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  • Jun 20, 2022 - Looking for Value Stocks Amid Volatile Times? Consider These 5 Stocks

Looking for Value Stocks Amid Volatile Times? Consider These 5 Stocks

Jun 20, 2022

Indian stock markets have been in a downtrend for a while and some fear that they have entered into the bear territory.

Constant FII outflows, monetary tightening, multi-year high inflation, the Russia-Ukraine war, and sky-high crude oil prices, have heightened the behaviour of investors risk-averse.

While certain investors are constantly wondering how to invest in these choppy markets, value investors are on a hunt for their favourite stocks.

Value investing is a strategy that involves picking stocks that appear to be trading below their intrinsic value or book value.

During volatile times, value stocks have proven to be investors' best bet while growth stocks take a serious hit.

Value investors believe that markets overreact to good or bad news, resulting in stock price movements that do not correlate with the company's long-term fundamentals.

This overreaction offers them an opportunity to profit by buying stocks at a discounted price, like going shopping during a sale.

Value investors are looking at the current markets as the 'Great Indian Sale'.

Here's a list of 5 stocks they would love to invest in.

#1 VLS Finance

Established in 1986, VLS Finance is a multi-faceted, multi-divisional, integrated financial services group.

It provides various services like asset management, strategic private equity investments, arbitrage, and investment banking.

VLS finance has strong fundamentals with improving return on asset, return on equity, and return on capital.

The return on equity has averaged 7.1% for the last five years and its three year profit CAGR stands at 106.4%.

VLS Finance is also a debt free company and is able to generate positive net cash flow.

The promoters of the company have increased their stake during the March 2022 quarter and the company continues to have zero promoter pledge.

Along with stable financial performance, VLS Finance has been paying dividends from 2017 to 2022 constantly. For the financial year 2022, the company declared a dividend of Rs 1.5 per share.

VLS Finance's current price-to-book ratio is 0.2 while the price-to-earnings multiple is 2.5 indicating that the stock is currently undervalued.

The company's shares have given a return of 9.8% over the last one year.

To know more about the company, you can have a look at its factsheet and quarterly results.

#2 Deep Industries

Deep Industries is a leading solution provider in the energy sector.

The company specializes in providing air/gas compression services, drilling and workover services, and gas dehydration services.

It also provides various equipment and services on a rental and chartered-hire basis required in oil and gas field operations.

The company is set to benefit from the increasing oil demand as China relaxes its lockdown. With Covid-19 cases under control, Beijing's economic stimulus is set to kick-in.

In 2020, Deep Industries became an approved contractor of Kuwait Oil Company. Kuwait is a major exporter of oil having strong trade relations with China.

The company is debt free while it has incremental cash flows.

As of March 2022, company promoters held a 64% stake in the company, with no shares having been pledged.

Deep Industries' current book value is Rs 341.1 and the price-to-book ratio is 0.6 indicating that the stock is currently undervalued.

To know more about the company, you can have a look at its factsheet and quarterly results.

#3 Suumaya Industries

Established in 1985, Suumaya Industries has grown from a lifestyle company to a large, diversified conglomerate.

In 2020 the company scaled up operations in new sectors like medical/technical textile, agro, retail, and rural financial inclusion.

Suumaya Industries also offers third-party logistics services.

Having diversified in 2020, the company's financial performance has shown exponential growth.

Suumaya Industries' three year profit CAGR stands at 553.7% and the return on equity has averaged 25.2% for the last five years.

Growing sales, increasing profitability and zero debt makes the company an attractive bet for value investors.

To know more about the company, you can have a look at its factsheet and quarterly results.

#4 Pilani Investment and Industries Corporation

Pilani Investment and Industries Corporation, a holding company of the Aditya Birla Group, is an investment company registered as a non-banking financial company (NBFC).

The company holds significant investments in equity shares of various diversified companies such as Century Textiles, Grasim Industries, Hindalco, and UltraTech Cement, among others.

In some of these companies, Pilani is classified as a promoter.

The company's growth has been closely related to the performance of its investee companies and the corresponding market value of the same.

As the economy is moving to normalcy after considerable disruption due to Covid-19, the companies are expected to report enhanced profits, which will enhance their valuations.

The company has also expanded its horizon by entering into financing activities such as corporate loans.

Increased revenue coupled with improving profitability margins and low debt have appealed to value investors.

The stock is currently undervalued and is trading at a price-to-book value ratio of 0.16.

The company's share price has fallen over 19% in the past one year.

To know more about the company, you can have a look at its factsheet and quarterly results.

#5 Nalwa Sons Investments

Nalwa Sons Investments is a registered non-banking finance company with an asset size of over Rs 1 bn.

The company is part of the O P Jindal group, a multi-locational, multi-product business empire with interests in sponge iron, ferro alloys, steel products, coated pipes, galvanised steel, and power.

The company holds significant investments in equity shares of the Jindal Group and other steel companies.

The company is trading at a price-to-book value ratio of 0.1.

The key fundamental ratios like return of equity, return on asset, and return on capital have also shown an increment in the last three financial years.

To know more about the company, you can have a look at its factsheet and quarterly results.

To conclude...

A company's share price might be an indicator of the investor sentiment towards the company, but it is not a true reflection of the company's fundamentals.

By conducting thorough research, value investors can find secret sales on stocks and buy them at a discount compared to how the market values them.

Value investors possess many characteristics of contrarians. They don't follow the herd.

But all successful value investors focus on staying invested for a long period of time and seldom believe in timing the market.

If you plant to invest, then aim at investing for a long term to reap maximum benefits.

Research analyst at Equitymaster Aditya Vora conducted a test on value investing a couple of months back and came at an interesting conclusion.

As per Aditya, you should completely avoid the following stocks:

  • Very high valuations: PE in excess of 50-60 or P/B in excess of 6-8.
  • Growth: Historical growth at 10-15%.

For more details, check out his entire editorial here: Is it Time to Go Back to Value Investing?

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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