Warren Buffett popularized the concept of “Time is the friend of the wonderful business” and “our favourite holding period is forever”.
Mohnish Pabrai took this one step forward by declaring that “the best investors in the World are dead people”. Mohnish jokingly added that the best thing would be if investors make their investment and then completely forgot about it.
Then, we came across the astonishing case of the Fund which hasn’t bought or sold a single stock in 80 years but has still managed to outperform its peers.
Prof. Sanjay Bakshi tutored us of how we should be “extremely patient” after buying a stock. To drive home the point, he reminded us his own mistakes where he prematurely sold off Avanti Feeds and Eicher Motors at a fraction of their present value and deprived himself of super-duper multibagger gains.
Now, ET has profiled the incredible story of Sharad Banavadikar, a retired banker, who has made a mind-boggling gain of 2000x from his 40-year old investment in MRF.
When Sharad Banavadikar was at the tender age of 21, he invested a princely sum of Rs. 875 in buying 120 shares of MRF.
Thereafter, though over the years, there was several bull markets and bear markets, and booms and busts, and though MRF’s stock price surged and plunged, Sharad Banavadikar resisted the temptation to sell the stock. Instead, he held on to it tight.
Today, that paltry investment of Rs. 875 is worth a mammoth Rs. 43 lakhs, not including dividends. This means that the investment has compounded at a CAGR of 23.68. This shows that even if the rate of compounding is relatively modest it can still convert paltry sums into giant fortunes.
This reminds me of the classic talk given by Warren Buffett on youtube. Warren cited the example of Coca-Cola as an example of how, if you buy a wonderful business and hold it for decades, you will get stupendous returns despite all the problems that may come in the way. An investment of $50 in one share of Coca-Cola and a reinvestment of dividends would have converted that paltry amount into a fortune of $5 Million. “If you are right about the business, you don’t have to worry about anything else” Warren Buffett said.
At this stage, if you want more inspiration, you should read the report on 100-baggers by Motilal Oswal. The report not only profiles the 100-baggers of the past but has also identified seven small and mid-cap stocks as potential 100-baggers of the future.
I have pointed out earlier that each of these stocks are chugging along nicely and that we cannot afford to take the recommendations lightly.