If you are a new investor, we recommend you go through this table below. This will help you understand the Multibagger Creation Journey.
|Here you Identified a Multibagger based on Past Performance & Growth aspects.
For example, The capitalization is 300 Crore & PE is just 5.
Imagine you Invested 1 Lakh Rupees on it.
|0% on 1 Lakh|
|After Year 1||The company performed well as expected and displayed 20% EPS Growth.
Now PE is 4.
But all EPS growth will not be reflected in Price, especially in the beginning years. Hence you will get +/- 20% returns.
|After Year 2||Now the company performed well again with another 20% EPS Growth.
This time the price will have to start reflecting as more & more analysts, people, funds will be looking into the stock.
Let us say the price gained 50%.
The PE is 5 again.
|+ 20% | 1.5 Lakh|
|After Year 3||Your company is performing well with another 20% EPS growth.
This time the market visibility is high & hence the price jumped another 100%
Now the PE is around 8 with Capitalization 600 Crore.
|+ 100% | 3 Lakh|
|After Year 5||Now you are on Year 5. The compounded EPS growth of 20% lead to 100% EPS growth in 5 years.
Since the Capitalization is above 1000 Crore, Mutual Funds will start Investing. Big Money & Increased Visibility leading to Higher PE.
Now the PE is 20 with Capitalization 1200 Crore.
|+100% | 5 Lakh
5X Gain in 5 Years
Now onward 20% EPS growth leads to 30% price growth.
Also, you will earn 100% return on original capital. i.e 1 Lakh gain every year.
|After Year 10||Now the company is growing again at 20% CAGR.
Now the PE is 30.
|+500% | 30 Lakh
At this point you will start getting Dividend Yield 1% as 30 Thousand rs. per year.
30X Gain in 10 Years
|After Year 20||If you are lucky to have a Superbagger with 20% CAGR. Eg: Infosys, Wipro, Page Industries etc.
Now the PE is 40 and you have a 100X returns on original capital.
All these are possible as, Infosys gave 300X returns in 20 years!
|+3000% | 10 Crores
Now the Dividend Yield will be 1 Lakh rs. per month equal to your Original Capital investment.
100X Gain in 5 Years
Cash Flow Generation!
This is how Stock Market creates wealth & cash flow. It takes really long time for the compounding to work. No shortcuts!
So here are the problems of amateur investors:
- They add more stocks than above learning & tracking capacity
- They exit stocks every other year breaking the power of compounding positioning
SO I recommend each & every investor to understand this process & continue holding stocks long term discarding noises, as long as their fundamentals & growth factors are intact. Be like Pro!
Take my words, A Stock Investor will not Succeed unless he/she develops the Right Discipline!
10 years back I used to be a Newbie in Stocks. I was reading Warren Buffet books & researching with my own Value Research website. During the time I was relying on my friends & TV channels for advices.
The problem I had was, Every month I wanted to buy a new stock. I spend time on researching, shortlisting my adviser stocks, listening to market channels, buying every other scrip they recommend.
One Day: My ICICI friend will come & say there is a New Natural Resources fund, so Reliance Naturals will become 100-bagger. Bhum!
Chalo Invest kiya Reliance Naturals pe!!
Another Day: On TV Channel, Porinju is sitting & recommending XYZ stock, claiming having a Strong Balance sheet! I didn’t know how to check the balance sheet.. But I bought that stock too!
After 1 year: I have around 60 stocks in my account. During the time I met with a Senior Investor while I visited my broker Geojit.
Seeing my portfolio he shouted!! Are you mad?? Did you know anything about these companies? How you are going to track them?
He said, I will be never a good investor if holding big bunch of stocks!!
It took another 2 years for me to realize the matter. My portfolio went red during a Bear Market zone. NOW, I wanted to cleanup my portfolio.
The problem is, I don’t know why I bought certain stocks, nor I know the adviser to contact. Clearly big mess!
Years after, I started with a Concentrated Plan. Yearly, I will buy only 5 new stocks with thorough study of annual reports, collaborated decision making, QR tracking and for long-term holding.
The advantages were many:
- Easier to Manage since the stock count was small
- Installment Based Investing was possible as I can buy the same stock every month at different prices.
- More Time to Life Since the number of stocks were low, there were more time to my life, I found that stock investing is Passive!
- Same Portfolio Returns you will get the same portfolio returns for the properly selected stocks, even if it is 50 or 5.
I am providing the same my own invested stocks through the Paid Subscription Plan. This will be having tracking & updates. I encourage serious investors to purchase this plan.
Same Trouble I can See Today Too!
When people contact me over the Phone Consultation, I am seeing the same problem is haunting them too. There was one investor with 3 brokerage accounts and 120 stocks!! Who is going to read the annual reports, track the QR performance of 120 stocks per year?
So my recommendations are below:
- Be Disciplined. Reduce the number of stocks. Invest every month on same stocks until your portfolio limit reached.
- Know your stocks. Read about them. Find the scope of the sector.
- Wealth Creation. Stock Market is for wealth creation. Give time for the companies to grow. Let the Magic of Power of Compounding happen.
NOW you tell me, Should I create Youtube Videos to make people understand this??
If people ask me What to do with the Current Market Problems, I can say Only one-thing: Convert those Problems to Opportunity!
The current problem here referred is the New Monthly Lows happening to Smallcaps & Midcaps.
Even my portfolio is showing 10% loss!
One cannot avoid such problems. But in reality We should be seeing the Fundamentals instead of the Market Price.
If the Fundamentals are Falling.. that is a Real Problem!
If the Stock Prices are Falling.. that is an Opportunity!
Imagine if you invested in a scrip of rs. 100 expecting it to be 500% returns in 5 years.
Now the price felled to rs. 50! But the fundamentals are intact & better!
What you should do?
In this case you should buy more as now the Returns Possibility is 1000%!! It just doubled!!
(rs. 50 to 500)
So how you would know which is the Best Price?
The only option is SIP!
Systematic Monthly Investments on Growth Scrips ensures that You will Sweep all the Low Prices.
Ensure that you Divide your Yearly Corpus on stocks Equally too!
Spend Less Time in Market
It is a well know fact that those who spend more time in market will gain less!
So focus more on your Career, Make more Savings, SIP in Growth Scrips, Give few years, Allow the Tree to Grow, Reap from the Super Gains!!