5 Most Traded Compounding Stocks In India
As legendary investor Warren Buffett wisely imparts, “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.” In alignment with Buffett’s enduring investment philosophy, we delve into the Nifty 100 list to scrutinize stocks that have demonstrated a remarkable CAGR exceeding 15-16% over a substantial 40-year period.
Compounding stocks have a profound impact on the ever-changing Indian stock market, characterized by constant flux and numerous investment opportunities. According to the report, the Indian stock market has exhibited an impressive compounded annual growth rate (CAGR) of approximately 15–16% over the past four decades. The Global Financial Development Database further attests to the robust performance, citing an average stock market return of 21.5% in 2021 for Indian indices.
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What are Compounding Stocks?
Compounding stocks, also called consistent compounders, are stocks that keep growing steadily in how much money they make and how profitable they are. They have strong finances and advantages over others. These stocks are a safe way to make more money over a long time because of how they grow slowly but steadily.
When you invest in these stocks, you need to wait for a while and not sell them quickly. This waiting helps their steady growth to make you more money.
5 Most Traded Compounding Stocks In India
Overview of Best Compounding Stocks in India
Bharat Electronics Ltd
Bharat Electronics Ltd, a large-cap company, specializes in designing, manufacturing, and supplying electronics products/systems for defense and non-defense markets. With an 86% analyst rating and a profitability score of 7.6, it exhibits signs of robust profitability and efficiency. The projected revenue growth for the next year stands at 13.53%, a positive indicator for the company’s prospects.
ITC Ltd
ITC Limited operates in FMCG, Hotels, Paperboards, Paper, Packaging, and Agri-Business segments. Scoring 8.4 for profitability, its revenue has consistently grown at 9.83% annually, surpassing the industry average.
Engineers India Ltd
Engineers India Ltd, a small-cap engineering consultancy firm, boasts a debt-to-equity ratio of 0.32% for the last five years, significantly lower than the industry average. Additionally, an expected earnings growth of 20.12% for the next year outshines its past performance.
Indian Railway Catering and Tourism Corporation Ltd (IRCTC)
IRCTC, a mid-cap company in catering and hospitality, scores 8.5 for profitability. Notably, it displays no red flags, indicating promising performance.
Bls International Services Ltd
BLS International Services provides outsourcing services for visas, passports, and attestations globally. With a high-performance score of 7.8 and no red flags, it signifies strong profitability and efficiency.
Why Invest in Consistent Compounding Stocks?
Here are four reasons to consider investing in these stocks:
Long-Term Wealth Creation
Consistent compounding stocks facilitate long-term wealth creation through consistent growth in earnings and dividends, reinvested to escalate investment value gradually.
Lower Risk
These stocks often hail from established, well-managed companies, offering dividends that reduce investment risk, ensuring stability.
Inflation-Beating Returns
They have the potential to deliver returns surpassing inflation, safeguarding the investment’s purchasing power against inflation.
Diversification
Investing in stocks across various industries and sectors mitigates portfolio risk and enhances long-term growth potential.
In summary, investing in consistent compounding stocks offers prospects for long-term wealth creation, lower risk, inflation-beating returns, and diversified investment portfolios.
