Lessons from the money-spinners

Lessons from the money-spinners

AARATI KRISHNAN

It wasn’t the obvious stocks or sectors that created epic wealth for investors over the last 10 years. Here is an analysis of the multi-baggers

Let’s admit it. Most of us don’t invest in stocks to ‘beat inflation.’

We do it to create wealth on an epic scale. The secret wish of every stock market investor is to unearth that gem of a stock that goes up fifty or hundred-fold in 10 years, and helps him bid goodbye to his day job.

So, what are your chances of hitting upon such a stock? Is there any science to it?

BusinessLinestudied all the NSE-listed stocks for which we had data going back 10 years (a universe of 788 stocks), to distil the lessons from the multi-baggers. The analysis also helped bust some common myths surrounding multi-bagger stocks.

The odds aren’t high

First, banish the thought that buying and holding any old stock will deliver untold riches to your bank account. In the last 10 years (from December 2005 to December 2015), finding multi-baggers has been an uphill task for an Indian investor. This was a period in which the Nifty 50 delivered only a 10.8 per cent CAGR (compounded annual growth rate).

Mid and small-cap stocks didn’t fare much better. The Nifty Next50 (formerly Junior Nifty) clocked 13.6 per cent and the Nifty Midcap100 earned 12.7 per cent.

But if you were shooting for a 26 per cent return (that is, doubling your money every three years) 60 of the 788 stocks made the cut. That’s an eight in 100 chance of unearthing them.

Take the top wealth creator Ajanta Pharma. Had you plonked ₹1 lakh on it in 2005, you would today be a crorepati. Eicher Motors (up 73 times), Amara Raja Batteries (67 times) and Indo Count Industries (40 times) were a few other toppers. (All stock returns in this analysis are adjusted for bonus and stock splits, and don’t include dividends).

https://www.thehindubusinessline.co...ons-from-the-moneyspinners/article8089207.ece