5 Best Long Term Companies of 2023

• 'The stock market is a device for transferring money from the impatient to the patient.' - Warren Buffett

The stock market is not a kind place for speculators and gamblers.

Those who don't understand the fundamentals of the listed companies they're trading in will end up losing their money.

So it should be no surprise to hear the old stock market saying that more than 90% of traders lose money in the long term. We would go further and say that most of the remaining 10% don't make enough for a good lifestyle.

In fact, less than 1% of traders make enough profits to justify taking up trading in the first place. Even these traders are at risk of losing their capital at any time. And only a small fraction of this 1% will actually get rich from trading in the long term.

Their numbers are negligible compared to the sheer number of traders in the market. Yet almost every trader thinks they can beat these odds and get rich by trading in stocks. This is a fallacy.

But it's not a reason to be disappointed. There is a simple way to beat the odds and beat the market too. To do that you need to become a long term investor.

In this regard, the Buffett quote above is particularly illuminating. The stock market rewards those who successfully apply the rules of long-term investing.

So if you are ready to take the plunge as a long-term investor, the first question on our mind should be, what kind of stocks make good long-term investments.

Here's it's important to keep the basics in mind. Stocks are not pieces of paper. The represent ownership in a business. Thus the best stocks for long term investing will be of those companies that do the best over the long term.

For example, when Amazon, Google, and Apple became the biggest companies in the world, the wealth of long-term shareholders multiplied many times over.

So with that in mind, here we present our 2023 list of companies with the best fundamentals for the long term.

Please note these are not stock recommendations.

Asian Paints

From humble beginnings in a small garage in the year 1942, Asian Paints became the largest paint company in 1967, and has maintained its leadership position for the last 55 years.

Asian Paints is one of the finest paint companies in India. It manufactures various products, including varnishes, enamels, lacquers, surfacing preparation, organic composite solvents, and thinners. It's present in more than 60 countries across the globe.

The company is known for its supply chain strategy. It removed all channel partners and reached out to paint dealers and mom-and-pop stores directly to sell its products.

It has more than 145,000 touchpoints and over 70,000 dealers selling its products. This extended market reach explains why Asian Paints has close to 50% market share in the organised market.

After establishing itself in the paint industry, Asian Paints has also successfully ventured into the home decor and interior design business too.

While competition will pick up in the sector with the entry of Grasim by the end of this financial year, Asian Paints stands as the strongest player by far in the sector.

The increased competition will hurt the weaker firms in the long term. But once the dust settles, Asian Paints will likely come out on top. Its balance sheet strength, strong control over costs, and the quality of the management, pretty much guarantees this outcome.

In the short term too the company's margins are improving due to a decline in input prices as well as a pickup in rural demand.

To know more about Asian Paints, checkout its factsheet and latest quarterly results.

• Tata Consultancy Services (TCS)

  Tata Consultancy Services (TCS) is a bright shining star in the galaxy of Tata group companies.

  The company is an Indian multinational information technology services and consulting company. It's the largest IT services company in Asia. It was the first company on the Bombay Stock Exchange (BSE) to reach US$ 100 bn marketcap in 2018.

  It has a global presence deep domain expertise in multiple industry verticals and a complete portfolio of services consisting of consulting, service integration application services and many more.

  The company uses its industry leading suite of products and platforms to deliver high quality, high impact solutions to its clients. It has a reputation of leveraging the latest technologies to serve customers across the world.

  In the short term the company is focused on growing profits steadily by maintaining its margins. TCS has handled the wave of attrition in the IT sector better than its peers. The company regularly ranks at the top of the best places to work in India.

  In the long term, TCS, with its deep domain knowledge across various verticals, and in-house developed talent, is well placed to capitalise on the boom in digital technologies around the world.

  For more details, check out its factsheet and quarterly results.

• HDFC Bank

  HDFC Bank, despite having less than 10% share of the banking sector, is one of the most respected banks in the country.

  It relies on a model of wide franchise and low-cost deposit base. This ensures good pricing power and sustainability of above average NIMs (net interest margins).

  As a result, the bank has always reported consistently good earnings. This has in turn led to high return ratios compared to its peers.

  It's also extremely conservative with its margins and provisioning policies. Therefore, it comes as no surprise that HDFC Bank's net NPAs have never crossed 0.5% of its loans.

  Currently, the company is in the process of merging with HDFC ltd. The management said it might complete its planned merger with HDFC ahead of time by the first quarter of the financial year 2024 instead of the original target of the third quarter.

  It also taking continuous digital initiatives to enhance customer relations and add value to the customers.

  While the short term looks stable for the bank, the long term looks very positive. HDFC Bank has been investing in various startups to fill gaps and gain expertise in many niche services. This will help the bank stay ahead of the curve in the fintech race.

  To know more about the bank, check out its factsheet and latest quarterly results.

• Hindustan Unilever Ltd (HUL)

  Hindustan Unilever Ltd (HUL) is a subsidiary of Unilever, one of the world's leading suppliers of food, home care, personal care, and refreshment products.

  The company has 50-plus brands under its roof spanning 15 categories - foods, beverages, cleaning agents, personal care products, water purifiers, and other fast-moving consumer goods.

  The company's products are present in 9 out of 10 Indian households. Forbes has rated HUL as the most innovative companies in India and #8 globally. It's a zero debt company with rock solid long-term fundamentals.

  In the short term, the company will benefit from falling commodity prices, which will support margins. It will also benefit from a good monsoon, as predicted by the IMD, which will give a boost to rural demand.

  In the long term, the company is well placed to dominate the FMCG market in India despite the rising competition. A combination of strong brands, good cost control, a high quality management, will ssure long term success.

  To know more about HUL, check out its factsheet and quarterly results.

• Larsen & Toubro (L&T)

  Larsen & Toubro (L&T) is an Indian company founded by two Danish refugees - Henning Holck-Larsen and Soren Kristian Toubro.

  If you talk engineering and infra stocks in India, L&T is the first name which comes to mind. It's one of the top 5 construction companies in India. It's also engaged in defence manufacturing, IT, and financial services.

  L&T's financial statements makes for pleasant reading Sales and profits have seen a steady increase. L&T has also recovered quickly from the pandemic.

  The company's fundamentals are strong. It has a low debt-equity ratio and a steadily growing return on equity.

  The stock has been bullish recently hitting a new 52-week high. This was on the back of strong order flows. In the last three months, L&T's orders have grown substantially boosting investor confidence.

  The government's budgetary allocation of a massive Rs 10 trillion capital investment plan for the financial year 2023-24, was yet another boost for the company.

  Big orders and many sectoral tailwinds have ensured L&T's long term prospects are very rosy indeed.

  To know more about the company, you can look at its factsheet and quarterly results.

Conclusion

We have often heard stories on how investing in share markets have led to unbelievably high returns. Investors are fascinated by the multibagger returns that fundamentally strong stocks keep on delivering.

But the most important aspect of investing is often ignored, i.e. the time horizon. History is proof that some of the largest gains have come from investing in long-term stocks.

The key to finding the best long-term stocks is to look at all the aspects of the company. You need to look at the growth opportunities for both revenues and profits, quality of the management, financial performance, track record of dividends, and much more.

Consider all these points holistically. The best stocks for the long term are the ones that have a tick mark against all of them.

We think this list of 5 stocks can get you started on your journey to become a long-term investor.

Happy investing!