Looking For the Best Bluechip Stocks for 2024? You Don't Want to Miss These 5...

Have you ever wondered why certain large-cap stocks are called bluechips?

The term bluechip comes from the most popular card game Poker. In this game, the most valuable chips are the blue ones.

Coined by Oliver Gingold in 1923, bluechip stocks are considered the most valuable stocks in the stock market.

Their well-established brands, loyal customer base, and a proven track record of solid fundamentals make them a compelling buy at any levels.

Despite being subject to market volatility, bluechip stocks have the ability to bounce back at a faster rate, making them low-risk investments.

They are like go-to stocks for investors of all kinds, beginners or experienced.

Keeping that in mind, we have shortlisted five bluechip stocks to add to your watchlist in 2024 with the help of Equitymaster's powerful India stock screener.

#1 Tata Consultancy Services (TCS)

First on the list is TCS, the second most valuable company in India after Reliance.

The Tata group company is engaged in the business of providing IT services, consulting, and business solutions.

It has a global presence, deep domain expertise in multiple industry verticals, and a complete portfolio of services consisting of consulting, service integration, and application services.

Along with the above, the company uses its industry-leading suite of products and platforms to deliver high-quality solutions to customers across the world.

These solutions are delivered using its Secure Borderless Workspaces (SBWS) operating model, which enables a highly distributed location-independent agile delivery.

What makes TCS the top bluechip stock to watch out for 2024?

Apart from strong net profit and revenue growth, the company boasts of a growing and healthy order book.

Its return on equity (RoE) and return on capital employed (RoCE) currently stand high at 46.8% and 63.8%, respectively.

TCS also rewards its shareholders with consistent dividends and share buybacks. It has announced four buybacks in the last six years, and it also announced a fifth buyback worth Rs 170 billion (bn) on 11 October 2023.

The company's dividends have also been consistently growing, and the five-year average dividend payout is 60.7%, with a current dividend yield of 1.3%.

In its recent conference call, the management of TCS said that it is continuously investing and building capabilities in Generative AI (artificial intelligence) through which it aims at securing large outsourcing deals and optimising costs.

To know more, check out TCS' financial factsheet and latest quarterly results.

#2 HDFC Bank

Second on the list in HDFC Bank.

It is one of the most respected banks in the country despite having a market share of less than 10%.

The bank relies on a model of wide franchise and a low-cost deposit base. This ensures good pricing power and sustainability of above-average NIMs (net interest margins).

After the merger with HDFC Ltd, HDFC Bank, which was just a distributor of financial services products, has become a financial services conglomerate.

It offers a full suite of financial services, from banking to insurance and mutual funds, through its subsidiaries.

Moreover, the bank has become one of the top 100 lenders in the world in terms of assets.

HDFC Bank also has access to its parent's 45-plus years' of experience in loan processing and mortgage origination.

This helps the company grow to newer heights despite facing small short-term challenges.

In the last five years, the bank's net interest income grew by a CAGR of 12.6%. Its net profit grew by a CAGR of 15.5% during the same period, primarily led by healthy growth in advances and deposits.

HDFC Bank is very conservative with its margins and provisions. It comes as no surprise that the bank's NPA (non-performing assets) haven't crossed 0.4% in the last five years.

After the merger, the company announced its financial results for September 2023. It reported a consolidated net profit of Rs 168 bn as against a net profit of Rs 111 bn a year ago, beating street estimates.

Going forward, the bank plans to focus on deposit mobilisation and branch expansion to drive growth.

To know more, check out HDFC Bank's financial factsheet and latest quarterly results.

#3 Bajaj Finance

Third on the list is Bajaj Finance.

The company is one of the largest non-banking finance companies (NBFC), with a customer base of 73 million (m).

It is also one of the most diversified financial services companies in India. The company offers various services, including retail loans gold loans, accepts deposits, mutual funds, and depository services to its customers.

It also offers home loans and brokerage services through its subsidiaries, Bajaj Housing Finance and Bajaj Financial Securities.

Recently, Bajaj Finance raised funds worth Rs 100 bn (US$ 1 bn) through Qualified Institutional Placement (QIP) and from its parent company.

With Jio Financial Services entering the consumer lending space, Bajaj Finance will face direct competition and hence announced an expansion plan and said it will use the funds raised for the same.

It will concentrate on launching new products and establishing physical offices across the country to improve its geographical presence.

In the last five years, the revenue of the company grew at a CAGR of 19.5%, driven by growth across segments, including mortgages, home loans, SME loans, and rural financing.

The net profit also grew at a CAGR of 23.6% during the same period. Its RoE has consistently improved and currently stands at 21.4%.

The company's net NPA also decreased drastically from 0.9x to 0.4x in the last year, showing its superior asset quality.

Going forward, the expansion plan could drive its growth.

To know more, check out Bajaj Finance's financial factsheet and latest quarterly results.

#4 L&T

Next on the list is Larsen & Toubro (L&T).

Headquartered in Mumbai, L&T is an Indian multinational conglomerate with a business interest in engineering, construction, manufacturing, technology, information technology, and financial services.

In recent years, L&T has also become a dominant force to reckon with in the green energy sector.

The company is investing heavily into the segment, with one of the notable investments of Rs 320 bn in the next 3-5 years in its green hydrogen business.

Coming to its financials, in the last five years, the company's revenue and net profit have grown at a CAGR of 6.3% and 5.5%, respectively.

The RoE and RoCE stand at 14.2% and 17.9%, respectively, at the end of the financial year 2023.

Its debt-to-equity has reduced from 1.2x to 0.7x in the last five years, and it plans to deleverage its balance sheet further.

L&T also pays consistent dividends to its shareholders and has a five-year average dividend payout of Rs 43.2%.

Going forward, its diversified revenue profile and expansion plans will drive its growth in the medium term.

To know more, check out L&T's financial factsheet and latest quarterly results.

#5 ITC

Last on the list is ITC.

The company is India's largest cigarette manufacturer and seller in the country. It also operates in four other segments, namely FMCG, hotels, paperboards, agribusiness, information technology, and paper and packaging.

Over the last few years, the company concentrated on increasing its FMCG and hotel portfolio to reduce its dependence on the cigarettes segment.

Some of its popular FMCG brands include Aashirvaad, Sunfeast, Bingo, and Kitchens of India.

ITC has backward integration in its cigarettes, agri paper and packaging business. This helps the company keep its costs to a minimum.

In the last five years, the revenue of the company has grown at a CAGR of 6.6%, driven by healthy growth in volumes across all its business segments. The net profit also grew at a CAGR of 8.7% during the same time.

Its net margin also improved despite inflation and the RoE and RoCE stand at 28.5% and 38% respectively.

ITC also pays consistent dividends to its shareholders, and its five-year average dividend payout is 84.8%.

Recently, the company's board approved the demerger of its hotel business into a new entity, ITC Hotels Limited.

The primary reason behind the demerger is that the hotel business guzzles close to 20% of the capital but only contributes 3.5% to the revenue.

With the demerger, ITC hopes that its profitability and capital allocation will improve post the demerger.

Going forward, ITC's growth across all business segments will drive growth in the medium term.

To know more, check out ITC's financial factsheet and latest quarterly results.

Snapshot of Top Bluechip Companies on Equitymaster's Indian Stock Screener

Here's a quick view of the above companies based on their financials.

Please note that these parameters can be changed according to your selection criteria.

This will help you identify and eliminate stocks not meeting your requirements and emphasise those stocks well inside the metrics.

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...