Buy shares of companies giving maximum returns

How to identify & buy shares of companies giving maximum returns? Why we buy shares of companies? To earn returns. How stocks generate returns for its investors? In form of market price appreciation and dividend income. So if we want to buy shares of companies giving maximum returns, we must check its past history.

Future is uncertain, but past history of stocks will clear this uncertainty to a great extent.

How?

We have to check how the stock has performed in the past in terms of its price appreciation and dividend payment.

But checking details of stocks for past one year is enough?


No, only one year data is not sufficient. To derive a more effective conclusion, one must check at least last 5 years data.

But I personally do 10 years data analysis for my stocks.

Stocks analysis is a skill that can be learnt by practice.

Initially it may look very complicated but with time and practice it becomes easier.

But this blog post is not written for stock analysts.

This article is about knowing how one can quickly identify and buy shares of companies giving maximum returns.

Is there a trick? I wish I knew some trick to quickly identify such shares.

I am studying stock market since 7/8 years now, and one important thing that I have realized that there is no such thing as PERFECT TRICK in stock investing.

One has to work their way up, and identify good stocks.

Some working style is complicated (like my stock analysis worksheet), and some are relatively easier.

In this blog post we will practically use the easier options to study several Indian stocks.

What will be the objective of this study?

This study will do two things for us: (1) it will show a procedure to identify and in turn buy shares of those companies giving maximum returns. (2) It will also highlight the past returns of the companies that will use as examples.

The example companies are real companies which trade in Indian stock market (BSE).

The financial parameter that we will use to analyze these share would be real and derived from data base of moneycontrol.com

So lets start our study about how to identify and buy shares of companies giving maximum returns.

# Example.1 – Tata Consultancy Services (TCS)

The question we must ask here is, what is maximum returns TCS can give to its shareholders?

To answer this question we will have to check the past historty of TCS.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for TCS is like this:

Buy shares of companies giving maximum returns - TCS

Salient points about TCS:

If some body invested Rs.10,000 to buy shares of TCS in year 2005, then by today the same Rs.10,000 would have become Rs.1,17,398.

The growth on invested capital from Rs.10,000 to Rs.1,17,398 means CAGR growth rate of 22.8% (price appreciation plus dividend income).

Market price appreciation of TCS shares is 18.4% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income alone was Rs.41,640 in last 12 years

In the same period when TCS shares earned 22.8% return for its investors, following growth in business fundamentals of TCS was also recorded:

  • Shareholders Equity grew by 30.1% p.a.
  • Revenue grew by 23% p.a.
  • Net Profit (PAT) grew by 8% p.a.
  • EPS grew by 10% p.a.
  • Dividend/share grew by 4% p.a.

Conclusion: TCS being one of the most loved blue chip stocks of Indian stock market has lived up to its expectations.

On one side where company was making growth in its business (revenue and PAT), it also compensated its shareholders almost in the same proportion.

No doubt why India loves & respect Tata Group Companies. It is in their business model which asks all its team to work in order to maximize shareholders returns.

One can buy shares of companies like TCS which generates maximum returns for its investors. Full marks to TCS.

# Example.2 – Reliance Industries Ltd (RIL)

What is the maximum return RIL can give to its shareholders?

To answer this question we will have to check the past history of RIL.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for RIL is like this:

Buy shares of companies giving maximum returns_RelianceInd

 

 

Salient points about RIL:

If some body invested Rs.10,000 to buy shares of RIL in year 2005, then by today the same Rs.10,000 would have become Rs.49,193.

The growth on invested capital from Rs.10,000 to Rs.49,193 means CAGR growth rate of 14.2% (price appreciation plus dividend income).

Market price appreciation of the shares of RIL is 13.5% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income was Rs.3,584 in last 12 years

In the same period when RIL shares earned 14.2% return for its investors, following growth in business fundamentals of RIL was also recorded:

  • Shareholders Equity grew by 17.8% p.a.
  • Revenue grew by 11.6% p.a.
  • Net Profit (PAT) grew by 12.7% p.a.
  • EPS grew by 5% p.a.
  • Dividend/share grew by 3.2% p.a.

Conclusion: RIL being one of the most loved blue chip stocks of Indian stock market, has just lived up to its expectations.

On one side where company was making growth in its business (revenue and PAT), it did compensate its shareholders in the same proportion.

RIL is one stock which is the biggest company in terms of market capitalization. It can also be a decent buy for prospective investors.

# Example.3 – HDFC Bank (HDFC.B)

What is the maximum returns HDFCB can give to its shareholders?

To answer this question we will have to check the past history of HDFCB.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for HDFCB is like this:

 

Salient points about HDFCB:

If some body invested Rs.10,000 to buy shares of HDFCB in year 2005, then by today the same Rs.10,000 would have become Rs.1,44,020.

The growth on invested capital from Rs.10,000 to Rs.1,44,020 means CAGR growth rate of 24.9% (price appreciation plus dividend income).

Market price appreciation of the shares of HDFCB was 24.3% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income was a decent Rs.8,405 in last 12 years

In the same period when HDFCB shares earned 24.9% return for its investors, following growth in business fundamentals of HDFCB was also recorded:

  • Shareholders Equity grew by 28.2% p.a.
  • Revenue grew by 29.3% p.a.
  • Net Profit (PAT) grew by 26.7% p.a.
  • EPS grew by 6.2% p.a.
  • Dividend/share grew by 7.7% p.a.

Conclusion: HDFCB being one of the most loved blue chip stocks of Indian stock market has completely lived up to its expectations. Moreover, this being a banking stock, expectation was very high

On one side where company was making growth in its business (revenue and PAT), it did compensate its shareholders in the same proportion.

This proves why HDFC is one of the most loved stocks of the Indian stock market.

# Example.4 – ITC

What is the maximum returns ITC can give to its shareholders?

To answer this question we will have to check the past history of ITC.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for ITC is like this:

Buy shares of companies giving maximum returns_I.T.C.

 

Salient points about ITC:

If some body invested Rs.10,000 to buy shares of ITC in year 2005, then by today the same Rs.10,000 would have become Rs.1,49,370.

The growth on invested capital from Rs.10,000 to Rs.1,49,370 means CAGR growth rate of just 25.3% (price appreciation plus dividend income).

Market price appreciation of the shares of ITC was 18.1% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income was a huge Rs.75,857 in last 12 years

In the same period when ITC shares earned 25.3% return for its investors, following growth in business fundamentals of ITC was also recorded:

  • Shareholders Equity grew by 15.7% p.a.
  • Revenue grew by 14.4% p.a.
  • Net Profit (PAT) grew by 13.7% p.a.
  • EPS grew by -17.8% p.a.
  • Dividend/share grew by –14.5% p.a.

Conclusion: ITC being one of the most loved blue chip stocks of Indian stock market has completely lived up to its expectations.

On one side where company was making growth in its business (revenue and PAT), it did compensate its shareholders very handsomely.

ITC is also one of my favorite stock as it pays great dividends.

# Example.5 – HDFC

What is the maximum returns HDFC can give to its shareholders?

To answer this question we will have to check the past history of HDFC.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for HDFC is like this:

Buy shares of companies giving maximum returns_HDFC_NBFC

 

Salient points about HDFC:

If some body invested Rs.10,000 to buy shares of HDFC in year 2005, then by today the same Rs.10,000 would have become Rs.1,09,248.

The growth on invested capital from Rs.10,000 to Rs.1,09,248 means CAGR growth rate of just 22.0% (price appreciation plus dividend income).

Market price appreciation of the shares of HDFC was 20.7% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income was a decent Rs.13,804 in last 12 years

In the same period when HDFC shares earned 22.0% return for its investors, following growth in its business fundamentals was also recorded:

  • Shareholders Equity grew by 21.4% p.a.
  • Revenue grew by 20.9% p.a.
  • Net Profit (PAT) grew by 17.9% p.a.
  • EPS grew by 0.9% p.a.
  • Dividend/share grew by 0.5% p.a.

Conclusion: HDFC being one of the most loved blue chip stocks of Indian stock market has lived up to its expectations very well. Moreover this being a NBFC, the expectation from HDFC was even higher.

On one side where company was making growth in its business (revenue and PAT), it did compensate its shareholders in the same proportion.

HDFC is one stock which will continue to grow as India grows because it deals with lending money to public.

# Example.6 – Tata Motors

What is the maximum returns Tata Motors can give to its shareholders?

To answer this question we will have to check the past history of Tata Motors.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for Tata Motors is like this:

Buy shares of companies giving maximum returns_TataMotors

 

Salient points about Tata Motors:

If some body invested Rs.10,000 to buy shares of Tata Motors in year 2005, then by today the same Rs.10,000 would have become Rs.60,487.

The growth on invested capital from Rs.10,000 to Rs.60,487 means CAGR growth rate of just 16.2% (price appreciation plus dividend income).

Market price appreciation in the shares of Tata Motors was be 14% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income was a good Rs.12,096 in last 12 years

In the same period when Tata Motors shares earned 16.2% return for its investors, following growth in its business fundamentals was also recorded:

  • Shareholders Equity grew by 14.5% p.a.
  • Revenue grew by 8.2% p.a.
  • Net Profit (PAT) grew by (Negative, company was in loss) p.a.
  • EPS grew by (Negative, company was in loss) p.a.
  • Dividend/share grew by -29% p.a.

Conclusion: Tata Motors being one of the India’s oldest blue chip stock, it has lived at all lived up to its expectations only marginally.

The company is not doing good business since almost last 7-8 years.

Its passenger car division has undergone a major revamp in last 3-4 years. Launch of vehicles like Tiago, Tigore, Hexa and Nexon is likely to improve the bottom like and expand the market share of Tata Motors in times to come. Their rich experience with Jaguar and Land Rover is showing its positive signs.

The company was not able to growth its business (revenue and PAT), but still it did compensate its shareholders very well.

One must be very careful in buying shares of Tata Motors. But with positive outlook now very clear, it will not be a bad idea to risk some money in this company now.

# Example.7 – Tata Steel

What is the maximum returns Tata Steel can give to its shareholders?

To answer this question we will have to check the past history of Tata Steel.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for Tata Steel is like this:

Buy shares of companies giving maximum returns_TataSteel

 

Salient points about Tata Steel:

If some body invested Rs.10,000 to buy shares of Tata Steel in year 2005, then by today the same Rs.10,000 would have become Rs.22,149.

The growth on invested capital from Rs.10,000 to Rs.22,149 means CAGR growth rate of just 6.9% (price appreciation plus dividend income).

Market price appreciation of the shares of Tata Steel was 4.9% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income was Rs.4,336 in last 12 years

In the same period when Tata Steel shares earned 6.9% return for its investors, following growth in its business fundamentals was also recorded:

  • Shareholders Equity grew by 17.7% p.a.
  • Revenue grew by 10.4% p.a.
  • Net Profit (PAT) grew by –0.1% p.a.
  • EPS grew by -4.6% p.a.
  • Dividend/share grew by -2.2% p.a.

Conclusion: Tata Steel being one of the India’s oldest blue chip stock, it has not at all lived up to its expectations.

The company was not able to growth its business (revenue and PAT) enough, hence it did not compensated its shareholders properly.

One must be careful in buying shares of Tata Steel. But knowing that Tata Steel is one of the biggest steel makers of the world, turnaround may be just arriving. Moreover, global steel market is not doing well anyways.

# Example.8 – Cummins India

What is the maximum returns Cummins can give to its shareholders?

To answer this question we will have to check the past history of Cummins.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for Cummins is like this:

Buy shares of companies giving maximum returns_CumminsInd

 

Salient points about Cummins:

If some body invested Rs.10,000 to buy shares of Cummins in year 2005, then by today the same Rs.10,000 would have become Rs.97,702.

The growth on invested capital from Rs.10,000 to Rs.97,702 means CAGR growth rate of a whopping 20.9% (price appreciation plus dividend income).

Market price appreciation of the shares of Cummins was 19.6% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income was a good Rs.12,239 in last 12 years

In the same period when Cummins shares earned 20.9% return for its investors, following growth in its business fundamentals was also recorded:

  • Shareholders Equity grew by 15% p.a.
  • Revenue grew by 12.4% p.a.
  • Net Profit (PAT) grew by 15% p.a.
  • EPS grew by 11.8% p.a.
  • Dividend/share grew by 11% p.a.

Conclusion: Cummins being one of the India’s oldest blue chip stocks. It has completely lived up to its expectations.

On one side where company was able to growth its business (revenue and PAT), it also compensated its shareholders almost in the same proportion.

Shares of companies like Cummins India is such an investments that, it must be a part of everyone’s investment portfolio.

# Example.9 – Pidilite Industries

What is the maximum returns Pidilite can give to its shareholders?

To answer this question we will have to check the past history of Pidilite.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for Pidilite is like this:

Buy shares of companies giving maximum returns_PidiliteInd.

 

Salient points about Pidilite:

If some body invested Rs.10,000 to buy shares of Pidilite in year 2005, then by today the same Rs.10,000 would have become Rs.2,99,495.

The growth on invested capital from Rs.10,000 to Rs.2,99,495 means CAGR growth rate of a whopping 32.7% (price appreciation plus dividend income).

Market price appreciation of the shares of Pidilite was 31.8% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income was a great Rs.25,185 in last 12 years

In the same period when Pidilite shares earned 32.7% return for its investors, following growth in its business fundamentals was also recorded:

  • Shareholders Equity grew by 20.6% p.a.
  • Revenue grew by 16.4% p.a.
  • Net Profit (PAT) grew by 21.7% p.a.
  • EPS grew by 5.3% p.a.
  • Dividend/share grew by -4.3% p.a.

Conclusion: Pidilite is one of the India’s oldest blue chip stocks, it has completely lived up to its expectations.

On one side where company was able to growth its business (revenue and PAT), it also compensated its shareholders almost in the same proportion.

But it is also a point worth noting that, though EPS and dividend per share has been negative for Pidilite in last 12 years but this has been well compensated by the company. In year 2006, Pidilite infused almost 2000 lakhs number shares in the market. This brought down its per share valuation by almost one tenth. But since last 11 years, company has taken care of its investors well.

Shares of companies like Pidilite is such an investments that, it must be a part of everyone’s investment portfolio.

# Example.10 – SKF India

What is the maximum returns SKF can give to its shareholders?

To answer this question we will have to check the past history of SKF.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for SKF is like this:

Buy shares of companies giving maximum returns_SKF

Salient points about SKF:

If some body invested Rs.10,000 to buy shares of SKF in year 2005, then by today the same Rs.10,000 would have become Rs.82,475.

The growth on invested capital from Rs.10,000 to Rs.82,475 means CAGR growth rate of a great 19.2% (price appreciation plus dividend income).

Market price appreciation of the shares of SKF was 18.6% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income was Rs.4,725 in last 12 years

In the same period when Pidilite shares earned 19.2% return for its investors, following growth in its business fundamentals was also recorded:

  • Shareholders Equity grew by 14.8% p.a.
  • Revenue grew by 10.5% p.a.
  • Net Profit (PAT) grew by 11.8% p.a.
  • EPS grew by 11.8% p.a.
  • Dividend/share grew by 16.1% p.a.

Conclusion: SKF is one of the India’s oldest, and Germany’s biggest blue chip stocks. It has completely lived up to its expectations.

On one side where company was able to growth its business (revenue and PAT), it also compensated its shareholders almost in the same proportion.

SKF is one of those companies of the world which makes the worlds best bearings. Though it does not enjoy a monopoly business but its customers treat them as one.

Shares of companies like SKF is such an investments that, it must be a part of everyone’s investment portfolio.

# Example.11 – Blue Dart

What is the maximum returns Blue Dart can give to its shareholders?

To answer this question we will have to check the past history of Blue Dart.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for Blue Dart is like this:

Buy shares of companies giving maximum returns_BlueD

Salient points about Blue Dart:

If some body invested Rs.10,000 to buy shares of Blue Dart in year 2005, then by today the same Rs.10,000 would have become Rs.92,901.

The growth on invested capital from Rs.10,000 to Rs.92,901 means CAGR growth rate of a great 20.4% (price appreciation plus dividend income).

Market price appreciation of the shares of Blue Dart was 19.9% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income was Rs.4,345 in last 12 years

In the same period when Blue Dart shares earned 20.4% return for its investors, following growth in its business fundamentals was also recorded:

  • Shareholders Equity grew by 8.2% p.a.
  • Revenue grew by 17% p.a.
  • Net Profit (PAT) grew by 10.2% p.a.
  • EPS grew by 10.2% p.a.
  • Dividend/share grew by 14.4% p.a.

Conclusion: Blue Dart is one of the India’s most respected companies. It has completely lived up to its expectations.

On one side where company was able to growth its business (revenue and PAT), it also compensated its shareholders almost in the same proportion.

Blue Dart is now currently owned by DHL Express (Singapore). Originally DHL has its headquarters in Germany. Blue Dart being a subsidiary of a German company, it shown in its financial reports.

Shares of companies like Blue Dart is such an investments that, it must be a part of everyone’s investment portfolio.

# Example.12 – Carborundum Universal Ltd (CUMI)

What is the maximum returns CUMI can give to its shareholders?

To answer this question we will have to check the past history of CUMI.

Companies are more likely to duplicate its past in times to come.

So the data that I have collected for CUMI is like this:

Buy shares of companies giving maximum returns_CarborundumU

 

Salient points about CUMI:

If some body invested Rs.10,000 to buy shares of CUMI in year 2005, then by today the same Rs.10,000 would have become Rs.75,377.

The growth on invested capital from Rs.10,000 to Rs.75,377 means CAGR growth rate of a great 18.3% (price appreciation plus dividend income).

Market price appreciation of the shares of CUMI was 17.7% per annum in last 12 years.

Upon investment of Rs.10,000, dividend income was Rs.4,961 in last 12 years

In the same period when CUMI shares earned 18.3% return for its investors, following growth in its business fundamentals was also recorded:

  • Shareholders Equity grew by 14.9% p.a.
  • Revenue grew by 13.1% p.a.
  • Net Profit (PAT) grew by 10.1% p.a.
  • EPS grew by -2% p.a.
  • Dividend/share grew by -5.6% p.a.

Conclusion: CUMI is one of the India’s most reliable mid cap stocks. Its performance has been good in last 12 years

On one side where company was able to growth its business (revenue and PAT), it also compensated its shareholders almost in the same proportion.

CUMI is being a part of MURUGAPPA Group of companies is well protected.

Investors must be cautiously include CUMI in their portfolio as since last 12 years, dividend per share is showing a downward trend.

Conclusion

Except for Tata Steel (which has its own big problems) all other blue the blue chip stocks picked for this analysis performed exceptionally well.

We picked few good stocks which did not enjoy the advantage of being a high market cap stock. Here the companies that we selected were Cummins, Pidilite, SKF, Blue Dart etc. All of these were comparatively smaller stocks, but they also showed stellar performances.

Then we picked one comparatively even smaller stock, Carborundum Universal. The performance of this stock was also very good.

This exercise is an eye opener for retail investors like you and me.

Generally we go behind blue chip stocks thinking them to be our long term money churner. This understanding is not wrong at all. When we see the returns displayed by these blue chip stocks, we understand why they are the most loved stocks of the market.

Their mind-blowing returns speaks for them.

Good idea is to pick stocks at right prices and hold them for a very-very long term (like 22 years, if possible).





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Disclaimer: All blog posts of getmoneyrich.com are for information only. No blog posts should be considered as an investment advice or as a recommendation. The user must self-analyze all securities before investing in one.

About the Author

Mani
I am a Blogger with a passion for investment education. I started blogging in 2007-08. Blogging didn’t happened to me as a coincidence, it was a conscious decision. The idea with which I started blogging still stands true. In my starting days my finances remained tight. I was reading heavily about how to manage finance. One day I got hold of a book which my father gifted me in 2003. It was stacked below my graduation books. It was a small-thin book with its cover named "Rich Dad Poor Dad".....more

2 Comments on "Buy shares of companies giving maximum returns"

  1. Hi,
    You are giving wrong information regarding returns of share. Take the case of HDFC Bank which has given approx 22% CAGR till from 2005.

    Please rectify and do not mislead people.

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