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The best shares to buy in Sri Lanka

Introduction

 

What are the main types of shares?

Historically, investing in the stock market has been one of the most essential routes to financial success. Some of the main types of stocks include:

 

Common or ordinary shares

Most people’s investments are in common stocks. It is common knowledge that in the event of a company’s dissolution, shareholders are entitled to receive a proportional share of the company’s remaining assets.

If a corporation fails to develop any assets, common stockholders could lose everything they have invested in the company.

 

 

 

 

Preferred shares

When a business declares bankruptcy, preferred stockholders have a financial advantage over common stockholders. Preference stockholders receive dividends before common stockholders.

As a result, preferred stock more closely resembles fixed-income bond investments than common stock does. Frequently, a firm will just have one sort of stock: common. Something makes sense, considering that stockholders typically seek to acquire this.

 

Large-cap shares

A large-cap stock is any publicly traded corporation with a market capitalization of more than $10 billion. Often referred to as large-cap stocks, large-cap stocks are frequently regarded as the stock market’s stalwarts or blue chips.

While many investors prefer smaller, rapidly growing companies, large-cap stocks can be tremendously helpful to those who take the time to research them.

 

Mid-cap shares

Medium-cap stocks are companies that are considered “just perfect” for investors looking for a mix of growth and profitability.

If investors currently have a lot of small-cap or large-cap companies in their portfolio (or both), adding some mid-cap equities can help them diversify.

Mid-cap stocks are those with a market capitalization or worth of less than $1 billion. When the aggregate market value of a corporation’s outstanding shares falls between $2 billion and $10 billion, the stock is can be classified as mid-cap.

 

Small-cap shares

Small-cap is an abbreviation for small market capitalization, which is calculated by multiplying a company’s share price by the number of outstanding shares. When a company’s market value is between around $300 million and $2 billion, it is defined as having a tiny market capitalisation.

 

Growth shares

Investments in growth stocks often carry a higher degree of risk, but the potential profits can be enormous. If a company has a strong and rising demand for its products and services, particularly concerning long-term developments in society, it is a good growth stock.

 

Dividend shares

Investors can expect regular dividend payments from many publicly traded companies. As a result of their dividends, dividend stocks are highly sought after in some investment circles.

Even if a corporation pays out just $0.01 per share in dividends, it is considered a dividend stock.

 

Safe Shares

Safe stocks are less volatile than the overall stock market since their share prices vary less. Low-volatility equities, often known as safe corporations, operate in industries that are less sensitive to economic fluctuations. These firms’ dividends can help ease the pain of falling stock prices.

 

ESG Shares

ESG investing is a type of investing that prioritizes environmental, social, and governance factors. ESG principles aim to address various collateral implications for the environment, corporate employees, consumers, and shareholder rights rather than focusing just on whether a firm earns a profit and grows its revenue over time.

 

Blue-Chip Shares

Blue-chip stocks consist of businesses that are leaders in their fields and have established strong reputations. They do not always produce the best returns, but their consistency makes them popular with investors who have lower risk tolerance.

 

Penny Stocks

Penny stocks are low-quality enterprises with extremely cheap stock values, usually less than $1 per share.

 

What are the advantages of trading shares in Sri Lanka?

Buying and/or selling shares present the following benefits:

  • Shares allow investors to benefit from a growing economy. As growth is experienced in the overall economy, corporate earnings will subsequently increase. This is attributable to the fact that economic growth will create more employment opportunities, which will generate income and create sales.
  • Shares help investors remain one step ahead of inflation, providing annualized returns of up to 10%, which is better than the annual inflation rate.
  • The stock market offers a low barrier of entry to beginner and professional investors alike. Investors can purchase shares online, through a broker, or a financial planner.
  • Stocks offer two ways through which money can be made, by receiving dividends and by buying low and selling high, which generates profits.

 

What are the disadvantages of trading shares in Sri Lanka?

The disadvantages involved with trading shares include the following:

  • A high degree of risk because investors can lose their entire investment, especially if they do not diversify their portfolio as part of a strategic risk management plan.
  • Preferred shareholders are paid first, which means that common shareholders are paid last if a company goes bankrupt.
  • It can be complex, time-consuming, and intimidating for beginners to select individual stocks to buy or sell. They will need to research companies, read financial statements, and have an idea of how a business operates and whether the company has any growth potential.
  • Retail investors often face institutional investors and professional traders who have experience and more capital, providing them with an advantage above other market participants.

 

What are the 10 Best Shares to Buy in Sri Lanka?

The Colombo Stock Market (CSE) is Sri Lanka’s primary stock exchange with an electronic trading platform. Since 1995, the CSE has had its headquarters in Colombo’s World Trade Centre (Colombo) Towers, and it has regional offices in Kandy, Jaffna, Negombo, Matara, Kurunegala, Anuradhapura, and Ratnapura. As of January 25, 2021, the CSE trades 296 companies spanning 20 economic sectors, with a total market value of 3,699 billion Sri Lankan rupees.

The 10 best shares to buy in Sri Lanka are:

EXPOLANKA HOLDINGS (EXPO.N0000)

Expolanka Holdings (EFL) operates in Sri Lanka, India, Bangladesh, the United States, the United Arab Emirates, Vietnam, China, Hong Kong, and Indonesia. EFL offers logistic services such as air and ocean freight forwarding, warehousing and transportation, and general sales agent services. The company also exports desiccated coconut, coconut water, fruits and vegetables, and provides leisure services such as airplane ticketing and hotel reservations. In addition, it provides managed IT services, contact centre services, process automation, IT project management, and value added processing services. The company was established in 1978 in Colombo.

LOLC HOLDINGS (LOLC.N0000)

LOLC Holdings is involved in financial services, agriculture and plantation, renewable energy, leisure, construction, overseas expansion, manufacturing and trading, information services, and other businesses. It provides agricultural solutions, including machinery, implements, fertilizer, and crop care; tea, rubber, cinnamon, commercial forestry, sugarcane plantation services, and generates solar energy. In addition to hotels, restaurants, and resorts, the company builds roads and bridges, and manufactures and trades batteries, generators, human and veterinary pharmaceuticals, machinery and hardware, home and office solutions, boiler and marine services, heavy machinery, and RADCO radiators, among other products. It was founded in 1980 and is based in Rajagiriya.

JOHN KEELLS HOLSINGS (JKH.N0000)

John Keells Holdings has operations in Sri Lanka, Asia, and Europe. Its Transportation segment offers third-party logistics, warehousing, trucking, freight forwarding, and travel agency services, as well as marine bunkering and related services. Its Consumer segments offers diet soft drinks; flavoured milk and water; energy drinks; tea drinks with fruit infusions; processed meats; and instant rice.

Its Retail segment sells printers, copiers, displays, POS systems, cellphones, and other office automation technology. The company’s Leisure section manages five-star city hotels, luxury hotels, and resort hotels. Real estate development, commercial leasing, mall and golf course ownership and management are all part of its Property sector.

Finance provides services in insurance, commercial banking, debt trading, fund management, leasing, and stockbroking. John Keells Holdings was founded in 1870 in Colombo.

COMMERCIAL LEASING & FINANCE (CLC.N0000)

Commercial Leasing & Finance is a Sri Lankan bank. The company offers term, education, gold, mortgage, and cash loans, as well as mobilizes public deposits. It also offers flexi cash, a working capital solution, as well as auto and equipment leasing, factoring, Islamic, and micro-financing.

The company also accepts debit cards and accepts online payments. Commercial Leasing & Finance PLC has 68 locations. The company was founded in 1988 and is based in Colombo.

BROWNS INVESTMENTS (BIL.N0000)

Browns Investments and its subsidiaries operate in Sri Lanka in plantation management, agriculture, leisure, and construction. It was founded in 2008 in Rajagiriya. It also has segments for Renewable Energy and Construction & Manufacturing. It handles business travel and walk-in clients’ visas, hotel reservations, and travel insurance, and operates as a sales agent for outbound tour companies. Subsidiary companies include Agstar Agro Goods and it offers aluminium and glass goods for residential, commercial, and industrial use. The firm also owns and operates the Excel World Entertainment Park in Colombo, as well as the Eden Resort & Spa, Dickwella Resort & Spa, Calm Resort & Spa, and Paradise Resort & Spa in Sri Lanka.

CEYLON TOBACCO (CTC.N0000)

Ceylon Tobacco produces and sells cigarettes. Brand names include Dunhill, John Player Gold Leaf, John Player Navy Cut, John Player Gold, State Express 555, Shuangxi International, Benson & Hedges, Bristol and Capstan. The company sells through a distributor and trader network. Founded in 1906, the corporation is headquartered in Colombo. British American Tobacco International Holdings BV owns Ceylon Tobacco Company PLC.

COMMERCIAL BANK OF CEYLON (COMB.N0000)

Commercial Bank of Ceylon operates in Sri Lanka, Bangladesh, Myanmar, and the Maldives. It has NBFI, Real Estate, and Services segments. It also provides syndicated and project financing, offshore banking, overdraft, lease and hire purchase, micro finance, and factoring services. Export bills buy, letters of credit and guarantee and draft purchase are among the company’s other services. In addition, it provides Islamic banking, information and communication technology, insurance brokerage, property development, and other utility services. Commercial Bank of Ceylon PLC was founded in 1920 and has its headquarters in Colombo, Sri Lanka.

DIALOG AXIATA (DIAL.N0000)

Dialog Axiata and its subsidiaries provide communication and telecommunication infrastructure services to Sri Lankan residents and businesses. The corporation operates in three segments: mobile, fixed telephony and broadband, and television. It provides mobile, fixed, broadband, and international gateway services, as well as telecommunication infrastructure services such as tower and transmission infrastructure. Dialog Axiata was founded in 1993 as Dialog Telekom but the names changed in July 2010. Axiata Investments (Labuan) Limited controls Dialog Axiata PLC.

LOLC FINANCE (LOFC.N0000)

LOLC Finance is a non-banking financial firm and operates in three segments: conventional, Islamic, and factoring. Savings accounts, fixed deposits, fixed deposit bonds, senior savings accounts, and children’s savings accounts are available. Micro loans and leases are among the company’s SME credit options. It also provides trade, import, property/project, business, and working capital financing services. Company provides resident and non-resident foreign currency accounts, debit and credit card services. It was founded in 2001 as Lanka Orix Finance PLC and renamed in 2015.

HAYLEYS (HAYL.N0000)

Hayleys is a global leader in manufacturing, agriculture, and services. Activated carbon made from coconut shells and environmental engineering solutions are available, as are knitted fabrics, and aluminium extrusion products such as windows, partitions, curtain walls, and shop fronts. Products include crop protection, processed vegetables and fruits, animal health, fertilizers, agricultural machinery, and pest management products. It also owns and administers 41 tea and rubber estates.

The company provides life sciences, medical, analytical, scientific, and testing equipment, consumables, and services, as well as travel agency services. It also manages freight, provides integrated logistics, terminals and engineering, maritime and energy services, and acquires, rents, sells, and develops properties and hires contractors for development. Hayleys was established in 1878 in Colombo, Sri Lanka.

 

 

FAQ

 

Are common and preferred shares the same?

No, common and preferred shares are different types of shares, each with unique attributes, advantages, and disadvantages. Common shares are the typical shares that investors purchase in the stock market.

 

Which stocks are the best option for beginner investors?

Penny stocks are a good place to start for beginners who are getting to know the stock market.

 

What are the benefits of investing in shares?

The chance to diversify the investment portfolio, the ability to earn money in two ways, a hedge against inflation, long-term wealth, and several others.

 

What are the disadvantages of investing in shares

Investing in shares has a high degree of risk because investors can lose their entire investment, especially if they do not diversify their portfolio as part of a strategic risk management plan. The stock market is volatile and can present an emotional rollercoaster for investors.

 

Can I day trade shares?

Yes, you can use day trading shares by buying low and selling high.

Author Details

Louis Schoeman

Louis Schoeman

Featured Forex and Stocks writer

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