In a departure from his previous strategy where Market analyst Sandeep Jain recommended stocks that were trending, this time he brings a stock that is fundamentally good but has not participated in the current market rallies. In a chat with Anil Singhvi during the popular TV show ‘Jain Sahab ke Gems’, he recommended a company which makes machine tools.
Top Stocks to Buy: Kennametal India
Jain recommended Kennametal India – a Multi-national Company (MNC). This US-based company boasts great quality, he said. The products made by it are unique. This company’s stock is currently trading around Rs 862. The return on capital employed is 25 per cent. He said that the stock of quality companies such as this can easily be at a PE multiple of 50-60. But, the PE multiple of Kennametal India stock is only 27 which makes its valuations attractive. The sales growth is around 17 per cent.
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On a careful observation of the company’s last 10 years performance, it appeared that the company had done very well in the last 3-4 years followed by a lacklustre performance in the middle years, Jain said. Since the last 3-4 years, it has rebounded and is exhibiting great strength, he said.
While the June Quarter results may not come as per expectations, stock of this company should be purchased with a long term view, he further said.
This stock has been an underperformer primarily because this segment has not done too well. Kennametal India stock has given negative returns of 1.74 and 20 per cent over a 5-year period and 1-year period. The best thing about this stocks is that it has a very little downside risk.
He said that sectors like industrial and capital goods companies or companies who manufacture intermediate goods have been the back benchers. These stocks have the potential to do well, he added.
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He puts the target price at Rs 920.