In economics, a monopoly is described as a market without competition. Monopoly companies are the favourite of investors because their business and return on investment are unlikely to suffer from competition. However, this article will discuss companies that are leaders due to significant competitive advantage. Let’s begin our discussion by understanding the monopoly stock meaning.
These companies are hard to beat in competition and command larger market share. In the world of investment, these stocks are called MOAT stocks.
A moat is a wide ditch that surrounds the mediaeval castles to prevent enemies. Similarly, these companies are protected by moat-like high entry barriers, significant capital investment, government policies, or a competitive advantage that the company has created, like the Indian Railway is a monopoly company.
What makes a company a monopoly business?
The company is often the sole player or large competitor in a monopoly market. The customers continue to buy their products or services because the company controls the market. There are several ways a company can create a barrier in the industry, like building technological barriers, distribution reach or regulations. Also, sometimes customers buy from the same company due to high switching costs.
Switching cost refers to the cost incurred by the customers for changing to another product or company. The cost advantage allows the company a wider moat. The substantial competitive advantage, along with the product’s unique feature, prevents customers from buying competitor’s products, allowing companies a monopoly status. These companies are successful in creating customer stickiness.
A company’s goodwill is another critical factor.
Let’s discuss some of the best monopoly shares from small, mid, and large-cap segments.
Small-cap monopoly stocks
You can find some of the top monopoly stocks among small-cap industries. The Indian stock market defines small-cap companies as businesses with a market capitalisation of Rs 5000 crore or less.
Oriental Carbon & Chemicals
The company is the only Insoluble Sulphur (IS) manufacturer in India. It dominates the domestic market with a 55-60 percent market share. In the global market, they enjoy a 10 percent market share.
IS is a critical component in tyre manufacturing that influences functionality, life, and quality. The industry is highly specialised and capital-intensive, and Oriental Carbon and Chemicals has created a competitive advantage due to its continuous expansion and R&D.
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With a 40 percent market share, NOCIL is India’s largest rubber chemical manufacturer. The company has long-term business relationships with type manufacturing companies like Apollo, JK, Sumitomo Rubber, MRF, Ceat, Michelin, Yokohama Rubber, Continental, Bridgestone and others.
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Mid-cap monopoly stocks
Mid-cap companies have a market capitalisation of Rs 5000-20,000 crore. Buying mid-cap stocks is riskier than large-cap stocks, but these companies often have a proven track record. Here are some of the best monopoly stocks among mid-caps.
The Borosil Group is the only solar glass manufacturer in India. Given the increasing demand for renewable energy and government policies, renewable energy is expecting a robust expansion, which makes Borosil Renewables shares an excellent pick for long-term capital appreciation. The company’s revenue has grown at a 43.8 percent CAGR in the last three years.
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Computer Age Management Services (CAMS) provides financial infrastructure and services to India’s growing mutual fund industry with a 70 percent market share. They are India’s largest registrar and transfer agent and extend their services beyond mutual funds to corporates.
Track live updates of CAMS share price on Angel One’s website.
Large-cap monopoly companies
The large-cap companies have a market capitalisation of Rs 200,00 crore and above. There are quite a few monopoly large-cap companies which are excellent for long-term investment.
Coal India is a PSU managed by the Ministry of Coal. Till 2020, Coal India enjoyed the sole rights to mine, process, and market coal in India. However, the sector has now been opened for private players too. Nevertheless, Coal India remains the dominant player and the world’s second-largest coal producer, with an approximate production capacity of 777.3 million tonnes annually during FY 2021-22.
Coal India is debt-free and pays healthy dividends to investors.
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Although there are several players in the industry, Relaxo keeps competition at bay by dominating the non-leather footwear segment and earning less than Rs 5 per pair. It has helped Relaxo make a dent in the target market and virtually become a monopoly.
Buy shares of Relaxo Footwear. Follow Relaxo Footwear share price on Angel One.
Asian Paints is a dominant player in the Indian paint market, with a 50 percent market share. Its market portion increases to 60 percent when it comes to decorative paints. Although several other players exist in the industry, Asian Paints has created a significant competitive advantage with its extensive product range, massive distribution network, and continuous innovation.
Buy stocks of Asian Paints. Get live updates on Asian Paints share price on Angel One’s website.
A few other top monopoly stocks have offered excellent performance and returns.
Monopoly companies are hard to establish and maintain. While choosing a monopoly stock, individuals must analyse the company’s financial and fundamental strengths and understand its future growth. We hope the article has helped you know about monopoly stocks. You can now invest in them by opening a free Demat account with Angel One.
Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.