Following the Union Budget, the Sensex has lost almost 3,000 points and the Nifty almost 1,000 points. A 10 per cent drop from peak levels has given investors an opportunity to look at stocks from a long term perspective. Here are a few stocks that you should be buying.
This share has slumped to a new 52-week low of Rs 338. In fact, the shares have even hit a 52-week high of as much as Rs 500 in the last one year. At these levels the downside risk in the stock is minimal, unless there is a dramatic fall in the markets itself.
There are a few reasons to be optimistic on the stock of Tata Motors. Bulk of the company's revenues and profits come from the Jaguar Landrover (JLR) range and this is dependent on global growth. Two of the company's major markets, like the US and China are seeing decent growth.
It is likely that for JLR, the company will achieve an 8-10 per cent EBIT margin on the back of new launches and technologies. Further, a ramp-up of recently launched models like Range Rover Velar, Discovery Range Rover & Range Rover Sport can provide decent volume growth for JLR. The product mix improvement is likely to result in decent growth as well.
Tata Motors: Cheap on valuations
The domestic business, including the heavy commercial vehicle segment and the medium commercial vehicle segment have also been seeing a sharp turnaround. This should further boost volumes and profitability. The company's EPS can easily jump to Rs 45 in 2018-19.
At the current market price of Rs 338, the stock is barely valued at 8 times. Even if you value the stock at 10 times, it should trade at Rs 450 in the coming months.
You can even buy the Tata Motors DVR, which is trading at Rs 189. In case the company declares a dividend, DVRs will give you a 5% extra dividend. To know more about DVRs click here
This is another stock that has taken a beating with a sharp fall on the Sensex and the Nifty. However, the bank is known to show sharp growth in performance every quarter, year after year. Take a look at some of the key metrics for the quarter ending Dec 31, 2017.
The company saw a 46.5 per cent, year-on-year growth in advances, which crossed the Rs 1.5 trillion mark. The deposits for the period ending Dec 31, 2017 for the bank grew by a staggering 29.7 per cent Y-o-Y. The retail banking advances grew 101 per cent, while the CASA (current account savings account ) was up 38 per cent.
Yes Bank: Not very expensive on the valuations front
The gross non performing assets for the period ending Dec 31, 2017 was placed at 1.73 per cent. This is extremely reasonable when compared to most banks in the country. The bank has also managed to expand its reach and now has 1050 branches across key liability corridors as on Dec 31, 2017 up from 964 branches as of Dec 31, 2016.
The valuations of the bank are not very high for a private sector bank. In fact, the bank can report an EPS of Rs 25 for 2018-19. If you accord a healthy p/e of 20 times, to a bank that is growing at 20 and 25 per cent, the stock should trade at Rs 500.
The shares can thus be bought with a time frame of 2 years for decent returns. Check stock quote of Yes Bank here
This stock is a decent play on dividend yields. The company can declare a dividend of Rs 21 per share like it did last year, as profitability has been decent this year as well. If it maintain the same dividend, you are getting tax free dividend yield of 6 per cent.
The shares are currently trading at Rs 346, which is not very far away from the 52-week low of Rs 335.
The company's ability to maintain profitability largely depends on where crude prices is headed and we believe that crude prices is stable at these levels. The company reported an EPS of Rs 25.94 for the quarter ending Dec 31, 2017. Assuming that it does an EPS of Rs 100 in 2018-19, the stock is trading at a p/e of just 3.5 times. You do not get stocks so cheap any longer.
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