Best FMCG Penny Stocks to Buy in India in 2023
Investing in penny stocks carries significant risks and requires careful evaluation of potential rewards and drawbacks before considering them as part of your investment strategy. Penny stocks are shares of small companies with low market capitalization. While they may appear appealing due to the potential for substantial gains, it's essential to acknowledge the high level of risk associated with these investments.
One of the primary risks of penny stocks is their limited liquidity. Due to low trading volumes, it can be challenging to execute large trades without significantly impacting the stock's price. This illiquidity can lead to difficulties in buying or selling shares at desired prices, potentially resulting in losses for investors.
Moreover, penny stocks often lack adequate financial information. Smaller companies may not be obligated to provide the same level of financial disclosures as larger, more established firms. As a result, investors may face difficulties in accurately assessing the financial health and stability of these companies before investing.
If an investor decides to proceed with investing in penny stocks, it's crucial to follow certain guidelines. Thorough research is essential into the company's financials, business model, management team, and industry prospects. Investors should only consider investing in legitimate businesses with clear growth potential to minimize the risks associated with penny stocks.
Overview of FMCG Penny Stocks
Fast-moving consumer goods, or FMCG, companies are considered among the best defensive stocks as they mostly deal in essential items. Many FMCG stocks have provided very good long-term returns to investors, but some have also been beaten down due to various factors, mostly fundamentals. These beaten down stocks or penny stocks sometimes offer a good opportunity to investors with a high risk appetite.
List of Top FMCG Penny Stocks
Mishtann Foods – The company has low debt, zero promoter share pledge and foreign institutional investors have been raising their stake, though slowly. The stock is currently trading around Rs 13, while its 52-week high is Rs 19.55 and 52-week low is Rs 1.94. The PE ratio has been mostly in negative and the market cap is around Rs 658 crore. The stock price is higher than the 200-day moving average of Rs 9.20.
JHS Svendgaard Laboratories – The stock has moved above the past few moving day averages and the company has low debt and promoter share pledge. The stock is currently trading around Rs 22-23, while its 52-week high is Rs 28.05 and 52-week low is Rs 13.60. The PE ratio has been mostly in negative and the market cap is around Rs 140 crore. The stock price is higher than the 200-day moving average of Rs 19.92.
Himalaya Food International – The company’s revenue has been increasing for the past few quarters and it has no debt on book. The stock is currently trading around Rs 22-24, while its 52-week high is Rs 30.94 and 52-week low is Rs 9. The PE ratio has been mostly in negative and the market cap is around Rs 134 crore. The stock price is around the 200-day moving average of Rs 23.02.
Anjani Foods – The stock has been higher than moving averages and the company has zero promoter pledge. The stock is currently trading around Rs 26-27, while its 52-week high is Rs 40.59 and 52-week low is Rs 13.22. The PE ratio is quite high 65.46 and the market cap is around Rs 75 crore. The stock price is around the 200-day moving average of Rs 25.70.
Ador Multiproducts – The company’s profit margins have been improving and it has zero promoter pledge but degrowth in earnings is a big stumbling block. The stock is currently trading around Rs 31-32, while its 52-week high is Rs 129 and 52-week low is Rs 27.45. The PE ratio is mostly negative and the market cap is around Rs 133 crore. The stock price is much lower than the 200-day moving average of Rs 59.66.
Kohinoor Foods – The company’s net profit has been increasing, margins expanding and cash flow improving but high interest payment is a risk. The stock is currently trading around Rs 36-37, while its 52-week high is Rs 102.85 and 52-week low is Rs 29.08. The PE ratio is mostly negative and the market cap is around Rs 14 crore. The stock price is much lower than the 200-day moving average of Rs 47.74.
Modern Dairies – Revenue, net profit and EPS have all been improving. The stock price is higher than recent moving averages. The stock is currently trading around Rs 23-24, while its 52-week high is Rs 32 and 52-week low is Rs 6.06. The PE ratio is 4.48 and the market cap is around Rs 54 crore. The stock price is slightly higher than the 200-day moving average of Rs 20.60.
Tasty Dairy Specialities – Revenue and net profit have been improving high promoter share pledge is a negative. The stock is currently trading around Rs 12-13, while its 52-week high is Rs 41.95 and 52-week low is Rs 10.05. The PE ratio negative and the market cap is around Rs 25 crore. The stock price is slightly lower than the 200-day moving average of Rs 14.61.
ANS Industries Ltd. – The company has low debt and net profit has improved but financial remain weak with stock below recent moving averages, making it a high risk. The stock is currently trading around Rs 7, while its 52-week high is Rs 13.28 and 52-week low is Rs 6.99. The PE ratio negative and the market cap is around Rs 6 crore. The stock price is lower than the 200-day moving average of Rs 10.09.
Sanwaria Consumer – The return on asset and net profit are improving for last two years, but it is still a high beta stock with many risks. The stock is currently trading around Rs 0.40 paise, while its 52-week high is Rs 1.45 and 52-week low is Rs 0.25. The PE ratio has been mostly in negative and the market cap is around Rs 29 crore. The stock is well below its 200-day moving average of Rs 0.67.
Factors to Check Before Investing in FMCG Penny Stocks
Before investing in FMCG penny stocks, it's crucial to carefully evaluate several factors to make well-informed investment decisions. FMCG penny stocks, like any other penny stocks, can be highly speculative and risky. Here are some critical factors to consider before contemplating such investments:
Financial Health: Examine the company's financial statements, including revenue, profit margins, and cash flow. Look for consistent growth in revenue and profitability over time. Be cautious of companies with a history of losses or erratic financial performance.
Market Presence and Competitive Advantage: Assess the company's market position and its competitive advantage in the FMCG industry. Companies with well-known brands and a strong market presence are more likely to withstand market fluctuations and economic challenges.
Debt Levels: Evaluate the company's debt levels and its ability to manage its debt obligations. High levels of debt can put significant financial strain on a company, making it more susceptible to economic downturns.
Consumer Demand and Industry Trends: Analyze the demand for the company's products and the overall trends in the FMCG industry. Companies with products that cater to changing consumer preferences and lifestyle trends are more likely to experience sustained growth.
Distribution Network: Examine the company's distribution network and its ability to reach consumers effectively. A robust and efficient distribution system is crucial for FMCG companies to ensure their products reach the market on time.
Brand Reputation: The reputation of a company's brands can play a significant role in its success. Evaluate customer reviews and feedback to gauge how well the company's products are received in the market.
Valuation: Assess the stock's valuation based on traditional metrics like price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and other valuation multiples. Compare the valuation with peers in the industry to determine if the stock is overvalued or undervalued.
Benefits of Investing in FMCG Penny Stocks
Investing in FMCG penny stocks can be appealing for several reasons, but it's essential to recognize both the potential benefits and significant risks involved. One potential benefit is the growth potential these stocks offer. As smaller companies with relatively low market capitalization, they have room to expand their market presence and introduce popular products, leading to substantial increases in stock value.
Investing in FMCG penny stocks also provides an opportunity for early entry into emerging companies, which can result in higher returns if the company experiences significant growth over time.
Moreover, adding FMCG penny stocks in an investment portfolio can offer diversification benefits. The FMCG industry tends to perform differently from other sectors, so exposure to these stocks can help spread risk.
Additionally, the low share prices of penny stocks allow investors with limited capital to participate in the stock market and potentially achieve gains. Some investors are attracted to the short-term trading opportunities that FMCG penny stocks can provide due to their volatile nature. Quick price movements can create opportunities for fast profits if timed correctly.
Investing in penny stocks can be highly risky, and potential investors should carefully assess the risks and rewards before making any decisions. While some investors may find success in this market, it's essential to conduct thorough research, exercise caution, and consider seeking professional advice if unsure about navigating the complexities of penny stock investing. For most individual investors, focusing on well-established companies with a proven track record may be a more prudent and stable investment approach.