MFs focus on companies with large market shares

The focus of fund managers while picking stocks in May was companies with higher market share and dominant pricing power. As the country limps back to normalcy after the stringent lockdown that shut businesses, these investors are betting that companies with a good market share would be in a better position to bounce back. Here are five companies that were among the top picks of fund managers in May.Bajaj FinanceBought by: ICICI Pru MFCMP: Rs 2,449Market cap: Rs 147,351 croreThe sharp correction in the stock price is making many fund managers buy in this high-quality franchise. Investors like the company because of its strong management, liquidity and geographical reach. However, in the near term, the company could see a spike in bad debts after the moratorium ends, while growth will be a challenge at least for a year.BritanniaBought by: Kotak MFCMP: Rs 3,367Market cap: Rs 80,972 croreBritannia Industries’ products are largely essential and in-home consumption items. In terms of distribution and logistics, the company’s products reached the dealers and sellers on time even in times of the lockdown. Also, revival in rural demand boosted Britannia’s sales. The stock registered gains of close to 10% in May and trades at a price-to-earnings multiple of 44 times. The valuations are not cheap, but they are not as high as some of the company’s peers either.Asian PaintsBought by: Aditya Birla MFCMP: Rs 1,637Market cap: Rs 157,111 croreInvestors have liked the stock in the past decade because of its market share, strong distribution networkand its better return ratios. It has a return on equity of over 25% for the past three years, and most importantly,is debt-free. In the first half of May, Asian Paints shares fell 9%, prompting fund managers to enhance exposure tothe stock. Salary hikes by the company when the majority of the industry was sacking or cutting pay have been perceived as a sign of strength.Aurobindo PharmaBought by: HDFC MFCMP: Rs 772Market cap: Rs 45,249 croreCurrency advantage, low-cost inventory, improving operating profit margin, growth in formulation business, better performance of the US and European markets in comparison to its peers and debt reduction have provided faith to fund managers to increase exposure to Aurobindo Pharma. Considering FY22’s estimated earnings, the company’s stock is trading at a price-to-earnings multiple of 11.7, which is attractive as compared to its peers, which trade in the price-to-earnings multiple range of 18-20. 76378242Bharti AirtelBought by: SBI MFCMP: Rs 560Market cap: Rs 305,457 croreFund Managers are attracted to the stock for its strong market share in the domestic mobile and non-mobile segment, diversification across businesses and healthy operations in Africa. The work from home trend and rise of OTT viewership are likely to catch up and benefit the company.As competition to acquire customers peaks out and companies start increasing prices, analysts expect average revenue per user to rise by 10% over the next few years and in line with mobile revenues to GDP ratio globally.

from Economic Times https://ift.tt/3fBhbmX