Fundamentally Strong Stocks
6 stocks
Stocks that are showing consisent growth in sales, profits, margins, dividends, earnings against the...
HDFCAMC
HDFC Asset Management Company
4,223.25
9.1 (0.2%)
CDSL
Central Depository Services (I
1,540.25
-4.1 (0.3%)
ABSLAMC
Aditya Birla Sun Life AMC Ltd.
843.70
16.7 (2.0%)
UTIAMC
UTI Asset Management Company L
1,301.75
6.6 (0.5%)
ACE
Action Construction Equipment
1,225.15
21.8 (1.8%)
SPARC
Sun Pharma Advanced Research C
204.50
14.2 (7.5%)
Stock market investing has been prevalent in India since the establishment of the Bombay Stock Exchange in 1875. Since then, the Indian stock market has been on a growth spree and has created newer milestones, especially in terms of the value and volume of stocks traded in the market. Added with the advancement in technology and investor participation, the stock market has seen exponential growth in recent years.
How does a person invest in the stock market?
Investing in the stock market has become easier nowadays. All you need is some documentation to open a Demat account, and you can start investing. However, as the stock market grows, the risk involved also increases simultaneously. Therefore, it is important for investors to understand and invest their money according to their risk profiles and preferences. A person can either invest or trade in the stock market, so anyone interested in investing money in the market must choose either of the two methods to invest. The decision to invest through any of these methods depends on the risk-taking capability of investors.
• There are two types of buyers and sellers in the stock market: Traders and Investors
• Investors can either invest for the long term or trade for the short term in the stock market
What is the difference between long-term investing and trading?
- Trading -Stock market trading is a way to buy or sell stocks of companies, with the objective of earning a return on investment from the price difference arising from the fluctuations in the stock price in a short period of time. Stock market trading is performed by investors who have high risk-taking capabilities because trading in the stock market is a risky affair due to high variations in stock prices. The sole objective of stock market trading is not to generate wealth or returns over the long- term but to earn returns from the variations of stock prices in the short term.
- Long-term investing -It is a very prominent investing technique among investors. The main objective of long-term investors in the stock market is to create a portfolio of stocks or securities that can generate returns for them through capital appreciation in the long term. Capital appreciation refers to the increase in the value of stocks over the long term, which helps investors to sell a particular stock at a higher price after its value has appreciated significantly or has reached the pre-decided targets. Long-term investors usually follow a “Buy and Hold” ideology, which means they buy a fundamentally strong share of a company and hold that share or stock for a period of at least more than a year with the expectation that the price of the share will increase due to the growth of the company.
• Trading in the stock market refers to the frequent buying and selling of stocks to benefit from price fluctuations.
• Long-term investing is concerned with buying a fundamentally strong share to hold it for a long period of time and benefit from the price appreciation in the value of the stock.
• The primary objective of long-term investing is wealth creation.
• The primary objective of trading is profit generation in the short term.
What are fundamentally strong stocks?
Before we understand fundamentally strong stocks, let us understand the term fundamentals:
- Fundamental: It refers to something that is the core structure or basis around which all the other development takes place. This dictionary meaning of the word fundamental can be directly associated with a stock. Fundamentals of a stock or a share refer to the various financial metrics and factors that bring changes in the value of the stock in the long term. Metrics such as cash flow statements, profit and loss statements, and balance sheets are some of the major fundamentals that long-term investors analyse to understand the growth prospects and risks involved in an investment opportunity. In long-term investing, the value of a stock is directly associated with the performance of the company whose stock is being bought and sold by an investor. Thus, long-term investors analyse these fundamentals along with other factors to gauge the current and expected performance of a company, which assists them in making an investment decision. Now, since we have a hold of the word “fundamental,” let us understand fundamentally strong stocks.
- Fundamentally strong stocks: The word fundamentally strong stocks refers to those stocks of companies whose fundamentals give a positive outlook to investors about the fundamentals of a company, such as cash flow, customer sentiment, operational efficiency, profitability, etc. Fundamentally strong stocks can also be understood as stocks that have lower risk and are favourable for investment. For example, Investor X has two options for investment: Stock of company A and stock of company B. Now, investor X is looking at the fundamentals of both companies, and he realises that company A is a profitable company with a very low debt. Also, other factors such as future growth prospects, cash flows, and the management of the company are giving a positive outlook. On the other hand, company B has a high amount of debt, with fluctuating profits and decreasing cash flow over the last 4 years. Thus, investor X chose company A to invest in because of its strong fundamentals and positive future prospects for growth. Meanwhile, Company B was not chosen because of high debt and fluctuating profits, which makes it a risky company for investment. From the above example, it is clear that the stock of company A is a fundamentally strong share, and hence, investor A chooses this share for long-term investment.
• Fundamentals refers to the various factors and financial metrics of a company.
• Fundamentals are analysed by investors to filter and choose a company’s stock for long-term investing.
• Fundamentally strong shares are those shares that indicate strong potential for price appreciation in the long term because of their strong fundamentals.
• Traders use technical analysis to choose the right stock for short-term trading.
• Investors use fundamental analysis for long-term investing.
How does Univest help you to choose fundamentally strong shares?
Investors can choose the best fundamentally strong shares using the premium screener feature of Univest. Univest is an investment advisory platform that offers expert recommendations for investment in stocks, futures, options, and commodities. The recommendations provided by Univest are backed by the research of its SEBI-registered research analysts, who are experts in market research and analysis.
Univest offers recommendations through its mobile application, which is available on the Play Store and Apple Store. Univest boasts a user base of over 30 lac customers who have benefitted from its research-backed recommendations since the inception of Univest in 2022.
The Univest App is a tech-enabled mobile application that provides its users with a distinct set of features that assist investors in picking the right financial instrument for investing in the stock and commodity markets. One such useful feature is premium screeners that investors can access on the Univest mobile application to choose fundamentally strong stocks by following these steps:
- Download and complete the signup process for the app.
- After the signup process is completed, open the Univest app and locate the screeners section at the bottom of the home screen.
- Click on the screener option, and an interface with various screeners will be shown.
- Scroll down on the screen, and you will find the fundamentally strong stock screener under the head of custom just for you.
- Click on the fundamentally strong stock screener, and you will be able to see a list of the top 30 fundamentally strong stocks.
• Univest is an investment advisory platform that was established in 2022.
• It provides recommendations for investing in stocks, futures, options and commodities.
• It has an expert team of 10+ SEBI-registered research analysts.
It has an expert team of 10+ SEBI-registered research analysts.
• Univest provides recommendations through its tech-based mobile application.
• Users can use the fundamentally strong screener to identify the top 30 fundamentally strong stocks.
FAQs
Are fundamentally strong shares guarantees of profits?
Fundamentally, strong shares do not guarantee profits. This is because these shares are primarily chosen for long-term investing, and predicting the accurate performance of a company for a future period based on the current fundamentals of the shares is not possible. Thus, if a company does not perform well in the future, then the share price of that company may plunge down, resulting in a loss on investments. Fundamentally strong shares are comparatively less risky, but they are not risk-free; hence, they do not guarantee profits in the stock market.
What is the number of fundamentally strong stocks that Univest provides through its screener?
A user of the Univest app can access the top 30 fundamentally strong stocks by using its fundamentally strong stock screener, which is available in the screener section of the Univest app.
What are the trading durations for short-term trading?
The duration for short-term trading varies according to the risk profile of the stock traders. The duration for trading in the stock market ranges from 1 day to several months, and as the trading duration shrinks, the risk involved increases due to high price variations in short periods.
What are some major fundamentals that must be considered while choosing fundamentally strong shares?
Fundamentally strong shares can be identified by using various fundamentals of a company. Some of the major fundamentals to be considered are:
i. Profit and loss statement
ii. Balance sheet
iii. Cash flow statement
iv. Market share of the company
v. Financial ratios
vi. Other factors
i. Profit and loss statement
ii. Balance sheet
iii. Cash flow statement
iv. Market share of the company
v. Financial ratios
vi. Other factors
What is the primary objective of investing in fundamentally strong stocks?
The prime objective of investing in fundamentally strong stocks is to create wealth and build a robust portfolio of stocks that provides stable and consistent returns in the long term.
What risks are involved while investing in fundamentally strong stocks?
Investing in the top fundamentally strong companies is considered less risky due to their strong fundamentals and future growth potential. But, the stock market always carries a volatility risk. Hence, investing in stocks of fundamentally strong companies also entails some degree of risk:
i. Macroeconomic risk:These risks are concerned with adverse situations that occur at a macro level, i.e. factors affecting the national economy or the stock market as a whole. A prolonged negative sentiment in an economy due to an adverse event or news can trigger a downfall in fundamentally strong stocks, leading to decreased share prices and losses. For example, the COVID-19 epidemic impacted the performance of fundamentally strong Indian companies significantly, causing severe downtrends in their stock prices.
ii. Sector-specific risk:If a particular sector in an economy is going through a negative momentum, then the fundamentally strong stocks under that sector may also move in a bearish trend, resulting in a price decrease.
iii. Performance risk:Investors use fundamental analysis to identify the top fundamentally strong shares, and based on their analysis, they try to predict the future growth and performance potential of a company. However, the future is unpredictable, and hence, predicting the future performance of a top, fundamentally strong company is very difficult. This uncertainty induces risk while investing in fundamentally strong Indian companies.
i. Macroeconomic risk:These risks are concerned with adverse situations that occur at a macro level, i.e. factors affecting the national economy or the stock market as a whole. A prolonged negative sentiment in an economy due to an adverse event or news can trigger a downfall in fundamentally strong stocks, leading to decreased share prices and losses. For example, the COVID-19 epidemic impacted the performance of fundamentally strong Indian companies significantly, causing severe downtrends in their stock prices.
ii. Sector-specific risk:If a particular sector in an economy is going through a negative momentum, then the fundamentally strong stocks under that sector may also move in a bearish trend, resulting in a price decrease.
iii. Performance risk:Investors use fundamental analysis to identify the top fundamentally strong shares, and based on their analysis, they try to predict the future growth and performance potential of a company. However, the future is unpredictable, and hence, predicting the future performance of a top, fundamentally strong company is very difficult. This uncertainty induces risk while investing in fundamentally strong Indian companies.