At the outset, the rules to identify the top stocks and investing in them are quite simple. A good stock is based on a good business, good management, and good execution. The complexity lies in putting these ideas to practice. Empirical data has consistently shown that a good and solid portfolio of diversified stocks can yield above-market returns over the long run. It is tough to predict in the short run, but long term these ideas surely work. At least, equities do outperform other asset classes.
For a stock to be in the top list, it has to have supportive macros, supportive industry level advantages and strong financial fundamentals and a set of intangibles. Cash flows at an operating level, solid working capital management and sound margins are where most of the companies tend to falter. A very simple such template can be used to identify the top stocks to invest in. Here we look at the top 5 shares to buy and top 5 shares to buy today.
Top 5 shares to buy today
In this list, we have picked up the top 5 stocks from the Nifty for financial and non-financial reasons, which we shall explain later. The table below is a quick gist of the five top picks in this list. Here is the story of top 5 shares to buy and top 5 shares to buy today.
SYMBOL | Market Price Rs | 52-Week High | 52-Week Low | 1-year Returns (%) | 1-month Returns (%) |
BRITANNIA | 4,301.85 | 4,669.20 | 3,132.05 | 33.84 | -1.99 |
LT | 2,169.00 | 2,297.65 | 1,456.35 | 21.23 | 0.84 |
AXISBANK | 865.35 | 970.00 | 618.25 | 11.63 | 1.40 |
SBIN | 525.60 | 629.55 | 430.70 | 3.65 | -6.14 |
RELIANCE | 2,331.05 | 2,856.15 | 2,180.00 | -12.21 | -2.26 |
• Why do we like Britannia? The company has been a steady performer in the last one year and has also been one of the few FMCGs to show a sharp recovery in the last one year. The stock is up nearly 34% in the last one year and that is commendable amidst rural buying pressure. Once the rural story starts improving; as we are starting to see the green shoots, the positive impact on Britannia should be substantial. It is part of top 5 stocks to buy and top 5 stocks to buy today
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• (L&T) has been one of the quite stars of the market in the last one year. It has overflowing order books of close to Rs5 trillion. In addition, L&T is emerging as a big beneficiary of the government decision to farm out more defence orders within India to Indian companies. Also, the IT franchise of L&T comprising of LTTS and the merged entity of LTI Mindtree is adding substantially to SOTP valuation.
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• Axis Bank has had several things going for it. Under the leadership of Amitabh Chaudhary, Axis Bank has focused on relationships, core government business, insurance franchise and made a big splurge on credit cards. The acquisition of the Indian consumer business of Citibank is likely to be value accretive for Axis Bank in adding high value clients to the roster.
• SBI has come under some pressure in the last few months but the fundamentals are still strong. It reported record profits last year and has been a big beneficiary from the growth in loan demand, higher margin on loan yields and delayed impact on deposit costs. With improving asset quality, provisions are also coming down. Of course, the SOTP of its insurance, factoring and AMC business is a big value add for SBI. A key addition to the top 5 stocks to buy and top 5 stocks to buy today
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• Reliance Industries needs no introduction. It has recently seen volatility in its refining margins and petchem margins under cost pressures. However, the retail and digital businesses are doing extremely well with the digital business a key contributor to the EBITDA. With the demerger of Jio Financial Services, the stock is already being rerated by most of the leading brokerage houses. It has to be part of any top 5 shares to buy and top 5 shares to buy today.
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Factors to consider before investing in the top 5 stocks to buy 2023
Here are some factors to consider for top 5 stocks to buy and top 5 stocks to buy today
• Cash flows and cheap valuations always work. Investors learnt it the hard way in digital and new-age stocks that eyeballs and big losses cannot create value. The idea is positive operating cash flows and consistent profit margins.
• It is not just the profit but the consistency in profits that also matters. Do not look at profit in a year but look at consistent profits quarter after quarter. That is a better gauge of how the company can handle down cycles in the market.
• Is the industry being disrupted and how is the company placed for the disruption. For instance, in an oil company, you must avoid a company that is still obsessed with old fuels but rather look for companies that are into new fuels.
• Transparency and corporate governance are a lot more critical than they may appear. Avoid companies that score low on these counts. They are not part of any top 5 shares to buy and top 5 shares to buy today.
Performance of the top 5 stocks of 2023
The table below captures the top 10 stocks in the Nifty picked based on their annual returns over the last one year. Focus on top 5 stocks to buy and top 5 stocks to buy today.
Stock | Market | 52-Week | 52-Week | 1-year | 1-month |
ITC | 379.20 | 394.00 | 248.80 | 49.59 | -1.57 |
M&M | 1,172.00 | 1,397.00 | 798.00 | 41.54 | -7.78 |
BRITANNIA | 4,301.85 | 4,669.20 | 3,132.05 | 33.84 | -1.99 |
NTPC | 177.90 | 182.95 | 134.30 | 24.38 | 3.01 |
HINDUNILVR | 2,535.00 | 2,741.60 | 2,018.00 | 22.04 | 2.63 |
LT | 2,169.00 | 2,297.65 | 1,456.35 | 21.23 | 0.84 |
EICHERMOT | 3,000.05 | 3,889.65 | 2,310.00 | 21.08 | -3.93 |
ICICIBANK | 884.50 | 958.20 | 669.95 | 20.04 | 1.76 |
COALINDIA | 220.30 | 263.40 | 164.65 | 18.26 | -1.26 |
ULTRACEMCO | 7,643.00 | 7,737.00 | 5,157.05 | 14.54 | 5.88 |
These are the top stocks by annual returns and may not necessarily match with the top 5 picks given in the previous para. However, it is best for investors to take an investing call only after due diligence.
Conclusion
The stocks listed are just illustrative and meant to give you an idea on how you can create a diversified portfolio by using basic investment rules. As an investor, you have skin in the game, so behave accordingly. Focus on top 5 shares to buy and top 5 shares to buy today.
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