3 Quality IT Stocks To Watch Out For

  • Stock Market Analysis
  • Editors Pick

Stock markets soared more than 80% from their lows in March 2020 to the end of FY21, making the year 2020-21 a whirlwind. Despite the pandemic, the upward trend in momentum has come as a comfort to some and a surprise to many, given the issues at the bottom of the pyramid. Markets, on the other hand, made money for everyone who had put money in before the epidemic.

Short-term losses can be absorbed by a diversified portfolio of high-quality shares, which can also provide strong risk-adjusted returns. If equities are held for a longer period, compounding can be helpful. Being a successful investor requires patience. You should let your gains ride unless you're in severe need of cash.

Prioritize stocks with efficient leverage, higher operational and free cash flows, a robust cash conversion cycle, and a solid ROE and ROCE track record. Secular equities can be held for a long time, but cyclical stocks can only be held for a year to three years.

The following stocks have the potential to survive the storm and emerge victorious on the other side of the pandemic. The names below, which have a long runway of opportunities ahead of them, can yield significant returns for an investor if purchased in a basket at regular intervals (after consulting a SEBI RIA) and kept for the long term.

Coforge

Coforge Limited (NS: COFO ) is a well-known global IT solutions company that assists clients in transforming at the confluence of domain expertise and rising technology, resulting in tangible business benefits. Because of its focus on extremely specific industries, in-depth understanding of the underlying operations of those organisations, and relationships with leading platform providers, they have a distinct advantage.


Source: investing.com, Tavaga Research

Mindtree (NS: MINT )

Mindtree is a digital transformation and technology service provider that provides services from concept to completion. It was created in 1999 and today employs over 19,000 people worldwide. It has offices in both New York and Bangalore. E-commerce, mobile applications, cloud computing, digital transformation, data analytics, EAI and ERP, and testing are among the services it offers.


Source: investing.com, Tavaga Research

Happiest Minds (NS: HAPP ) Technologies Limited

A mindful IT Company, helps organisations and technology providers achieve digital transformation by providing seamless customer experiences, operational efficiency, and actionable insights. Artificial intelligence, blockchain, cloud, digital process automation, the internet of things, etc.

Some of the industries in which we provide these services include automotive, BFSI, consumer packaged goods, e-commerce, edutech, engineering R&D, hi-tech, manufacturing, retail, and travel/transportation/hospitality.


Source: investing.com, Tavaga Research

Investors who prefer quality large-cap stocks can consider buying a Nifty IT ETF which is offered by many AMCs. This ETF replicates the Nifty IT index and is available at a low cost compared to various IT mutual funds (active). That said, the buying method is equally important. Investors must use the SIP route to buy this ETF and invest lump-sum on dips.  

Important points to note before buying any stock:

  1. Before investing, seek advice from a SEBI-registered investment adviser.
  2. The ideal way to buy stocks is through a systematic investment plan (SIP) or a staggered lump-sum purchase (not in one go)
  3. Although the above IT stocks have performed well in the past, there is no assurance that they will do well in the future.
  4. When investing in IT stocks, keep an eye on the Indian rupee. If the currency strengthens, it will be bad news for Indian IT firms.
  5. While IT firms have a lot of cash, you should constantly analyse the operating cash flow of each firm before investing. The OCF indicates whether or not a corporation can produce cash through selling its services, rather than just profits.

Disclaimer: The above-mentioned stocks should not be considered as a recommendation to buy or sell. Team Tavaga recommends you consult a SEBI Registered Investment Adviser for dealing in equities.

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  • Ramesh Karkera @Ramesh Karkera
    fundamentally strong companies
    Like 1
    • Nitin Mathur @Nitin Mathur
      @Ramesh Karkera Hope you purchased Happiest Minds!
      Like 0
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  • Anil Otle @Anil Otle
    👍
    Like 1
    • Nitin Mathur @Nitin Mathur
      @Anil Otle Thank you for commenting
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  • rajeev jha @rajeev jha
    thank you sir.
    Like 1
    • Nitin Mathur @Nitin Mathur
      @rajeev jha Thank you for commenting.
      Like 0
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