The current Ukraine-Russia crisis seems deepening and the US as per agencies has given a go-ahead to Poland for supplying Kyiv with fighter jets. So, until there is a state of ceasefire , markets are unlikely to trade higher. Also, as there is a saying by Jim Rogers, "Bottoms in the investment world don't end with four-year lows; they end with 10- or 15-year lows."
So, as we are unsure of the market trajectory going forward, here are some of the moat stocks in India, one can add to their watchlist or can consider for long term investing after thorough understanding of their financials.
What is moat?
The moat is defined as a deep and broad trend around the fortified place that is filled with water. Moats came from the medieval time and worked to protect those within the fortresses or castles and their riches from the outsiders. Likewise, in the world of investing, these moats have competitive advantage that enable them not to lose out their market share and long term profitability.
This is the leading private sector bank that has a distinct advantage over its peers with respect to consistent net interest margin, low NPAs as well as good risk management system. The other positives at the bank's command are its good network, strong loan portfolio, well-diversified revenue mix.
In the quarter ended December 2021, the bank's net profit expanded sequentially as well as YoY to Rs. 10,342 crore. Nevertheless, its asset quality, while improved sequentially, was still on a higher side if we compare YoY figures.
Currently, in the meltdown, along with other uncertainties, what has weighed on the stock is the steep valuations, high FII outflow as well as change in management. Not to forget, FIIs hold a considerable stake in HDFC Bank to the tune of 37.47% as of December quarter of 2021. Furthermore, the stock is trading very close to its 52-week low price of Rs. 1297.05 per share.
This is another paints firm that is currently facing the wrath of the boiling crude markets. The stock again close to its 52-week low price has an advantage with respect to its distribution network as well as logistical efficiency together with an array of products under its umbrella.
The company is in fact the largest paint entity in India and the third largest in Asia. The company carries out the manufacture, sale and distribution of paints as well as coatings related to home decoration. The company commands a sizable market share of over 50% in India's paint manufacturing business.
The MNC company has a wide reach with presence across geographies (more than 180 nations) and over 30 brands in various categories offers a moat against its competitors. The company is the Indian subsidiary of Swiss multinational. Some of its highly popular products in the country are Maggi, Kitkat, Nescafe etc.
The company has lately announced Rs. 65 per share final dividend for the year ending 2021. The scrip last commanded a price of Rs. 17342.05.
The company's stand out in its reasonably priced passenger vehicles that are high quality at the same time.The company further commands a good market share and has a wide distribution network together with service center. Furthermore with the company's entry into the EV space though from some time now with the launch near 2024, the company shall not lag in this upcoming space too.
Fundamentally, the company is trading at a high P/E of over 50 plus and has been a consistent dividend yielding company.
The food company commands a high brand equity due to its strong product portfolio, pricing strategy as well as distribution channels. The company is into selling various brand s of confectionaries both in domestic as well as global markets.
The company's RoE has increased over a yearly period to 46.9% in the year ended March 2021. Also, the company has been logging an increase in quarterly sales YoY to Rs. 3575 crore.
Though its not easy to identify a moat stock, proper analysis in an in-depth way may enable an investor to even view its long-term profitability prospects. Nevetheless, this way of investment is preached by many legendary investors like Warren Buffett, Pat Dorsey. Not to forget the saying by Buffett who advocating betting for moat stocks says, "I look for economic castles protected by unbreachable moats".