts post Q4 results with a 12-month target price of Rs 1,150. The growth momentum remains intact. Going forward, the margins are likely to improve across all businesses. Increasing captive financing is a key positive for future performance, said the note.
Bharat Petroleum Corporation: Buy | Target: Rs 568 | LTP: Rs 400.30 | Return: 42%
Motilal Oswal maintains a buy rating on BPCL post Q4 results with a 12-month target price of Rs 568. The EBITDA was above estimates led by core operating performance. The net profit benefitted by higher other income and lower tax rate.
Stabilisation of Kochi expansion is likely to expand Kochi refinery GRMs. Sharp correction seen in the oil & gas space due to rise in crude oil prices offers an attractive opportunity to add.
Larsen & Toubro: Buy | Target: Rs 1,730 | LTP: Rs 1365.20 | Return: 27%
CLSA maintains a buy rating on L&T post Q4 results with a target price of Rs 1,730. The Q4 results were a beat on guidance as well as on inflow and margins. The Hydrocarbon business is going to be the emerging star and fast-growing business going forward.
L&T has a credible strategy to improve both growth and its return on equity. The stock is a good proxy for domestic capex.
NTPC: Buy | Target: Rs 200 | LTP: Rs 165.30 | Return: 21%
CLSA maintains a buy rating on NTPC post Q4 results with a target price of Rs 200. The March quarter results were in line with estimates, but profit figure remains muted by higher cost.
Capacity additions are clearly on track. CLSA expects a marked pick-up in profit growth due to focused efforts to secure coal.
Capacite Infraprojects: Buy | Target: Rs 340 | LTP: Rs 282.80 | Return: 20%
Angel Broking initiates a buy call on Capacite Infraprojects with a target price of Rs 340. The company has a large order book with marquee client base which provides revenue visibility.
The company has a focused approach which leads to a strengthening of its position. Increased floor space ratio (FSI) to trigger construction work in Mumbai region. Expanding presence in cities with a high growth potential given revenue visibility.
Tech Mahindra: Buy | Target: Rs 880 | LTP: Rs 686.40 | Return: 28%
Goldman Sachs maintains a buy rating on Tech Mahindra post Q4 results but raised its 12-month target price to Rs 880 from Rs 824 earlier.
The Q4 results were above expectations on continued margin beat. The entire topline growth was led by enterprise business in Q4. Going forward, 5G remains a key structural growth opportunity for Tech Mahindra, said the report.
Bank of Baroda: Buy | Target: Rs 180 | LTP: Rs 138.70 | Return: 30%
Edelweiss maintains a buy rating of Bank of Baroda post Q4 results with a target price of Rs 180. The public sector lender posted a net loss of Rs 3,102.34 crore in the March quarter, missing estimates due to a jump in provisions for bad loans.
Provisions for non-performing assets for the quarter rose by 190 percent YoY to Rs 7,052.53 crore in Q4. The March quarter was marred by higher slippages, said the Edelweiss note.
However, the loan growth remains strong with better rated corporate and retail segments. The brokerage firm expects quality growth to gain traction in near future.
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