5 Best Stocks to invest in 2021 India – Ben Graham Principle

Best Stocks to invest in 2021 - Ben Graham PrincipleBest Stocks to invest in 2021 – Ben Graham Principle

Ben Graham is the father of value investing and considered as a guru for Warren Buffet. Ben Graham indicates that investors should filter the stocks that are trading below the intrinsic value. This way, you would be investing in stocks which are trading at the correct price. In this article, we would provide 5 Best Stocks to invest in 2021 based on a Ben Graham formula.

Also Read: Top 5 Bluechip Multibagger Stocks for 2021

What is the Ben Graham theory of value investing?

Ben Graham is the guru of Warren Buffet and considered as the father of value investing. He says investors should filter stocks which are trading below their current assets. The focus should be coming up with the intrinsic value of the stock based on the company financials. Investors should buy such stocks that are trading 1/3rd below its net current assets.

How to get list of Best Stocks to invest in 2021 based on this principle?

Below filters can be applied to shortlist this formula. Stocks that have a market cap of over Rs 500 Crores can be taken instead of just considering large cap, else one would miss out any Midcap multibagger stocks or small cap stocks.

1) Debt to equity ratio should be 0 to 1

2) Current Ratio should be > 2

3) Return on Equity (RoE) should be > 12%

4) 5 Years Average RoE should be > 12%

5) 5 Year EPS growth should be > 10%

6) Earnings Yield should be > 10%

Also, stocks can be filtered based on total debt less than twice of net current assets.

5 Best Stocks to invest in 2021 based on Ben Graham Principle

Here are the top 5 stocks based on the filters applied.

#1 – Kanchi Karpooram Ltd – Current Price Rs 1,161

#2 – Mangalam Organics Ltd – Current Price Rs 757

#3 – Tamilnadu Petroproducts Ltd – Current Price Rs 99

#4 – Nucleus Software Exports Ltd – Current Price Rs 601

#5 – Saksoft Ltd – Current Price Rs 472

Best Stocks to invest in 2021 – Ben Graham Principle – Detailed View

Let us get into the details of these stocks in terms of what the company does, checklist items and share price performance in the last 5 years.

#1 – Kanchi Karpooram Ltd – Current Price Rs 1,161

Kanchi Karpooram is South India’s first & the largest producer of a variety of Terpene & Paper chemicals.

Checklist of Financial Ratios

1) Debt to equity ratio should be 0 to 1 – Actual is 0.1 – Filter Passed

2) Current Ratio should be > 2 – Actual value is 5 – Filter Passed

3) Return on Equity (RoE) should be > 12% – Actual is 33% – Filter Passed

4) 5 Years Average RoE should be > 12% – Actual is 35% – Filter Passed

5) 5 Year EPS growth should be > 10% – Actual is 83% – Filter Passed

6) Earnings Yield should be > 10% – Actual is 15% – Filter Passed

Share Price Performance

1 year return – 470%

3 Years annualised returns – 58%

5 Years annualised returns – 124%

Share Price Chart in the last 5 years

Best Stocks to invest in 2021 - Ben Graham Principle - Kanchi Karpooram Ltd

#2 – Mangalam Organics Ltd – Current Price Rs 757

Mangalam Organics Limited is the prime manufacturers of Camphor, Resin and Sodium Acetate. The company has a strong foothold in the pine chemicals Industry. Mangalam Organics Limited is a government recognized export house with customers in Europe, USA, Africa and the Middle East.

Checklist of Financial Ratios

1) Debt to equity ratio should be 0 to 1 – Actual is 0.12 – Filter Passed

2) Current Ratio should be > 2 – Actual value is 3.29 – Filter Passed

3) Return on Equity (RoE) should be > 12% – Actual is 33% – Filter Passed

4) 5 Years Average RoE should be > 12% – Actual is 25% – Filter Passed

5) 5 Year EPS growth should be > 10% – Actual is 34% – Filter Passed

6) Earnings Yield should be > 10% – Actual is 17% – Filter Passed

Share Price Performance

1 year return – 145%

3 Years annualised returns – 50%

5 Years annualised returns – 105%

Share Price Chart in the last 5 years

Best Stocks to invest in 2021 - Ben Graham Principle - Mangalam Organics Ltd

#3 – Tamilnadu Petroproducts Ltd – Current Price Rs 99

Company is engaged in the manufacture and sale of commodity chemicals. The products are used as raw materials in industries involved in the manufacture of detergents and cleaning agents, lubricants, epoxy resins, pharmaceuticals and textiles.

Checklist of Financial Ratios

1) Debt to equity ratio should be 0 to 1 – Actual is 0.08 – Filter Passed

2) Current Ratio should be > 2 – Actual is 2.52 – Filter Passed

3) Return on Equity (RoE) should be > 12% – Actual is 14% – Filter Passed

4) 5 Years Average RoE should be > 12% – Actual is 12.5% – Filter Passed

5) 5 Year EPS growth should be > 10% – Actual is 28% – Filter Passed

6) Earnings Yield should be > 10% – Actual is 14% – Filter Passed

Share Price Performance

1 year return – 200%

3 Year annualised returns – 38%

5 Years annualised returns – 36%

Share Price Chart in the last 5 years

Best Stocks to invest in 2021 - Ben Graham Principle - Tamilnadu Petroproducts Ltd

#4 – Nucleus Software Exports Ltd – Current Price Rs 601

Nucleus Software Exports Limited is an IT company in the Banking and Financial Services sector. It offers IT and consultancy services serving a variety of sectors of the banking industry.

Checklist of Financial Ratios

1) Debt to equity ratio should be 0 to 1 – Actual is 0 – Filter Passed

2) Current Ratio should be > 2 – Actual is 2.36 – Filter Passed

3) Return on Equity (RoE) should be > 12% – Actual is 16% – Filter Passed

4) 5 Years Average RoE should be > 12% – Actual is 13% – Filter Passed

5) 5 Year EPS growth should be > 10% – Actual is 28% – Filter Passed

6) Earnings Yield should be > 10% – Actual is 11% – Filter Passed

Share Price Performance

1 year return – 154%

3 Year annualised returns – 16%

5 Years annualised returns – 24%

Share Price Chart in the last 5 years

Best Stocks to invest in 2021 - Ben Graham Principle - Nucleus Software Exports Ltd

#5 – Saksoft Ltd – Current Price Rs 472

Saksoft Limited is a leading Digital Transformation Solution Partner for clients across the globe.

Checklist of Financial Ratios

1) Debt to equity ratio should be 0 to 1 – Actual is 0.14 – Filter Passed

2) Current Ratio should be > 2 – Actual is 2.31 – Filter Passed

3) Return on Equity (RoE) should be > 12% – Actual is 20% – Filter Passed

4) 5 Years Average RoE should be > 12% – Actual is 19% – Filter Passed

5) 5 Year EPS growth should be > 10% – Actual is 21% – Filter Passed

6) Earnings Yield should be > 10% – Actual is 13% – Filter Passed

Share Price Performance

1 year return – 184%

3 Year annualised returns – 25%

5 Years annualised returns – 16%

Share Price Chart in the last 5 years

Best Stocks to invest in 2021 - Ben Graham Principle - Saksoft Limited

You may like: These Nifty Next 50 Stocks gave up to 1600% returns in 5 years

Should you invest in Stocks based on Ben Graham Formula?

Stock market investing in an art and it high risk. These principles would help you to filter right stocks. Investing in such stocks during stock market corrections can help to create wealth in medium to long term.

Disclaimer: I am not holding any of these shares as on the day of writing the article but can invest in them at any point of time.

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Suresh KP

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