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25 Stocks For Wealth Creation In The Next 25 years From Motilal Oswal

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Having studied how wealth got created in the last 25 years, Motilal Oswal Financial Services thought it an interesting idea to attempt shortlisting 25 stocks likely to deliver handsome returns over the next 25 years.

The 25-for-25 stocks

Company Company Company
1 Ajanta Pharma 10 Dr LalPathlabs 19 Mphasis
2 Alembic Pharma 11 HDFC AMC 20 Muthoot Finance
3 Astral Poly Tech 12 HDFC Bank 21 P & G Health
4 AU Small Finance 13 HDFC Life Insurance 22 Page Industries
5 Bajaj Finance 14 Honeywell Auto 23 Syngene International
6 Bata India 15 ICICI Lombard 24 Varun Beverages
7 Bayer Crop Science 16 ICICI Securities 25 Whirlpool India
8 Coromandel International 17 Indiamart Intermesh
9 Dixon Technologies 18 Max Financial

The check list

1. SIZE

 

Motilal Oswal Financial Services started with a list of 150 midcaps i.e. companies ranked 101 to 250 by current market cap.

2. BUSINESS MODEL

It preferred consumer-facing, secular business models. So they eliminated cyclical businesses like Auto ancillaries, Capital Goods, Chemicals, Oil & Gas and Realty. This reduced the list of companies from 150 to 114.

25 Stocks For Wealth Creation In The Next 25 years From Motilal Oswal

3. VERY PROFITABLE

To ensure this, Motilal Oswal Financial Services chose companies with last 5-year average RoE greater than 15%. This reduced the list from 114 to 63.

4. BUSINESS POTENTIAL & MANAGEMENT POTENTIAL

Next, to the best of our ability, the firm judged the business potential and management potential of the companies, and selected only those which qualified on both counts. This reduced the list from 63 to 28.

5. MARKET LEADERSHIP

Motilal Oswal Financial Services flagged off market leaders from the 28 companies to arrive at a list of 13 companies.

6. VALUE MIGRATION

It also observed that in situations of Value Migration, all companies benefit irrespective of market leadership. So, of the 28 in Point 4, we selected 5 beneficiaries of Value Migration, taking the total list of shortlisted stocks to 18.

7. LARGE CAPS FOR FINANCIALS

Motilal Oswal Financial Services believes Financial Services is quite a risky business, and here size begets size. So, we mainly resorted to large caps for financials, and roped in 6 leader names for the portfolio, taking the total to 24.

8. DIGITAL PLAY

 

Finally, they opted for a pure digital play, even if it didn't meet some of the above filters, taking the total to 25.

9. VALUATION: We believe in the very long run, valuations matter less. So we ignored the same in the shortlisting process.

Story first published: Wednesday, December 23, 2020, 9:30 [IST]
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