Investing for long term is always projected as a complex task, reading about the nature of company business, balance sheets, Profit and loss statements etc. Is there any easy way to find the best stocks to invest for long term? That's what this thread is all about.
Many recommend companies like #ITC, #HDFC, #Reliance, #AsianPaints etc. Even people outside the stock market know that these are market leaders in their respective category. ITC controls 77% market share of Cigarettes and more than 85% of their revenue comes from Tobacco.
But when we are investing for long term we are looking for time period of 15 to 20 years. Will these stocks continue to be a market leader even after so many years? What if their competitor catch up? In order to find an answer for that, let's consider the below example.
When it comes to search engine everyone's 1st preference and only choice is Google. But we also have other search engines like Microsoft Bing. Its been more than 23 years since Google launched, still they are number 1 with huge market share.
No wonder why Google is able to continue generating wealth for its investors year after year. Its mainly because they are way ahead. We need to follow the similar approach when it comes to picking up market leader for long term investment.
Is there any quantitative way to pick such market leader stocks which are way ahead than their competitors? Yes, there is a simple way.
I used screener website to download all stocks that are having market cap greater than 100 Crores.
I used screener website to download all stocks that are having market cap greater than 100 Crores.
There are 100+ different sectors, each stock is categorised under different industry. Finance sector has the highest number of stocks.
Now we need to sort the stocks based on industry and market capitalization. Let us consider Air-Conditioner stocks, Voltas, Blue star and Johnson. Market cap of Voltas is 43k crores where as Blue Star market cap is only around 9k,Voltas is 4.53 times bigger than its competitor.
Similarly consider Hindalco with 1.29 lac crores market cap which is 6 times bigger than its nearest Competitor National Aluminium. Likewise we need to do the calculation for all 2000+ stocks listed in NSE. Based on this approach, listed below are the top market leader stocks.
When the market leader is way bigger than its nearest competitor, only the market leader continue with top spot, but what about the other companies in the same sector ? They will continue to fight among themselves to grab more market share.
For example, Hindalco might be the market leader which is 6 times bigger than its Competitor National Aluminium but check out what's next to National Aluminium? MMP Industries which is way below. So National Aluminium is 42 times bigger than its nearest competitor.
Consider Bearings stocks Timken is 14 times bigger than NRB Bearings.
Consider paints stocks, Indigo Paints is 8 times bigger than its nearest rivalry Shalimar paints. Indigo might continue to gain more market share. The potential gain from these stocks could be much higher than the market leaders.
Best way to short list some of the best stocks from the final list is
Here's the link to detailed article squareoff.in
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