“When you’ve had money and lost it, it can be much worse than never having had it at all!” said a character in Gordon Gekko’s Wall Street.
Chaitanya Dalmia’s tryst with a mega-bagger which came his way and then walked away exemplifies this proverb.
Chaitanya’s profile is not familiar to us because he keeps his stock market activities under the radar. However, his thought-provoking articles in Outlook Business reveal that he has a deep understanding of the fine art of finding multi-bagger stocks and is willing to share his secrets with us.
In his latest article in Outlook Business (Confession Of A Value Investor), Chaitanya Dalmia explains as to how serendipity (luck) plays an important part in the difference between getting and losing multi-bagger stocks.
When the TMT (Technology, Media & Telecom) bubble burst in 2000 in the wake of the Ketan Mehta scandal, several investors lost their shirts. Chaitanya Dalmia was amongst the many who was badly hurt by the collapse. He describes himself as a “harrowed citizen of a war-devastated country whose psyche has been terribly bruised”.
However, unlike other investors who threw in the towel and vowed never to touch stocks again, Chaitanya Dalmia went back to the basics of value investing by turning to the treatises by Benjamin Graham and the other eminent Gurus.
While he was looking for “cheap” stocks, one caught his attention and he bought a bit of it. The surprising part is that Chaitanya had no special knowledge of the stock or its fundamentals. The only reason he bought the stock was because of its dividend yield. Also, the stock came to his attention because it was languishing in the list of low P/E stocks for which there were no takers.
Like a fairy tale coming true, the stock blossomed into a multi-bagger before Chaitanya’s disbelieving eyes.
However, this is also where bad luck turns up to spoil the fairy tale. Though Chaitanya had been tutored about how one should ignore noise, focus on earnings, ignore daily stock price movements, etc, etc, he couldn’t resist the temptation to cash in on some of the profits.
When the stock became a two-bagger, Chaitanya sold off a chunk of the stock. Later, when it became a four-bagger, Chaitanya sold off yet another chunk.
Today, fifteen years later, the stock is – believe it or not – a magnificent 80-bagger!
However, “I am left with a miniscule quantity today” Chaitanya says with obvious regret in his voice.
“I was lucky to catch this stock cheap … hindsight is always 6/6 .. it’s all a matter of chance” Chaitanya comforts himself in a philosophical tone even when he is ruefully reminiscing about how “a vastly different outcome” it would have been if he had resisted the temptation to sell the stock. “I don’t know whether to feel good or bad” about the fact that the stock has surged 80x, he adds.
The important take-home point for us from this bitter-sweet episode is that we have to be inspired by Chaitanya’s never-say-die spirit and we have to keep looking for that elusive mega-bagger stock. Someday or the other, when our lucky stars are properly aligned, the stock shall fall into our lap. At that stage, we must have the good sense not to fritter it away but to keep it under lock and key and sit tight on it!