Stock market investing can generate superior returns for investors, especially in the long term. Investors who focus on long-term stocks can capitalise on the growth potential of well-established companies, leveraging the power of increasing returns and avoiding the unpredictability and volatility associated with short-term investments.
What are long-term stocks?
Investing with a long-term perspective means holding onto stocks, shares, bonds, and mutual funds for durations extending beyond one year. Generally, long-term investments are those that are spread over three, five, seven, ten years or more. Although it might seem challenging to lock in your capital for such periods, the potential benefits significantly outweigh this consideration.
Best stocks to buy for the long term have strong financials, and steady growth strategies and belong to rising industries, offering investors a chance to generate returns along with protecting their investments. Investing for the long term is also an ideal strategy for risk-averse investors.
Sometimes investors look at well-known and popular strategies that have a proven track record to identify stocks suitable for long term. Screener.in’s stock screener, which tracks the parameters of legendary investor Peter Lynch for picking stocks, listed shares that are ideal for long-term investing. Screener.in used the following metrics which align with Peter Lycnh’s strategy to shortlist the best stocks to buy for the long term:
- 5-year EPS growth of over 15%
- 5-year average return of over 15%
- PEG ratio less than 1
- Debt-to-equity ratio less than 0.6
- Current ratio over 1
List of Best Stocks for Long-Term Investment
| S.No | Stock Name | Industry |
| 1. | Coal India | Mining/Minerals |
| 2. | Dr Reddy’s Laboratories | Pharmaceuticals |
| 3. | Jindal Stainless | Steel |
| 4. | Lloyds Metals | Mining/Minerals |
| 5. | Apar Industries | Electric Equipment |
| 6. | Narayana Hrudayalaya | Healthcare |
| 7. | BASF India | Chemicals |
| 8. | Godfrey Phillips | Cigarettes |
| 9. | Waaree Renewables | Engineering |
| 10. | GE Shipping | Shipping |
(Source: Screener.in as on July 03rd)
This blog has been written exclusively for educational purposes. Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance.The securities mentioned are only examples and not recommendatory. It is based on several secondary sources on the internet and is subject to changes. The risk of loss in trading and investment in Securities markets including Equities and Derivatives can be substantial.
Overview of Stocks for Long Term
Coal India
Coal India is the largest coal producer in the world. It commands a substantial share in India's energy sector which is crucial for power generation and industrial needs. As a state-owned company, Coal India benefits from government support, offering stability in regulatory environments. It has a robust infrastructure of mines, logistics, and distribution networks which deters competition and enhances operational efficiency. It has a history of attractive dividend yields, thus making Coal India an appealing option for long-term investors.
Dr. Reddy’s Laboratories
Dr. Reddy's Laboratories (DRL) is a Nifty50 company which has a strong position in the pharmaceutical market, making it a compelling investment. DRL focuses on innovation and research, along with strategic partnerships and acquisitions, enhancing its market competitiveness. It has a strong global presence which reduces dependency on any single market. Consistent dividends and a prudent management make DRL an attractive pick for the long-term.
Jindal Stainless
Jindal Stainless is a leading player in the stainless steel industry and caters to various industries such as construction, automotive, railways, appliances etc. The company has a strong market presence both domestically and internationally, enhancing its revenue streams and profitability. These factors, along with its solid financial performance, make it a compelling choice for long-term investment.
Lloyds Metals
Lloyd Metals and Energy, part of the metals and mining sector, operates in the ferroalloys sector. This sector is crucial for steel production and could potentially gain from global infrastructure development and industrial growth. The company has shown strong revenue growth, supported by efficient operations and strategic expansion. Llyod Metals plans to expand into value-added products for which it has undertaken a capex of Rs 1200 crore, indicating a strong runway for growth in the future. Its aim to become debt-free by 2030 could drive up its profitability.
Apar Industries
Apar Industries, which has a presence in three broad segments - conductors, transformer and speciality oils, and power/telecom cables - is a market leader in its industry with a strong global footprint, suggesting a strong growth potential for the company. With a track record of consistent financial performance, strategic expansions, and a commitment to sustainability, Apar Industries presents a compelling opportunity for investors. Additionally, Apar has a strong order book, suggesting good revenue visibility for investors. The company is also focussing on the growing renewable energy sector, which will lead to new streams of growth in the future.
Narayan Hrudyalaya
Narayana Hrudayalaya is one of the leading healthcare providers in India, with a network of multispecialty and super speciality hospitals spread across multiple locations. Narayana Hrudayalaya could benefit going ahead as the demand for quality healthcare is on the rise in India. The company has a strong network of hospitals with plans to expand in the future, providing a possibility of future growth.
BASF India
BASF India operates across diverse segments and industries, including chemicals, agricultural solutions, nutrition and care, and performance products, boosting revenue stability. The company also has strong parentage of BASF SE, which is a global leader in chemicals, ensuring access to advanced technologies and global best practices. Further, India's chemical industry is the sixth-largest globally with a strong outlook for the future, from which BASF India is well-positioned to benefit. BASF has seen solid profit growth and is almost debt-free, indicating growth potential.
Godfrey Philips
Godfrey Philips India is a leading player in the Indian tobacco industry, which provides it with a stable revenue stream and pricing power. The company's strong brand portfolio gives it a competitive edge. Apart from this Godfrey Philips' healthy margins, consistent profit growth and good debt-to-equity ratio show financial stability for the company. The company operates through 146 TFS stores/kiosks which includes convenience stores chain 24 Seven. The company has a strong distribution network, 1,000 plus employees and efficient supply chain management, giving it economies of scale.
Waaree Renewables
Waaree Renewables is a leading player in India's solar module manufacturing and EPC (Engineering, Procurement, and Construction) market. Waaree could potentially benefit from the growing focus on the renewable energy sector and favourable government policies in this segment. The company has the country's largest Solar panel manufacturing capacity. It has a strong track record, built over decades of experience and successful project deliveries. Adani, Reliance Industries, Arcelor Mittal, Aditya Birla Group, Larsen and Toubro, and NTPC among others are some of its high-profile clients. The company has a strong financial record and focus on R&D, making it attractive for investors.
GE Shipping
GE Shipping is India’s largest shipping company in the private sector with a strong fleet and presence. It has a global footprint and long-standing relationships with international clients, providing it with diverse revenue sources and geographical diversification. The company has become net debt free, signalling strong financial position. Moreover, its track record of strong profit growth and solid dividend payouts bode well.
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Key Factors to Consider Before Selecting the Best Stocks for Long-Term Investment
When choosing stocks for long-term investment, consider the following tips to make informed decisions:
- Research Thoroughly: Avoid making investment decisions based solely on trending tips. Deep dive into the company’s performance, industry position, and future growth prospects.
- Remove Underperforming Stocks: If a stock consistently underperforms, it might be wise to reallocate those funds into more promising investments.
- Look Beyond P/E Ratios: While important, P/E ratios should not be the sole determinant of your investment choices. Consider other financial metrics and company fundamentals.
- Consider Market Capitalisation: Understanding how to assess a firm's market capitalisation can help prevent overpaying for investments. A larger market cap often indicates stability, while a smaller one may suggest higher growth potential.
- Consistency in Strategy: Select a well-considered investment strategy that aligns with your goals and stick to it, leveraging both fundamental and technical analysis.
Picking stocks for the long term involves a detailed analysis of the company’s fundamentals, growth prospects of the industry it operates in, its competitors and the macroeconomic environment. Investors should also consider various metrics like price-to-earnings ratio, dividend payout ratio, and return on equity among others to understand if the company has strong growth potential. Diversification is also a key aspect that investors should consider before selecting stocks for the long term. A well-diversified portfolio ensures is less volatile and has the potential to maximise returns, Apart from this, investors must understand their risk profile before investing.
Advantages of Long-Term Investments
Long-term investments in India continue to offer several advantages:
- Potential to earn significant returns through compounding
- Opportunity to build a robust and diversified investment portfolio
- Reduced stress and risk associated with short-term market volatility
- Tax efficiency as long-term capital gains tax is lower than short-term tax
By investing for the long term, investors have the chance to navigate the complexities of the market along with benefiting from India's long-term economic growth. Long-term investing also offers the pathway to achieve financial goals, securing a prosperous financial future. By focusing on the horizon and not the short-term waves, investors can ride out market volatility and benefit from the growth potential of their investments.
It's important to remember that the landscape of long-term investments is always evolving. As new industries emerge and global economic conditions shift, so too will the opportunities for long-term investment. Staying informed, adapting to changes, and maintaining a diversified portfolio will help investors navigate these shifts successfully.
Conclusion
Investing for the long term is not just about selecting the right stocks or sectors, it's about cultivating a mindset that prioritises patience, diligence, and a commitment to continuous learning. Whether you are just starting your investment journey or looking to refine your existing portfolio, the key to success lies in making informed decisions, maintaining discipline, and staying focused on your long-term objectives.
With the right approach, the world of long-term investment offers endless possibilities for growth and success. Finally, regularly review your portfolio to ensure it aligns with your investment objectives, making adjustments as needed to stay on course toward your financial goals.
FAQs
What is the benefit of long-term investing?
Long-term investing helps you to ride market volatility while enjoying the benefits of compounding. Through long-term investing, one can achieve his/her financial goals, leading to a secure future.
How to reduce risk while investing for long-term?
To reduce risk, Investors must pick stocks spread across different sectors. This will also ensure lesser volatility and higher returns.
Is it safe to invest for long-term?
By selecting fundamentally robust companies with a proven history of profitability and stability, investors can ensure they are picking safer stocks in the long term.
How does volatility impact long-term stock investment?
Market instability can temporarily affect the value of long-term stocks; however, companies chosen for their large market capitalization and strong financial fundamentals typically recover their value over the long term.