Which are the top stocks in India right now according to Equitymaster's safe stocks expert Tanushree Banerjee?
As per Equitymaster's Stock Screener, these are the top stocks in India according to Tanushree Banerjee right now...
These companies have been ranked as per their return on equity (RoE) and have market capitalization of more than Rs 100 bn.
The return on equity is a gauge of a corporation's profitability and how efficiently it generates those profits. The higher the RoE, the better.
However, there are other parameters you should take into account before forming a hard opinion on the stock valuation.
Who is Tanushree Banerjee?
Tanushree Banerjee is the Co-head of research at Equitymaster as well as the editor of three stock recommendation services - StockSelect, Equitymaster's most popular service, Forever Stocks, a service with a curated list of 20 stocks to be bought and held for several years and Equitymaster Venture, a service which recommends Indian stocks in the technology space.
She is Equitymaster's guru of investing in safe stocks. In tune with her commitment to investing safely, her services recommend the kind of safe stocks you could 'bet your retirement on'.
Tanushree has over 17 years of experience as a research analyst and editor. She began her career tracking banking stocks and tracking RBI policies. Over time she expanded her coverage to most sectors in the stock market.
What is Tanushree Banerjee's investing philosophy?
Tanushree believes in the philosophy of investing legends, Warren Buffett and Benjamin Graham, called value investing. She staunchly abides by Buffett's 2-Rule Mantra.
Rule No.1: Never lose money.
Rule No.2: Never forget rule No.1.
What is value investing?
Value investing is an investment approach that allows one to profit from undervalued stocks. It is based on the idea that each stock has an intrinsic value, i.e. what it is truly worth.
Through fundamental analysis of a company, we can determine what this intrinsic value is.
If the intrinsic value is higher than the actual stock price of the company, then the stock offers an investment opportunity. It's like buying a Rs 100 note, for Rs 80.
Conversely, if the intrinsic value is lower than the current market price, then the stock is 'over-valued' and should be avoided. Think of a Rs 100 note selling for Rs 120.
Which other famous investors believe in value investing?
Legendary investors Benjamin Graham and Warren Buffett have based their entire investing philosophy on buying undervalued stocks i.e stocks that have a margin of safety.
However, they consider other parameters as well besides valuation such as high return on equity and high profit margins. They also focus on companies that provide a unique product or service that gives them a competitive advantage.
Another famous investor who is an advocate for buying undervalued stocks is hedge fund manager and Columbia University professor Joel Greenblatt. His investing strategy involves buying undervalued stocks based on two parameters - high earnings yield and return on capital (RoC).
The earnings yield tells us whether the company is available at an attractive price. The RoC tells us how well the company has used its capital.