25 Wealth Creating Stocks For The Next 25 Years From Motilal Oswal

Equity is an important asset class in anybody's investment portfolio, especially in the long-term, to create exponential wealth. With patience during market volatility, young investors looking to save for their future can look at 25 stock recommendations published in Motilal Oswal's 25th Annual Wealth Creation Study 2020 that the brokerage believes can help create wealth in the next 25 years.

The study, conducted by its Managing Director Raamdeo Agrawal, recommends growing businesses with strong branding.

The 25 picks from Motilal Oswal for the next 25 years are:

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

While short-listing the stocks, the study considered companies with market cap ranking from 101st to 250th with a preference towards consumer-facing, secular business models and eliminated cyclical businesses like auto ancillaries, capital goods, chemicals, oil & gas and realty.

"This reduced the list of companies from 150 to 114," Agrawal said, adding that it chose companies that had a 15% average return on equity over the past five years. This further reduced the list from 114 to 63.

Thereafter, the study judged the business and management potential applying another set of parameters which reduced the list from 63 to 28.

The list flagged off 28 firms that are market leaders in their domains to arrive at a list of 13 companies. "We have observed that in situations of value migration, all companies benefit irrespective of market leadership. So, of the 28, we selected five beneficiaries of value migration, taking the total list of shortlisted stocks to 18," Motilal Oswal said.

Further, the brokerage believes that financial services is quite a risky business, and here size begets size. "We mainly opted for large-caps in financials, and roped in six leading names for the portfolio, taking the total to 24. Finally, we opted for a pure digital play, even if it didn't meet some of the above filters, taking the total to 25," it said.