LIC raises stake in these 10 stocks in last 1 year; are these sound portfolio bets?

With the Sensex and Nifty close to breaching their crucial levels of 40,000 and 12,000 soon, experts feel stock selection remains key at current levels given the rich valuations.

One way of finding stocks, which are offering value at current levels, is by looking at a portfolio of marquee investors. We have studied the portfolio of Life Insurance Corporation of India (LIC), the largest domestic institutional investor in India, for the past four quarters.

Data from AceEquity suggests that there are 10 such high-quality stocks in which LIC has raised its stake consistently for the past 1 year. These include: Asian Paints, Britannia Industries, Castrol India, CRISIL, Hindustan Unilever, ICRA, Indiabulls Housing Finance, Indraprastha Gas, P&G Hygiene & Health and UltraTech Cement.

Most companies on the list have grown at a rate higher than the industry and are strong compounding bets. Hence, experts recommend including them in your portfolio.

“An investor should always think independently and not blindly copy any foreign or domestic institutional investor or superstar investor. From the above list, Asian Paints, HUL and Britannia and P&G are safe compounding bets that can be added on a decline if the portfolio is conservative,” Pritam Deuskar, Fund Manager, Bonanza Portfolio, said.

As many as 7 out of 10 stocks have delivered positive returns in the last one year. Britannia has rallied 55 percent in the last one year followed by Hindustan Unilever (51 percent) and Asian Paints (23 percent).

On the losing front, ICRA, CRISIL, and Castrol India saw negative returns of up to 18 percent in the last one year.

“All of the above companies have consistently grown at a higher-than-industry growth rate for the past 5-6 quarters, been able to leverage operational efficiencies and hence improved margin,” Atish Matlawala, Senior Analyst, SSJ Finance & Securities, said.

He expects these companies to outperform industry growth for at least the next 4-6 quarters and deliver better returns over the next couple of years. "Companies like Asian Paints, Britannia, HUL and UltraTech are must have for any investor portfolio.”

Investors should actively churn of their portfolio and book losses in non-performing stocks and enter stocks that are showing momentum because the bull run is here to stay.

According to June quarter data, LIC holds stake in many as 32 stocks. These include: LIC Housing Finance, TCM, Simplex Realty, Larsen & Toubro, ITC, Corporation Bank of India, ICICI Bank, Punjab National Bank, NTPC, ACC and Castrol India.

From a performance perspective, most stocks have not delivered stellar returns in 2018. Hence, analyst advises investors not to blindly follow LIC's investment portfolio and churn portfolio to include stocks that are showing momentum.

“Many companies are going through turbulent times and hence investor must do a detailed analysis of these companies before investing. Stocks like ICICI Bank are worth investing if one has a longer-term view. The worst is over for ICICI Bank and will be on the growth path in the next 4-6 quarters,” said Matlawala.

Deuskar of Bonanza Portfolio feels ITC and ICICI Bank can be better bets and investors should never invest in stocks just because some particular institution is buying.