Consumer durables are those products that are manufactured to last for a relatively long period. As the name suggests, these are manufactured items that are durable, such as cars and household appliances. They include washers, refrigerators, dryers, TVs, Cars, scooters, jewellery, firearms, home furniture, office fittings, etc. Companies that manufacture these products sell shares of their companies, which are known as consumer durables stocks.
Just like any other investment, consumer durable stocks are a risky investment, that needs to be analyzed and studied before any investments are made. Well-known, popular brands that have a good track record of constantly coming up with new products are often a hit to the public. They usually have high growth potential and high operating margins.
What is the best time to invest in consumer durable stocks?
Since these products are durable, they are often more expensive than fast-moving consumer goods. This means that people tend to buy these goods once every 5-7 years. This would imply that people only buy these goods when they are in a surplus of funds. Recession periods are when people usually delay making such large purchases, which makes them the worst time to buy and invest in these stocks.
On the other hand, a booming economy is the best time to get maximum returns on consumer durables stocks and equities. Carefully tracking the market and waiting for the perfect time to sell these stocks before the market falls is the best way to gain profits.
Sometimes there are unforeseeable instances that also affect these rates. For example, with the unexpected arrival of a heatwave, or an unanticipatedly hot summer, the sale of coolers and ACs could suddenly rise. Similarly, the sudden onset of the Covid 19 Pandemic resulted in people saving their money for medical purposes, leading to a drop in sales of consumer durables.
It is analysed that the Indian economy is about to grow at the rate of 7-8 per cent, which is a good sign for the consumer durables market. Thus it is safe to say that this sector has a bright future ahead.
How to choose the right stocks to buy?
There are a few factors that help decide which companies have the highest chances of faring well
- Gross margins – The gross margins of a company are the profits they make. This is the difference in the sale price of their product, and the cost of raw materials and processing and manufacturing.
- Reputation – The company’s brand image plays a large role in building a base of loyal customers. The better the reputation, the more chances it has of a new product being a success, increasing an investor’s chances of profit.
- Long-term growth – Unlike those companies that have one popular product that takes the world by storm, reliable companies with consistently good products are the stocks that are most likely to give the best returns, and have the least losses during the market downfall.
- Research and development – Innovation is the key to success. Companies that have a focused approach towards the development of products have higher chances of making good consumer durables, thus making them popular amongst the public.
Why are consumer durable stocks beneficial?
- Disposable income
Due to the rise in disposable income people have, many families are now able to afford higher-end products that will last them for many years, rather than a luxury, the purchase of durable products is now considered an investment on its own, thus raising the value of the stocks of companies that deal with consumer durables.
- Evolving Financial system
Having certain basic appliances and a vehicle have become a necessity for many middle-class families, that can buy these products thanks to banks lending loans far more easily than they did before, and the several discounts and offers that companies now offer. This in turn makes the companies large-cap stocks, resulting in larger dividends upon investment.
- Rural Appeal
In this day and age of modernization, the news of appliance and vehicles that makes lives easier has reached far and wide, including in rural areas, while these regions may not be able to afford luxury items, they too are equipped with basic consumer durables, thus increasing the total market that this sector caters to. This way, any company is said business is automatically able to thrive, even during times of inflation.
- The rising popularity of Media
In recent years, there has been a sudden hike in media consumption by the public. It ranges from TV shows and movies to new songs and audio experiences to video games. Therefore there has also been a rise in the sale of products that cater to these needs, such as Bluetooth devices, earphones, expensive high-quality phones, Video game consoles, televisions, and so on. Companies that are in the business of producing these goods have seen a rise in their revenues, thus resulting in high returns to investors.
- Diversification of portfolio
The diversification of your portfolio helps reduce the risks involved so that the fall of a single type of asset does not affect the overall investment. Allocating investments among various sectors is almost an unwritten rule in today’s world of stock trade and exchange. In the case of consumer durables, when they are on the rise, they bring profits, and when they are on the down low, they are covered by the stocks belonging to companies that sell essentials.
Top Indian Consumer durables companies to invest in
Below is a list of some of the leading consumer durables companies, that have stocks and equities that offer the highest returns on investments.
- Havells India – This company produces products that meet the requirements of their customers so much so that they have become a household name. Recently during the end of the recession period, they showed an exponential jump.
- Voltas – The Volkart Brothers and Tata Sons, collaborated to create Voltas Ltd. Similar to Havells, they too are a household name relating to appliances. Even during the market downfall, they had a very minor negative shift.
- Polycab India – Despite the severe hit Polycab took in the pandemic, it bounced back almost immediately thanks to its loyal customers. Apart from the pandemic, their financial performance has been consistent for the last 5 years.
- Honeywell automation – Although it is a subsidiary of Honeywell International Inc. it has existed in the Indian market for a long time, and like Polycab India, it too has a consistent financial track record.
- Dixon Technologies – Unlike the many other industries on this list, Dixon technologies is more focused on security solutions such as CCTVs. Following the bull market trends, Dixon Technologies rose steeply after 202 and gave high returns to its investors.
- Whirlpool India – Whirlpool is a household name thanks to its durable goods that can last for an entire generation. Its large variety of products meets the needs of almost every customer, thus giving them large and varied customers.
- Bajaj Electricals – Like Whirpool, Bajaj Electricals to has a wide variety of products that help increase its market share. Also, the nostalgia associated with its name makes it a household brand. They are affiliated with the Baja Group, which is their parent company. This helps them minimize the effect on their shares in the case of a bear market.
- Sheela Foam – This company has created a reputation for the quality of the products they manufacture. Best known for its home comfort products, Sheela Foam has always had an edge over all its competitors in the market thanks to its consistency.
- Blue Star – One of the fastest growing Consumer Durables companies in India, Blue Star is best known for designing, developing, manufacturing, and marketing its products, thus providing full transparency to its Investors.
- V-guards Inds. – This company ensures that there is a constant stream of revenue by diversifying the sectors that it is involved in, thus expanding its market. This in turn results in high profits.
- TTK Prestige – Their new invention of the Built-in Kitchen appliance pushed TTK prestige into the limelight, popularising the brand amongst consumers.
Investing in these companies is not an easy task, and one cannot invest in too many companies at the same time, so it is important to streamline this process. At the same time, you cannot rely on a single stock option, diversification is a must. Monitor the Financial profiles of companies before making such investments.
Just like any other sector, if the companies producing these items stop inventing and innovating, the market will become stagnant and eventually result in people turning to newer alternatives, thus leading to losses on investments. As of right now, consumer durables sales are on a rise thanks to various factors, making now the best time to invest in them. They are best for short-term investments and need to be properly analyzed to understand the best time to invest in them.
Thus, in conclusion, there is a wide variety of consumer durables stocks available, and anyone investing in this sector has the choice of choosing companies on basis of their needs and investing styles. There are also innovations and discoveries in this field, such as robot cleaning devices, and mattress technologies that have captured the attention of the public. So investors must keep an eye out for companies that are constantly developing and investing in those companies.