The Sensex and the Nifty have moved in a range over the last few weeks. Even at these levels, the Sensex at a one year foward p/e of 19 times, is way above the historic average. It therefore makes sense to carefully evaluate your options before investing. Here are a few good stocks that could do well in the coming years and should be bought.
With the May general elections now over, it is time to focus on quality stocks with good earnings potential.
LIC Housing Finance
The stock of LIC Housing Finance has slumped to a new 52-week low. In fact, the present price of Rs 373, takes the stock to a multi-year low. The shares of the company have been hit, like most shares from the housing finance space and the NBFC space. Having said that, the stock has become reasonably attractive.
Even if the company manages to sustain earnings, the shares are quoting at a pr/e of just 7.62 times, trailing p/e. It is also likely to get a boost to its profits from the cut in corporate tax rates.
LIC Housing: Good for long term
The shares of the company are also trading very close to 1-year forward book of just one time. If you get the shares around the 360 levels, it would definitely be worth picking. At the current price the dividend yield is more than 2 per cent.
The only worry right now is that the recovery in the real estate sector may take some time. However, the worries over liquidity that other HFCs are facing is not going to be a bother for LIC Housing. It can easily raise capital given the pedigree and the backing of LIC. A good stock to buy for the long term.
Like LIC Housing the shares of Coal India too has been trading at near 52-week lows. Recently, there were some worries over coal production at the company having fallen, given the floods in some areas.
This may see some impact on the company's earnings for the quarter ending Sept 30, 2019. However, one must not forget that such instances are temporary aberrations and do not impact the company structurally. The government recently allowed 100 per cent FDI for the Coal sector, but here again we do not see too much of an impact on Coal India, given that we continue to import coal.
Coal India: Good for its dividend yields
Coal India is a very good stock to buy for its dividend yields. The company last last declared a dividend of Rs 13.15 per share. If it maintains the same dividend, the dividend yield on the stock works to a very decent 7 per cent.
Remember, dividends are tax free in the hands of investors and hence the post dividend tax yield is very attractive.
We do not see too much of a fall in the stock price from these levels, given that the company is slated to declare dividends in the month of Feb. Buy the stock for decent dividends every year.
3. Shalby Ltd
Shalby Ltd is a renowned hospital chain, that are considered as leaders in "knee replacement" surgery.
The company is almost a debt free company, with return on investments that are probably the best for a listed hospital chain.
The reason to buy the stock of Shalby are plenty. The promoters of the company own more than 79 per cent shares in the company. It also reported a decent net profit for the quarter ending June, 2019, despite slightly higher expenses on advertising and start-up operations in select new hospitals.
Going ahead with the commissioning of new hospitals the profits are expected to improve a great deal.
Shalby: Cheap on valuations
Shalby is one of the cheap low priced hospital stocks that individuals should buy. The company can report an EPS of Rs 8 for 2019-20. This means the stock is trading at just 10 times this earnings.
Hospital stocks are known to receive very high discounting of 30 to 40 times. There is no reason the shares should trade at such low valuations given the decent profitability and margins in the past.
One can buy the Shalby stock with a long term perspective in mind. Also, in case there is a sudden crash in the markets, healthcare stocks tend to protect capital as they are largely considered as defensive plays.
The shares off Shalby Ltd have barely moved higher along with the market. In fact, while the markets have gained significantly in the last few months, the shares of Shalby have languished. It is currently trading at Rs 84. It maybe just time to look at this stock.
4. Yes Bank
Yes Bank shares have crashed from 52-week high levels of Rs 400 seen in August 2018 to the current levels of Rs 45. The one big reason for the recent fall is the losses of Rs 1507 crores reported by the bank for the quarter ending March 31, 2019.
While the losses surprised investors and many were quick to downgrade the stock, we believe in the next one or two quarters, the worst would be behind. In fact, the cleaning-up at the bank would be a good time to buy into the stock.
While 2019-20, the performance of the bank would not be so encouraging, one can expect a positive momentum in 2020-21. From a 2-year holding period, the shares of Yes Bank are not a bad bet at all.
However, the immediate worries for the bank would be the exposure to ADAG group of companies and also Jet Airways.
The bank is looking at revamping its business by focusing on the retail side of the business. However, the next few quarters for the bank are indeed going to be tough and hence only investors who have a long-term perspective in mind, should invest. The one good thing is that the share price has now fallen to a new 52-week low, which makes the stock an interesting bet at the current levels.
This article is strictly for informational purposes only. It is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author of this article do not accept culpability for losses and/or damages arising based on information in this article. The author owns Shalby Ltd shares.
Taxation on stocks
It is important to remember that with effect from April 1, 2018, there would be a long-term capital gains tax that would be levied on stocks. Therefore, investors may not that there would be a 10 per cent tax that is applicable.