These 4 Stocks Could Create Lasting Generational Wealth

There are a lot of stories about people discovering that their grandfathers and fathers had invested in shares of companies decades ago and forgot about it.

The value of many of those investments today would be running into millions of rupees. This is the power of holding quality stocks for decades and not engaging in frequent buying and selling.

The best way to get rich is not through get-rich quick schemes - slow and steady wins the race. You create financial freedom that you can pass on to your children and grandchildren over a lifetime.

The best generational wealth stocks are those that pay dividends. Income-generating stocks have a long history of outperforming not only non-dividend-paying stocks but other asset classes as well.

Over short periods of time one asset class or another may outperform stocks, but the long-term results prove that if you want to accumulate large amounts of wealth, investing in stocks is the way to go.

Investing in stocks is a proven way to build generational wealth, as the stock market has potential for growth that outpaces inflation.

In this article, we will look at the top companies that could still create lasting generational wealth.

Read on...

#1 Infosys

Infosys Ltd is the 2^nd largest information technology company in India.

The company provides consulting, technology, outsourcing and next-generation digital services to enable clients to execute strategies for their digital transformation.

The company's digital services are rated to be among the best in the industry. Infosys derives 57% of its revenues from digital services and balance 43% from traditional services.

The key business verticals for Infosys are the same as TCS barring life sciences and healthcare. Infosys instead has an energy, utilities, and resources divisions.

As present, the company caters to 185 of Fortune 500 companies. Its clients include companies like ICICI Bank, Daimler Mercedes-Benz, HSBC Bank, Goldman Sachs, J&J, Accenture, Lockheed Martin, IBM Corporation, Deutsche Bank, etc.

Coming to the financials, it reported a 3.6% growth in revenue in Q1FY25 due to slow decision making at client's end leading to slower ramp-up of project execution.

In this fast moving world of artificial intelligence, the importance of traditional software services firms is important. They will be the ones to integrate enterprises' software with the new AI technology. Infosys will play an important role in the same.

Going ahead, for FY25 the company has guided for 1-3% revenue growth in constant currency terms. The company expects growth to accelerate in financial services and telecom verticals due to large deal wins. Infosys also has a positive outlook on the European markets.

The stock is up 31% in the last one year due to improving operational performance.

#2 HDFC Bank

HDFC Bank Limited is an Indian banking and financial services company headquartered in Mumbai. It is India's largest private sector bank by assets and the world's tenth-largest bank by market capitalisation.

The bank's network includes 21,683 banking outlets comprising branches (6,342) and business correspondents (15,431), ATMs/ cash deposits, and withdrawal machines (18,130) spread across India.

HDFC is a leading player in the payments ecosystem in the country. Every third rupee spent on cards in India happens on an HDFC Bank's issued instrument.

HDFC has offices and branches in Bahrain, Hong Kong, UAE, Kenya where they offer NRI clients offshore deposits, bonds, equity, mutual funds, treasury and structured products.

The company announced a merger between its housing finance arm HDFC Ltd and itself which completed on 1 July 2023, making HDFC the world's 7th most valuable bank.

The combined entity has a customer base of 120 million and the merger lead to a substantial increase in headcount with the workforce totalling 177,000.

HDFC Bank has been one of the most consistent performers of Dalal street growing at a 20% compounded annual growth rate for over 2 decades and shall continue doing so in the wake of India's strong GDP growth.

Coming to the financials, the company reported a robust net interest income growth of 59.4% in Q1FY25 and operating profit growth came in at 30.1%.

HDFC Bank stock is up 4% in the last one year due to the overhang of merger related issues.

#3 Reliance Industries

Reliance Industries founded by the late Dhirbubhai Ambani is one of India's largest conglomerates dealing in numerous businesses.

The company categorises its businesses into 3 broad segments which are oil to chemicals (O2C) segment, retail segment, and digital services segment.

Under the O2C segment, the company primarily refines crude oil to manufacture/ extract transportation fuels, polymers and elastomers, intermediates, and polyesters. It has a crude refining capacity of 1.4 million barrels per day.

Under the retail segment, Reliance sells consumer electronics, fashion & lifestyle, groceries, pharma and connectivity. It operates 15,200 retail stores and has a customer base of 190 m customers.

Under the digital services segment, company's Jio offering has a total subscriber base of 410 m subscribers and a market share of 36% in India.

Reliance industries has done a commendable job of pivoting from the traditional O2C business to new age businesses such as retail and internet enabled services.

In order to set up the new businesses, company secured multiple investments from top-notch investors around the globe including Meta, Google, KKR, etc.

Recently the company demerged Jio Financials and listed it on the Indian stock exchanges in line with company's objective to unlock value creation.

Going ahead the company still has opportunities to unlock value by demerging the retail and Jio digital business.

Coming to the financials, Reliance reported a growth of 11.6% in its consolidated revenues and EBITDA grew by 1.8% for Q1FY25. EBITDA margins deteriorated slightly to come in at 16.6% versus 18.1% in the previous year.

Shares of Reliance Industries are up 26% in the last one year. The stock is up by 4.7% in the past 1 month.

#4 Zomato

Incorporated in 2010, Zomato Limited is one of the leading online food service platforms in terms of the value of food sold.

Its offerings include food delivery, dining-out services, loyalty programs, and others. Broadly, Zomato operates in four business segments: 1) Food delivery, 2) Dining out, 3) Hyper pure, and 4) Blinkit.

As of FY24 end, the company derives 63% of its revenues from food delivery, 24% from quick commerce (Blinkit), 6% from dining out, and the balance 6% from the hyper pure business.

In the food delivery business, company has its footprint across 800+ cities and has a network of 247,000 restaurant partners and 400,000 delivery partners.

Zomato's quick commerce business Blinkit is also scaling up rapidly and is now available across 26 Indian cities. The company has added 149 net stores during the year and is aiming to add 475 more stores in FY25 to take the total store count to 1,000 stores.

Hyper pure is Zomato's farm-to-fork supplies offering for restaurants in India. Zomato sources fresh, hygienic, quality ingredients directly from farmers, mills, producers and processors to supply its restaurant partners. As of FY24 end, company billed 75,000+ unique outlets.

Coming to the financials, Zomato reported a 74.1% revenue growth in FY24 with operating profit growing at more than 210%.

Going forward, management has guided for accelerating store additions as well as restaurant and delivery partners and is aspiring to maintain steady operating profits.

The stock is up 147.7% in the last one year due to strong operational performance.

Conclusion

Generational wealth creation through stocks involves leveraging the stock market's potential for long-term growth to build and preserve financial assets across multiple generations.

By investing in a diversified stock portfolio, individuals can benefit from compounding returns and long-term market trends.

Regularly reviewing and adjusting the investment strategy ensures that wealth remains robust and adaptable to changing conditions, ultimately supporting and growing financial assets for future generations.

The most important parameter in considering stocks to invest in is the ability of the company to operate for at least more than a decade which proves management's track record of seeing all the ups and downs of their respective business cycles.

There are a lot of companies which despite being listed for a long time have not been able to stand the test of business downcycles and have declared themselves bankrupt.

Remember the challenges before diving headfirst.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...