Basant Maheshwari Reveals the Secret behind his Multi-Baggers
Kolkata-based Basant Maheshwari has made a name for himself as a value investor and has the credit of spotting several multi-bagger stocks. Mr Maheshwari took to full-time investing in 2001 after his family business failed to take off.
In the time period of 2001 and 2014, Mr Maheshwari invested in many companies such as Bharti Airtel, Trent, Pantaloon Retail, Axis Bank, Titan, Page Industries, Hawking Cookers and Gruh Finance and it was all successful.
Mr. Maheshwari is the founder of the investment portal The Equity Desk and he is the author of the book “The Thoughtful Investor”. Teaching is also one of his passions other than investing.
Investment strategy: Mr Basant Maheshwari told in an interview with NDTV that he is biased towards the companies which generate huge profits from minimum cash. Such companies are likely to be cash flow positive and when in bad years, the free cash flow turns into dividends.
To watch thee interview of Mr Basant Maheshwari : (Watch the full interview here)
Mr Basant Maheshwari’s convictions investment
- Make sure to only invest in companies that have a return on equity (greater than or equal to 30 per cent) and that pay regular dividend. These two factors are an indication of a sound management
- Invest in companies with high sales growth. Companies that generate 25-30 per cent sales growth for 5-6 years are very unlikely to be loss-making propositions.
- Never buy into a company that is not the leader in its sectors.
- Buy companies, which are trading at a market price/face value of more than 100.
- Companies with debt can also be good bets provided the growth in debt is significantly less than growth in sales.
Mr Maheshwari’s multi-baggers and his philosophy for investing in them
- PAGE INDUSTRIES He bought the stock at a price of ₹ 350. He got rewarded the returns of 20 times between 2008-14. Criteria for selection: Consistent growth of 40 per cent for 11-12 years and kept on capturing market share. Attained the best growth in the industry. Did not take debt or dilute equity.
- HAWKINS COOKERS He bought the shares at a price of ₹ 350 and harvested the return of 8 times between 2008-14. Criteria for selection: Bought the stock for dividend yield and stability in the portfolio after the 2008 global financial crisis. The kitchen appliances markets were growing at a fast pace.
- PANTALOONS RETAIL: He held between 2003 and 2008, the return of 40 times. Criteria for selection: It was a bull market story, which ended with the global financial crisis. The initial thought that it could be India’s Wal-Mart, but later convinced that it required heavy doses of cash, which would have been difficult in a bear market.
- TITAN: Bought in 2008 after selling Pantaloon as a retail play. Between 2008 and 2013, it gave a return of 6 times. Criteria for selection: Big brand, high RoE. Sold last year after the announcement of restrictions on gold imports.
- GRUH FINANCE: He held these stocks between 2011 and 2014 for the return of four times. Criteria for selection: A home finance company that outgrew HDFC. It lends in semi-urban and rural areas, where there is little competition from big lenders. Small ticket-size of loans and good risk management. Repco Home Finance is another good bet.
Story That Did Not Go As Planned:
Mr Maheshwari bought Voltas in 2009 and to sell the stocks at a loss of 60 per cent. He quotes “It was a bad decision and I paid the price”. Criteria for selection: Voltas fell from the price of ₹ 250 to as low as ₹ 160. and after the sharp fall, it appeared to be cheap.
Tips and Advice for Investors:
Compaies that are associated with the housing sector might do well as the economy is lookubg up. Interest rates are likely to come down too.
Companies Such as:
- Kajaria Ceramics
- Whirlpool of India
- Gruh Finance
may turn out to be good bets in future.