Balance sheet analyses reveals 19 companies with a winning formula
This report aims to identify companies which would not only be investment picks in adverse times such as these, but would also figure among the best performers upon a revival of the market. We have shortlisted 18 companies based on their strong balance sheet positions and cash generation capacities. We firmly believe that the shortlisted players have the wherewithal to battle the unrelentingly glum economic scenario.
Robust balance sheets set them apart: We have considered companies which have strong cash generation capacities (OpCF/sales ratio), or low capex requirements, or those which have already completed a bulk of their capex with healthy free cash flows (FCF), or have low debt obligations with strong cash per share and RoCE. We have excluded the real estate and shipping sectors from this exercise.
Liquidity, under-ownership feathers in their caps: We have further scrutinised the companies with reference to liquidity and the under/over-ownership criteria. We believe under-owned stocks, over a period of time, should generate higher returns. The market ownership ratio of 60% is taken as the benchmark. (Ownership ratio = (FII% + DII%)/ Free Float%)
Stress case test: Companies that satisfied the above two criteria have been further assessed on the basis of stress-case conditions, to help time the investment better. The last bear cycle has been considered for valuation purposes.
Large cap picks: Bharti, ONGC, RIL, Maruti and Bajaj Auto
Mid cap picks: Sesa Goa, Birla Corp, UltraTech, Thermax and Titan
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