Years Ago, when legendary investor Warren Buffett introduced this concept of investing in stocks which are a monopoly in their respective business field.
Monopoly means a company that has a major competitive advantage and is a pioneer in its area. In simple words, it is very difficult to compete with companies which are monopolies and of course, they will have the highest market share for their products or services.
You may like to read Best Stocks to Buy for Long Term Investment in India – 2019
In the recent past, sustaining monopoly behavior is very important for investment and earn more as they grow.
Many companies will look like monopolies in the short term and will fail to keep up their position in this competitive world. The advantages of these companies may go away in the future when such a situation comes, the company and their investors will suffer a lot.
How to find companies with monopoly behavior for the long term?
These simple points can help in finding companies with monopoly behavior
- Companies must have a strong brand name
- Great Network and presence in the market
- High Followership/ Users
- Low expenses
- The high cost of alternate and switching to others
Strong brand name: Monopoly stocks
A company that has a strong brand name cannot be replaced from its position in the market, For example, Maggi is a strong brand of Nestle. After running into trouble in 2015, when it was declared unsafe for consumption, Maggi has been able to bounce back and regain its lost market. Such is the brand strength of Maggi . Many people use the name ‘Maggi’ for the category of noodles itself.
You may like to read Best Investment Plans in India with High Returns for high-risk investors 2019
Great Network and presence in the market- Monopoly stocks
Companies require many years to spread their distribution across geography. Hence, companies with high distribution are in a prime position. For example, Pepsi’s Kurkure is a product which is present and available with almost the same MRP cross India.
High Followership/ Users- Monopoly stocks
Company products or services when used by a high number of people , it increases the value of product or services, example Facebook, Linkedin, Whatsapp etc. No matter what so ever company you is if you are looking to promote your business you must use Facebook, Linkedin or Whatsapp, most of the time you need to pay to reach more people within the network. Companies with this behavior are Monopoly in nature.
The high cost of alternate and switching to others
If customers of the company wish to switch to others, there may not be a good alternative or may have a very high cost. Such companies will be a monopoly in nature and will have a high potential to earn more money when more such users add to the base. Example if you are using Microsoft Windows in your computer, it will be very difficult to switch to any other operating system in the same computer and many times it comes with high cost.
Top Monopoly stocks in India- Here is the list
Having known the main ways and means of finding monopoly stocks, You may find many of such companies around you. But one must review their performance over the past and future potential before choosing for investment
- These are companies that dominated their presence in their respective domain
- These are the stocks that grew in size, stayed up to date with technology.
- They had a better business model, crushed the competition,
- They run their business model with discipline and focus.
- They also had great people as leaders that kept them on track or got them back on track when they strayed.
- These were market leading stocks for decades.
Monopoly stock #1: Page Industries
Page industries have the highest market size in undergarments segment in India and they are constantly enhancing their distribution ship. Their presence is increased in many small towns in India and growing very fast. Going forward, Page Industries is having very high visibility in increasing their strength.
Monopoly stock #2: Bajaj Auto
Bajaj auto enjoys a high market share in their 3 wheelers and 2 wheeler market, both in Domestic and exports. with such a high market share and brand name they can sustain for a long time and can make good money over the period.
Monopoly stock #3: Vardhman Textiles
Vardhman Textiles is the largest producer and exporter of yarns. they supply yarn and fabrics to major brands like H&M and Zara, Tommy Hilfiger, Esprit, Gap, Mango, Benetton, Arrow, Peter England, Van Heusen, and Wills etc.
Monopoly stock #4: India Energy Exchange (IEX)
IEX business model is similar to BSE in the stock market matters, IEX deal with Electrical Power Trading in their platform.
IEX is very unique, I don’t think they have any competitor. a Perfect example of monopoly in the field of Electrical power trading or Power Exchange business.
Monopoly stock #5: HDFC AMC
similar to HDFC and HDFC Bank in their respective fields. HDFC AMC is No. 1 company in the business of Asset management, they enjoy high market share and very high users.
Monopoly stock #6: ITC
I don’t think this needs any explanation! ITC has more than 80% market share in the cigarette market and it is entering the FMCG market with high rate.
You may like to read L&T Takeover Mindtree news- Must read for L&T Share Holders
Conclusion: Of course this is just a watch list If you can find the right monopoly stock do invest for more returns in the long term. they can actually generate profits for you even if the stock market closes tomorrow!
To Find more of such Monopoly stocks by your self, you may attend free training by opening Zerodha account here.