Today’s Economic Times carries a report that says, “A good monsoon prediction lifts spirits on Dalal Street”. It further adds that this augur well for rural-focused companies.
The announcement of a normal monsoon in addition to an increase in farmer income due to a 15% hike in the Minimum Support Price for crops could mean an increased demand and greater rural consumption. One of the sectors which could gain from a good monsoon is FMCG.
In this Marketsmojo Professional Exclusive, we try and find the best investment ideas in the FMCG sector.
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A Brief Synopsis of the Four Stocks
Godrej Consumer
This Large Cap company, having MCap of Rs 73,372.38cr, is a leader in the Indian FMCG sector, with leading Household and Personal care products. The company’s product range includes brands like Cinthol, Fair Glow, Evita, Vigil, Godrej Expert, Anoop Renew, Godrej Dishwash and more.
The institutional holding of the company is high at 30.07%
Growth: Over the last 5 years, the company has shown a Sales growth of 10.03%. In the last 9 months, the Sales has grown at 3.7%, and PAT has grown at 10.9%
Profitability: The Average ROCE of the company has been 19.8% and the ROE is 22.4%.
Stock Performance: The stock is up 37% over 1 year and 93.4% over the last 3 years.
Glaxosmithkline Consumer
This Large Cap company, having MCap of Rs 27,728.66cr, is in the business of manufacturing health drinks. They have created brands like Horlicks, Boost, Maltova and Viva.
The institutional holding of the company is at 12.79%
Growth: Over the last 5 years, the company has shown a Sales growth of 5.8%. In the last 9 months, the Sales have reduced by -0.5%, and PAT has grown at 1.5%
Profitability: The Average ROCE of the company has been 29.7% and the ROE is 24.5%.
Stock Performance: The stock is up 13.4% over the last 1 year.
Dabur India
This Large Cap company, having MCap of Rs 60,578.69cr, is the fourth largest FMCG stock in the country currently catering to the healthcare, personal care & food segment. The company’s product range includes Hajmola, Pudin Hara, Glucose D, Odomos, Odonil, Dabur Red Toothpaste and more.
The institutional holding of the company is high at 26.21%
Growth: Over the last 5 years, the company has shown a Sales growth of 4.9%. In the last 9 months, the Sales has reduced by -1.2%, and PAT has grown at 1.5%
Profitability: The Average ROCE of the company has been 27.5% and the ROE is 30.4%.
Stock Performance: The stock is up 22.3% over the last 1 year.
Bajaj Corp
This MidCap company, having MCap Rs 6,957.58cr, is engaged in the business of hair oils. The company markets the hair oils under the brand names Brahmi Amla, Amla Shikakai and Jasmine hair oil. Its key product is Bajaj Almond Drops which is the market leader in the light hair oil segment.
The institutional holding of the company is high at 29.75%
Growth: Over the last 5 years, the company has shown a Sales growth of 7.4%. In the last 9 months, the Sales have grown by 1.9%, and PAT has reduced at -4.4%
Profitability: The Average ROCE of the company has been 41.3% and the ROE is 35.5%.
Stock Performance: The stock is up 19.6% over the last 1 year.
How did we select these three stocks?
- India’s Meteorological Department has predicted a normal monsoon this year. A good monsoon helps rural incomes which should help increase rural Demand.
- If this event plays out, one of the sectors that could benefit is the Fast-Moving Consumer Goods Sector. The companies in the sector could see a positive Financial trend.
- The FMCG sector has been a a strong performer across time period. Over the last 10 years the Nifty FMCG Index is up 362% versus the Nifty which is up 112%. In general, the volatility of the FMCG stocks is also lower than average. The additional good news is that there are other, more structural factors, which will help the rural economy already in play. (Read More).
- Using our MojoLogic screener we’ve identified 4 stocks in the FMCG sector. We have chosen companies for which:
- Quality which is Good or Excellent.
- Valuation which is Attractive or Very Attractive
- Financial Trend which is Flat, Positive, Very Positive or Outstanding
- Moving Averages which are Mildly Bullish or Bullish
- Market Cap is greater than Rs. 1000 cr.
The output is as follows:
Note to investors:
With more than 4000+ listed companies and the plethora of news and tips it can be very confusing. Where should one even begin? One of tool that we offer our subscribers is a family of stock screeners. In this Marketsmojo Professional Exclusive Series I will show ways of using these tools to help choose your investment ideas. The above contrarian stock picks have been chosen from the MojoLogic Screener.
A Screener is far more efficient than digesting every piece of available information. Screeners can analyze thousands of stocks in seconds a process which would otherwise require a lot of time and a large team of analysts.
To add to this, stock screens take away the biases and emotions that all of face hindering out stock selection process. Once you have designed a stock screen model that works for you, you can regularly check which stocks meet the criteria, with a single click.
To make life simpler we have also provided a few pre-designed investment themes. Check them out here.
Sanjeev Mohta
Market Expert
Sanjeev Mohta is the Market Expert at Marketsmojo. He has over 27 years’ experience in Investment Research and Fund management across Asian Markets and Asset classes. He has worked in various organisations in Singapore and India like Alchemy, QVT, Jefferies, ABN Amro and HSBC Securities. He Has a PhD in Economics from Tulane University, USA.