One of the important criteria for selecting the stocks out of nifty 100 is also their ROE and ROCE as it indicates management’s efficiency of capital allocation.
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In case of Tata consumer, I find that ROE, ROCE is about 6% to 9% as against HUL’s 24 % and Nestle’s 113 and 117%. This criteria must have eliminated Tata consumer.
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in case of Godrej consumer, last 10 yrs profit CAGR is 12% while 5 years its just 7% while 3 years its negative 3%. Since i beleive , stocks returns follow earnings over long period of time, if I am expecting 15% stock returns, then my selected stocks should have minimum 15% earnings growth also. I have made Pidilite as exception to this rule. Even if it has 10 years profit CAGR of 14% and 5 years profit CAGR of 7%, i couldnot muster courage to not include it.
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Dabur and Marico are not part of Nifty 50, but they are part of Nifty Next 50 and after you pointed out, they appear to be attractive companies with meeting most of my screening criteria. Thanks for pointing me in their direction. I will study them and may be when i will decide to sell any 2 stocks from my current PF, these 2 will be seriously considered as strong contenders.
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