Experts pick 10 all-weather stocks for the long-haul

Increasing doubts about global growth and local corporate earnings have pummelled stocks in recent weeks. On Monday, the markets went the other way and pushed prices up by a spectacular amount.

But don’t be fooled. The markets will remain volatile, and this is the time for safety, not high risk in stock buying. You can buy stocks, but only if your holding horizon is long.

To help investors decide, _Firstpost_asked 10 brokerages to pick their favourite stocks for the long haul. Bear in mind that many of these stocks chosen are currently struggling with various obstacles to growth. However, the experts have faith that these problems will eventually be overcome.

Here are their stock-picks.

Edelweiss’s pick: Coal India

The world’s largest coal-mining company continues to bask in investor attention because of the sizzling outlook for coal. The state-run firm produces more than 80 percent of India’s coal, which accounts for over half of the country’s energy use and consumption. With Indian demand set to triple in the next two decades to two billion metric tonnes, the outlook remains bright for the company, current problems notwithstanding (environmental concerns and lack of access to new mines).

Kotak Securities’ pick: Infosys

Strong management quality, high corporate governance standards, high operating margins, a substantial cash pile, a proven track record in winning “transformational” deals (multi-year orders from large companies), and relatively cheap stock valuations make India’s second-largest software exporter a relatively safe bet in the technology industry.

Enam’s Securities’ pick: Reliance Industries

India’s most valuable company by market value (despite some recent challengers like Coal India and ONGC) derives most of its revenues (refining and petrochemicals) from demand in the non-OECD regions (which excludes the US and Europe), a big plus at a time when most of the developed world is mired in economic woes. Other notable points: net cash flows are likely to become positive after the BP deal, and margins could get a big boost once RIL’s petrochemicals capacity is doubled. Moreover, the current stock market price does not take into account the value of the energy exploration and production business, making it an undervalued stock.

Angel Broking’s pick: Axis Bank

India’s third-largest private-sector bank has quite a few things going for it: superior asset quality, strong fee income (30 percent of total income) and an emphasis on reducing the cost of funds by increasing the share of low-cost deposits (current accounts and savings accounts) to 42 percent of total deposits.

Motilal Oswal’s pick: Bajaj Auto

Buoyant rural demand, a superior portfolio of products (high-end motorcycles and commercial vehicles, as well as three wheelers) and domination of the high-end portion of the competitive motorcycle segment is likely to keep growth roaring ahead.

Ambit Capital’s pick: Kotak Mahindra Bank

The fifth-largest bank by market capitalisation, it has a presence in asset management, stock broking, investment banking, as well as auto finance, through various subsidiaries. Well-capitalised and conservatively managed, it is a play on the growing financial services sector in India.

ICICI Securities’ pick: L&T

India’s largest engineering and construction company is a play on the economically-critical infrastructure sector. A boom in construction activity as the country revamps its airports, roads and other infrastructure could help L&T increase revenues by 20 percent (compounded annual growth rate) over the next few years. Possible divestments of subsidiaries, such as L&T Infotech and L&T IDPL, could also unlock significant value for investors.

Sharekhan’s pick: Bhel

Bhel’s plans to expand capacity to 20,000 mw (megawatts) per annum from 15,000 mw sits perfectly with increasing demand from a power-starved country. A strong order book worth Rs 1.59 lakh crore (ensuring revenues for the next three years), and more orders-in-waiting (especially from state-level utilities) should keep revenues growing in double-digits over the next few years, despite intensifying competition from Chinese rivals.

Centrum Broking’s pick: MRF

Growing automobile sales (barring recent short-term blips) should keep demand for tyres - new and replacement – buoyant. As a strategic investment, the brokerage believes the stock has the potential to be a multi-bagger: at current stock prices, MRF’s market capitalisation is Rs 2,800 crore, while branded sales for the year to March are estimated at Rs 11,000 crore.

Emkay Securities’ pick: Coromandel International

India’s largest private-sector phosphatic (phosphate-based) fertiliser producer is also the sector’s best-managed company. More importantly, about 25 percent of its operating profit and 40 percent of revenues actually come from other agri-inputs, such as micro-nutrients, making this company an interesting bet, despite operating in the price-controlled fertiliser business. Good working capital management and attractive returns on capital and equity are other plus points.