Sunday, April 29, 2018
Paisa jaldi banana hai ki zyaada?
https://www.valueresearchonline.com/story/h2_storyview.asp?str=27492&utm_medium=vro.in
Finding Multi-baggers the Basant Maheshwari Way
Basant Maheshwari's advice to investors who want to make a debut in the stock market is to focus on zyaada, because only that can lead to wealth creation
Finding multi-baggers in the stock market is his passion and he makes no bones about it.
'Paisa jaldi banana hai ki zyaada?' Basant asked a packed audience of 300-350 investors at a seminar conducted by the Tamilnadu Investors Association at Chennai.
His advice to investors who want to make a debut in the stock market is to focus on zyaada, because only that can lead to wealth creation.
'Most people start buying shares thinking they will make R2,000 or R5,000 a day. But that cannot change your life. What can change your life is making R2 crore or R5 crore over many years,' he says.
Getting started
Creating that kind of wealth, he qualifies, will take a lot of time and dedication. First, you cannot consider stock market investing to be a hobby. It is a full-time activity. 'Hobbies always cost you money,' he quips.
Fascinated with markets since his college days, Basant worked for six years at his family firm before becoming a full-time investor.
His second bit of advice is to invest enough money in equities to make a difference to your wealth. 'You are not poorer by 10 or 15 per cent in life. You are poorer by 10 times. So, you cannot create wealth by investing R50,000,' he says.
But he advises starting small because to really understand equity investing, you first have to lose money. He did not make money in the market for the first ten years. 'I used to buy low P/E stocks at their 52-week lows. If the price of the stock was in single digits, even better,' he laughs.
He asks investors not to look to the stock markets for regular income. 'Stocks cannot help you pay your tuition fees or electricity bills. For five years, a stock may do nothing. Then it may suddenly go up fivefold. Plus, a bank FD never falls 80 per cent in a bear market. But a stock has all the right to do so,' he says, irrespective of whether a stock is a blue chip or a tiny cap.
Basant's most successful stock picks were Pantaloon Retail, which he bought because he thought it could be India's Wal-Mart, TV18, Page Industries, Repco Home and Gruh Finance. He bought Pantaloon at R7 and the stock went up to R875, but he sold it around R280.
Finding multi-baggers
So what are his secrets to finding such multi-baggers? He outlines three clear strategies.
One, look for companies with good cash flows and secular earnings growth. Avoid cyclicals. 'What are the stocks that have made the most money in 20 years? Asian Paints, Nestle, Infosys, Marico, Dabur, Eicher Motors, Bajaj Auto,' he reels off. He points out that you will never find a Sterlite, Tata Steel or Coal India in that list. Making money from cyclical stocks needs two good decisions: an entry decision and an exit decision.
He also asks investors to avoid regulated sectors or those with government intervention. 'Take HPCL. We've kept hearing the deregulation story, but it has not made money in ten years.'
'When we invest in markets, we suddenly become patriots. We say India needs coal, so let's invest in Coal India. Or we have load-shedding in our city, so let's buy power stocks. That's the government's job, not yours,' he points out.
Highly regulated businesses don't create wealth because the government has a welfare motive. He cites the example of Coal India, which sells coal at a huge discount to global prices.
Two, really good stocks don't come cheap. Companies growing revenues and profits at an above-average rate always trade at a high P/E, at a premium to the market. He points out that L&T was never cheap. Nor was Page Industries, one of his multi-baggers. When Basant bought it during March 2009 lows, many blue chips were trading at 5-6 times earnings, but Page Industries was at a P/E of 16. He still went ahead and bought it. He feels that in sectors or businesses with strong brands and high entry barriers, high P/Es can be sustained.
As most of the money in markets is made by identifying secular trends, he also likes to bet on stocks at their 52 week highs! 'When a new trend is unfolding, stocks belonging to the sector regularly make new highs. So anything that is at a 52 week high attracts my attention,' he says.
Once you identify a trend (like software in 1994), it is best to go for the sector leaders, companies with strong cash flows and high return on equity, he recommends. 'Don't buy the poorer cousins in a sector. If you bought Infosys in the nineties you are wealthy. But if you bought Silverline or DSQ Software, you lost everything.'
His logic is that companies that generate strong cash flows can pay out higher dividends. So even if the business is dull for a while, investors receive dividends. 'Dividends are life jackets to stocks. Dividends are tax-free and they keep growing,' so they establish a floor to the stock price.
When to sell
His final piece of advice is not be in a hurry to 'book profits' as this is how people lose out on the biggest wealth creation opportunities of their lives.
He advises holding onto stocks for years as long as the company's profits are growing. It doesn't matter if it remains at a high P/E.
'If a stock you bought for R100 goes to R150, you rush to sell it. If it goes to R60, you hold on and wait for it to come back to R100. That's how you lose money. If you buy property and its value goes up, you don't sell the kitchen and say the bedroom is now free! Why are we so insecure about making money in stocks?' he jokes.
He explains that many people who have become rich through equity investing bought 15-20 stocks many years ago and just didn't sell them. Of the 15, 12 'would have become junk.' But 3 stocks would have turned out multi-baggers!
The problem with frequently 'booking profits' is that you have to keep finding new ideas to invest in. 'If you get one idea every month, there's something wrong with your strategy. Good ideas come to you occasionally, once in six months or a year.'
He rounds off his session by saying that stock market investing, unlike investing in gold or bank deposits needs knowledge. 'If you don't have a good idea about investing, just go to a mutual fund. It won't pay off like individual stocks but it will still work out better than bank deposits. Just consider the opportunity cost. Good funds have managed 22-25 per cent, which is still better than 8 per cent.'
Thursday, August 2, 2012
Monday, May 25, 2009
Investor's have a "Left out feeling...."
Stock markets have rebounded 70% to 13,900 levels (25th May) from its recent lows it touched on 9th Mar.’09 (Sensex 8,160), however lot of investor’s have missed on the major rally, including the MFs & HNIs.
Now the serious investor will not like to miss the next up move, but the big question is which way is the market headed now….? Let me give you a quick checklist before touching upon this question …..
What has changed in last few months?
a) Stimulus packages announced few months back seemed to show it tickle down effect.
b) Companies (Read US Bank & Finance Co.’s) have declared positive numbers (albeit with some accounting jugglery).
c) World leader’s has come together to handle this problem of global slow down, as it is effecting the developed nations more then others,
d) Economic growth is bottoming out (atleast falling at lower rates).
e) Business Confidence and Purchase Manager Index is showing sign of revival and confidence.
Back home in India:
a) UPA Govt. is back in power, more stronger then before.
b) RBI has moved Interest rates down and over next few months Banks would be in position to also lower rates further (once the high rate deposits come up for renewal around Sep/Oct’09).
c) Headline Inflation rate is close to zero and expected to remain at lower end for next few months, due to high base effect (WPI had touched double digits in 1st week of Jun’08 and had peaked in Aug’08).
However much more needs to be done on global economic front:
a) Problems created by developed nations cannot be solved overnight.
b) The economic conditions continue to be challenging, un-employment rate in US is inching towards 10% mark,
c) UK as well Japan has shown negative GDP growth for qrt. ended Mar’09.
d) After UK’s AAA stable outlook rating been changed to negative, it seems to be turn of US AAA rating downgrade
Thus all in all, still a mixed data. Markets are expected to remain volatile. For India the near term triggers are:
1. Union Budget
2. Announcement of other key portfolio at the centre
3. Monsoon forecast
4. Oil price movement
5. FII flows
While Investor should remain cautious, they need to continue with discipline investing and remain invested for the core holding. (I continue advocate SIP style of investing).
Markets have run up quite fast and thereby have build in lot of expectation, especially on reforms front. Any negative surprise from budget may not be welcomed.
For the bottom line answer question – Should I enter now or wait? – My view would be that if you want to punt and play short term – you better don’t go long now and if you investment horizon is 4 to 5 years, then you can start getting your feet’s wet now and done wait of the big wave to hit the shore.
Jetha N.Punjabi
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