Should "ITC" be part of your long term portfolio:

ITC's stock touched a new high of Rs 299.2 last Friday following a stellar performance logged by the company in the September quarter. Most investors who had not invested in the stock would be sulking on the missed opportunity of participating in the gains made by the tobacco-to-FMCG major over the last couple of years.

However, there are four solid reasons why one can still invest in ITC but with a clear long-term horizon:

1. The company is consciously reducing its dependence on the cigarettes business. It is effectively pumping the cash generated by the cigarettes business in fast growing businesses like FMCG, agri and hospitality. Ten years ago, the company's tobacco business was contributing 80% to its total revenues. Today, its contribution is down to 40%. The business still earns 90% of the company's bottomline. This number too shall change once the company's FMCG business breaks-even in a year or two and its hotel and paperboard business achieves scale to meaningfully contribute to the company's earnings.

2. ITC has built businesses, which will accrue long-term returns. Be it the FMCG business, agri, paperboard or the hotels business, each of these are businesses in which current investments are going to create properties capable of accruing long term benefits for the company.

3. It has achieved leadership in most of the businesses it is in. It is the leader in the cigarettes and paper business in the country. It is among the three players in the hotels business. In FMCG, it is fast gaining market share in high-clutter categories like biscuits, salty snacks, noodles and personal products.

4. ITC has handsomely rewarded shareholders in the last 20 years. The stock has appreciated from trading at rupee one at the end of 1991 to now trading at Rs 290. And during this period the company has doled out cumulative dividends of nearly Rs 19,000 crore to its shareholders! The company has announced two bonus issues a 1:2 bonus issue in 2005 and a 1:1 bonus issue in 2010. Investing in a company with this past track record is safer than an investment in a penny stock.