Raamdeo Agrawal is one of our favourite people because he has a simple and down-to-earth attitude to picking stocks. He does not hesitate to candidly admit the mistakes that he made in his long and distinguished investing career.
If we pay attention to his sayings we can learn much and avoid making the same mistakes.
In an amusing incident at the Motilal Oswal Conference on Wealth Creation, Sanjoy Bhattacharyya point blank asked Raamdeo Agrawal why he did not buy Asian Paints despite his conviction that it was a powerhouse stock.
Raamdeo Agrawal’s answer was refreshing. He said that though he always had Asian Paints in his radar, he was always daunted by its’ “expensive” and high PE valuations. “It was a valuation trap for me” Raamdeo Agrawal said ruefully at the missed chance to get a multibagger.
Interestingly, Raamdeo Agrawal also revealed that he ended up buying Nestle almost by chance. Thanks to his deep interest in the Wealth Creation study, Raamdeo Agarwal was determined to buy Nestle but had told his broker to buy the stock only if it came down to his price level and not otherwise.
There was a big block of shares that suddenly came up for sale and the broker sensed that this was a golden chance to grab the stock even though the price demanded was much higher than the limit placed by Raamdeo Agrawal.
The broker frantically tried to reach Raamdeo Agrawal but couldn’t as Raamdeo was on a flight.
In desperation, the broker contacted Motilal Oswal who immediately gave the green signal to buy the stock at the available price.
When Raamdeo Agrawal got back, he was initially upset that he had paid a “high” price for the stock though the later stellar multibagger performance of the stock more than made up for everything.
Needless to say, the broker got a fat bonus for having the presence of mind to call Motilal Oswal at the opportune time.
Anyway, what the Motilal Oswal Conference on Wealth Creation establishes is that in the long run investors would do well to buy stocks of companies that are consistently growing at a high rate of growth even if they do have to pay a full price for the stock (see also Why You Should Only Buy The Consistent Growing Wealth Creation Stocks).