Should you be investing in ITC shares for the long term?

Should you be investing in ITC shares for the long term?

Should you be Investing in ITC shares for the long term?. This is a question on most Indian investors mind when a discussion happens about long term investing. Whenever i have been part of such a discussion which is way too often for my liking. The answer is quite simple IT DEPENDS ON THE PRICE at which you buy.

Why are global financial institutions reducing exposure to ITC?

With global financial institutions prioritising investing in companies with high compliance to environmental, social and governance (ESG) norms, they have been reducing their exposure in ITC, the country’s largest cigarette maker. From 20\% at the end of June 2017, the FII holding in ITC declined to 15\% at the end of December 2019.

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Is ITC stock a value trap?

Even before the budget, it was one of the most underperforming stocks among its peers in FMCG as well as cigarette segments. Investors tempted to bottom-fish would want to consider the following factors before scampering to buy into the ITC stock, which has proved to be a value trap in recent years.

What does ITC’s return on equity look like?

A high return on equity means that ITC has few tangible assets which generate a significant amount of revenue. In order to maintain its current revenue and grow it in the future, the reinvestment in tangible assets is around 5\% of its revenue each year.

Will the price of ITC go up in the next 5 years?

The prices will most probably go up in next 5 years, but will it hit double digit growth or not is hard to say (as inflation itself will be around 7\%–10\%) The TL;DR answer – Invest in ITC in small packets (i.e. 10–20 shares) regularly if you are interested in very long term investment period of at least 5–10 years.

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Is there a multi fold return on investment in ITC?

The company had begun to project itself for more growth, but is there multi folded return assured – probably but not as drastic in the short to mid term. Hence it’s now clear that those who invested in ITC, in any amount, before 2010 have now doubled their investment (apart from dividends and fees paid).