5 Monopoly Stocks Selling At Big Discounts To Recent Highs
No matter what the state of the market may be, a bull market, bear market, or even a trendless market, investors are always on a quest to find profitable stocks at bargain prices.
After all, who does not love a bargain?
The lure of finding a stock that triples or quintuples are irresistible.
And typically, the starting point for that is buying a solid stock for cheap.
But the challenge is how to find these stocks.
One approach could be to focus on monopoly stocks. Monopolies benefit from high barriers to entry and superior margins.
Getting these stocks at a lower valuation can potentially generate consistent wealth in the long term.
With the market having seen a correction recently, shares of some of these monopoly stocks are trading lower.
Here are 5 monopoly stocks in India that are trading at over a 35 per cent discount to their recent highs.
#1 IRCTC
The first monopoly stock on our list is IRCTC.
The stock is currently trading at a discount of 50% from its 52-week high of Rs 1,279.3.
The Indian Railway Catering and Tourism Corp (IRCTC) is a government entity. It is the only authorised entity by the Indian railways to offer online railway tickets. Effectively, it has a 100% market share in this space.
Apart from this, it also enjoys a monopoly in packaged drinking water that is sold on Indian trains.
Over the last 5 years, revenues at IRCTC has grown at a CAGR of 4.3 per cent in 5 years. However, the net profit saw a CAGR growth of 25.3 per cent.
The company's numbers have improved over the last year. In 2022, the company saw a 103 per cent YoY increase in revenue to Rs 6.9 billion. And it reported a 106 per cent YoY growth in net profit to Rs 2.1 billion.
The growth was on the back of the rise in revenue in the catering and tourism segments.
IRCTC is planning to build budget hotels. These will be built in Lucknow, Banaras, and Ayodhya.
To know more about the company, check out IRCTC's factsheet and quarterly results.
#2 Indian Energy Exchange (IEX)
The next on our list is IEX.
The stock is currently trading at a discount of 48 per cent from its 52-week high of Rs 318.6.
IEX is one of the two nodal power exchanges in India. It accounts for 95 per cent of short-term electricity contracts traded over the exchanges. It is a virtual monopoly.
Over the last five years, revenue has grown at a CAGR of 16.5 per cent. However, the net profit saw a CAGR growth of 21.6 per cent.
The growth is due to the continuous rise in electricity volumes on the exchanges.
In 2022, the company saw a 36 per cent YoY increase in revenue to Rs 4.8 billion. However, it reported a 50 per cent YoY growth in net profit to Rs 3 billion.
The 29.2 per cent rise in electricity volumes was the main reason for the robust performance.
The company is planning to expand capacity.
To know more about the company, check out IEX's factsheet and quarterly results.
#3 Computer Age Management Services (CAMS)
The third on our list is Computer Age Management Services.
It is currently trading at a discount of 42 per cent from its 52-week high of Rs 4,067.4.
The company provides transaction processing and customer care services. It's also in the business of online transactions and capital accounting. It accounts for 70 per cent of the market share on mutual fund average assets under management.
Over the last five years, its revenue has grown at a CAGR of 13.7 per cent. Also, the net profit saw a CAGR growth of 17.6 per cent.
The mutual fund asset service was one of the main drivers of the growth. The growth was further supported by the digitising trend.
In 2022, the company saw a 24 per cent YoY increase in revenue to Rs 9.3 billion. It also reported a 39 per cent YoY growth in net profit. High transaction volumes and new SIP registrations were a driver of profit.
In 2022, the company launched its first cloud-based platform. It has increased its client base by fifteen for the year.
To know more about the company, check out CAM's factsheet and quarterly results.
#4 Multi Commodity Exchange (MCX)
The fourth on the list is the Multi Commodity Exchange.
MCX is currently trading at a low of 40 per cent from its 52-week high of Rs 2,135.
It is the largest futures exchange in India. It has a market share of over 95 per cent. It has a near monopoly on bullion metals, base metals, and crude oil trading in India.
Due to the rise in global stock market volatility, MCX saw a rise in trading volumes. Over the last five years, its revenue has grown at a CAGR of 8.7 per cent. Also, the net profit saw a CAGR growth of 4.4 per cent.
In 2022, the company saw a 10 per cent YoY increase in revenue to Rs 1.4 billion. It also reported a 21 per cent YoY growth in net profit to Rs 678 million.
The company also plans to develop new products and contracts for 2023.
To Know more about the company, check out MCX's factsheet and quarterly results.
#5 Hindustan Zinc
The last on our list is Hindustan Zinc.
Hindustan Zinc is currently trading at a discount of 34 per cent from its 52-week high of Rs 408.6.
It is an Indian mining and resource producer of zinc, silver, and lead. It holds 78 per cent of the share in the primary zinc industry. It is the world's second-largest zinc-lead miner.
Over five years, its revenue has grown at a CAGR of 11.2 per cent. Also, the net profit saw a CAGR growth of 2.9 per cent. It was on the back of the metal production capacity of the company.
In 2022, the company saw a 27 per cent YoY increase in revenue to Rs 87 billion. It also reported an 18 per cent YoY growth in net profit to Rs 29 billion.
It was due to the highest ever metal production by the company. Also, the price of zinc rose by 37 per cent. These two factors raised the earnings of the company.
For 2022, the company is to set up a 30 kilo tonnes per annum (KTPA) plant in Rajasthan. This plant is to expand the production of zinc alloys.
The move is in line with the company's strategic purpose of reducing dependence on thermal power by scaling up our renewable energy.
To know more about the company, check out Hindustan zinc's factsheet and quarterly results.
How to invest in monopoly stocks?
Monopolies are challenging to create and maintain without government support.
Warren Buffett has always emphasised the idea of investing in companies that have moats.
A moat refers to a deep, wide ditch that surrounds a castle, fort, or town. It serves as a defence against the attack.
In investing, it refers to a company's ability to preserve its competitive advantage over its peers. The stronger the business, the larger the moat. The lower the moat, the weaker the business.
All these monopoly companies have a higher moat. It is because they have a majority of the market share. This stake helps them to generate revenues in adverse economic conditions.
If you plan to invest in such stocks, assess the company's fundamentals and allocate wisely in fundamentally strong stocks.
Also, keep in mind the overall factors impacting the company and industry.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
