Hi James
Thanks for the reply. I’ll ask my friend to write a sequel and post it here!
As for my journey – In the last 6 years – I have witnessed several market downfalls and seen a significant part of my networth getting eroded and… coming back up again.
Some of the painful memories are exiting early from many multibagger cos – I bought Safari at 400 levels and exited at 600 and last i checked it was at 4500. Then others are HLE glascoat, Dmart, Technocraft Industries, Axtel and many more
Some good calls are RACL Geartech, ADF foods, GRSE, HBL, TD power, REC which have given handsome returns.
Some learnings which if you go through all the threads you would already know so nothing new
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The golden formula for multibaggers is low PE + explosive earnings growth. Several cos like ADF , RACL etc were purchased at a PE of 10 – 12. High PE is actually a low PE if the co is going through a rough earnings patch and Low PE is high PE if for some reason earnings are unnaturally high as is the case with many packaging film cos like Cosmo.
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Try and allocate as much as you can – you can lose only that much but upside is manyfold
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Have a look at the chart even if you are a pure fundamentalist – some price patterns keep repeating and it helps many times
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Return on Equity is the main driver of share prices in the long run. Try and invest in cos that have a good ROE (18%+). Price to Book ÷ Price to Earning = ROE = Margins x Turns x Capital Structure. One can clearly see the link ROE plays between market prices and Business Performance through this formula. The co that comes to mind currently is Premier Explosives which is has gone from Low ROE to High ROE in the last few qtrs and market prices have followed suit. If you ask the owner of any business they will invariably be looking for highest margins with lowest capital being locked up.
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Simple things work best , avoid complex discussions, complex cos and complex math. I remember doing some complex calculations for Mirza and not investing. For a while it felt intellectual and share prices also tanked so I felt vindicated. However , look at all the wealth it has created over time esp after the demerger. Lesson learnt
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Act quickly when the chance arrives and don’t chase prices (up or down). So what if some get away there will always be chances. Be sure you are not overpaying.
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In general , market sizes are small in India (5000 crores or less) and those big juicy massive market sizes exist only in a handful of sectors.Try to estimate market size first. If one gets a sense of the total earnings pool then the overall market cap of the sector can be calculated and compared with the co in question. Also that’s how businesses decide to enter a market , there should be enough revenue potential in a market to launch a product. I remember RJ and RD describing their call of investing in United Spirits. You were getting a market size of 20,000 crs in some 300 crores at one point.
Thats it! It’s great to be a part of VP and though I have been little less active I read all messages daily that people post here and pick several ideas from this forum
The Collab corner esp has some great writeups and contributions on businesses and their triggers.
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