Regardless of the state of the market, be it a bull market, a bear market or even a flat market, investors are always on the lookout for profitable stocks at bargain prices. .
After all, who doesn’t like a bargain?
The attraction of finding stock that triples or quintuples is irresistible.
And usually the starting point for this is to buy a solid stock on the cheap.
But the challenge is how to find these stocks.
One approach could be to focus on monopolistic stocks. Monopolies enjoy high barriers to entry and higher margins.
Getting these stocks at a lower valuation can potentially generate consistent long-term wealth.
With the market having recently undergone a correction, shares of some of these monopoly stocks are trading lower.
Here are 5 monopoly stocks in India that are trading more than 35% off their recent highs.
The first monopoly stock on our list is IRCTC.
The stock is currently trading at a 50% discount to its 52-week high of Rs 1,279.3.
The Indian Railway Catering and Tourism Corp (IRCTC) is a government entity. It is the only entity authorized by Indian Railways to offer railway tickets online. Indeed, it holds 100% market share in this space.
Apart from this, it also enjoys a monopoly on packaged drinking water sold in Indian trains.
Over the past 5 years, IRCTC revenue has grown at a 5-year CAGR of 4.3%. However, net profit grew CAGR of 25.3%.
The company’s numbers have improved over the past year. In 2022, the company recorded a 103% increase in revenue year-on-year to Rs 6.9 billion. And it recorded a 106% year-on-year growth in net profit to 2.1 billion rupees.
This growth is based on the increase in turnover in the catering and tourism segments.
IRCTC plans to build budget hotels. These will be built in Lucknow, Benares and Ayodhya.
For more on the company, check out the IRCTC’s Quarterly Fact Sheet and Earnings.
#2 Indian Energy Exchange (IEX)
Next on our list is IEX.
The stock is currently trading at a 48% discount to its 52-week high of Rs 318.6.
IEX is one of the two nodal power exchanges in India. It accounts for 95% of short-term electricity contracts traded on stock exchanges. It is a virtual monopoly.
Over the past five years, revenues have grown at a CAGR of 16.5%. However, net profit grew CAGR of 21.6%.
The growth is due to the continued rise in electricity volumes on exchanges.
In 2022, the company recorded a 36% increase in revenue year-on-year to Rs 4.8 billion. However, it recorded a 50% year-on-year growth in net profit to Rs 3 billion.
The 29.2% increase in electricity volumes was the main reason for the strong performance.
The company plans to increase its capacity.
For more on the company, see IEX’s Fact Sheet and Quarterly Earnings.
#3 Computer Age Management Services (CAMS)
Third on our list is Computer Age Management Services.
It is currently trading at a 42% discount to its 52-week high of Rs 4,067.4.
The Company provides transaction processing and customer service services. It is also in the field of online transactions and capital accounting. It accounts for 70 percent of the market share on average mutual fund assets under management.
Over the past five years, its revenue has grown at a CAGR of 13.7%. Additionally, net income grew CAGR of 17.6%.
The mutual fund asset service was a key driver of growth. Growth was also supported by the trend towards digitalization.
In 2022, the company recorded a 24% increase in revenue year-on-year to Rs 9.3 billion. It also posted 39% year-on-year growth in net profit. High transaction volumes and new SIP registrations were a profit driver.
In 2022, the company launched its first cloud-based platform. He increased his clientele by fifteen for the year.
For more on the company, see CAM’s fact sheet and quarterly results.
#4 Multi-Commodity Exchange (MCX)
Fourth on the list is the Multi Commodity Exchange.
MCX is currently trading at a low of 40% from its 52-week high of Rs 2,135.
It is the largest futures exchange in India. It holds a market share of over 95 percent. It holds a virtual monopoly over precious metals, base metals and crude oil trading in India.
Due to increased volatility in global equity markets, MCX experienced an increase in trading volumes. Over the past five years, its revenue has grown at a CAGR of 8.7%. Additionally, net income grew CAGR of 4.4%.
In 2022, the company recorded a 10% increase in revenue year-on-year to Rs 1.4 billion. It also reported a 21% year-on-year growth in net profit to 678 million rupees.
The company also plans to develop new products and contracts for 2023.
To learn more about the company, see MCX’s Fact Sheet and Quarterly Earnings.
#5 Hindustan Zinc
Last on our list is Hindustan Zinc.
Hindustan Zinc is currently trading at a 34% discount to its 52-week high of Rs 408.6.
It is an Indian mining and resource producer of zinc, silver and lead. It holds 78% of the shares of the primary zinc industry. It is the second largest zinc-lead mine in the world.
Over five years, its revenue grew at a CAGR of 11.2%. Additionally, net income grew CAGR of 2.9%. This was on the back of the company’s metal production capacity.
In 2022, the company recorded a 27% increase in revenue year-on-year to Rs 87 billion. It also reported an 18% year-on-year growth in net profit to 29 billion rupees.
This was due to the company’s highest ever metal production. In addition, the price of zinc increased by 37%. Both of these factors increased the company’s profits.
For 2022, the company is to set up a 30 kilotonnes per annum (KTPA) plant in Rajasthan. This plant is intended to develop the production of zinc alloys.
This decision is in line with the company’s strategic objective to reduce dependence on thermal energy by developing our renewable energies.
For more on the company, see Hindustan Zinc’s Fact Sheet and Quarterly Results.
How to invest in monopoly stocks?
Monopolies are difficult to create and maintain without government support.
Warren Buffett has always emphasized the idea of investing in companies that have moats.
A moat refers to a deep and wide moat that surrounds a castle, fort, or town. It serves as a defense against attack.
In investing, it refers to a company’s ability to maintain its competitive advantage over its peers. The stronger the company, the bigger the gap. The lower the moat, the weaker the company.
All of these monopolistic companies have a higher moat. This is because they hold the majority of the market share. This participation helps them to generate income in unfavorable economic conditions.
If you are considering investing in such stocks, assess the fundamentals of the company and allocate wisely fundamentally sound stocks.
Also keep in mind the overall factors affecting the business and the industry.
Disclaimer: This article is for information only. This is not a stock recommendation and should not be treated as such.
This article is syndicated from equitymaster.com
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)