The most interesting observation I could make from here was 1) No Cyclical company 2) No MNC 3) Majority of these companies were first generation entrepreneurs. Almost all of these were first generation entrepreneurs!

 

 

 

 

Have a look at Goldiam. In the jewellery space I think it is one of the top picks along with Titan and Gitanjali. Titan, Gitanjali and Goldiam in this order is my preference. A Pantaloon group company also has recently taken a stake in Goldiam.

 

On a slightly different subject, which LARGE CAPS you think could still be multibaggers even from this level over the next 5 years. Pantaloon, F.T. ?(not exactly sure of F.T. current market cap right of the bat).

 

Rgds.

 

Basantjee,

 

I completely agree with you and that is exactly the reason I asked you this question. I also firmly believe that you can find multibaggers in small caps and Mid caps only and it is very difficult to find multibaggers in large caps. So pls clarify, are you saying that chanecs are remote that since Pantaloon and F.T. are already large caps they will not be multibaggers going forward from current level (10 to 15 times in the next ten years) ? Pls clarify.

 

Thanks & Rgds.

 

These are unusual situations where the sheer size of the market is about 30 -40 times the current level of penetration. In fact we could see a 10 bbagger in 5 years in both these companies if they are able to execute what they said.

 

Here we should recall that Bharti Airtel moved from amarket cap of Rs 7000 crores to Rs 100,000 crores in 3-4 years  because the market itself was growing so fast. So there could be relaxations to this theory but this relaxation is more of an exception then the norm.

 These are unusual situations where the sheer size of the market is about 30 -40 times the current level of penetration. In fact we could see a 10 bbagger in 5 years in both these companies if they are able to execute what they said.

 

 

This is exactly what even I feel and hence I asked the question. Thanks for clarifying.

 

Rgds.

 

Looking at the mcap in absolute numbers has its own inherrent flaws.

 

I have invested some time back in Mount Everest and it has become a halfbagger in a short span of time, looking at the sheer opportunity and some big daddy will buy this company it can still go up. Have you been able to analyse this company?

 

Secondly Indraprasath Medical also looks promising to me, HDFC has a stake in it.Can you or board memebers throw some light to it?

 

 

 

Mt.Everest: Yes heard that the co. is being sold off at about Rs 150 per share. For the apst two years it has been takeover stock. generally I do not invest in such companies because timing the takeover is very very difficult. SOme companies like Federal Bank and South Indoian Bank are being held by investors for overa decade now only to be taken over but that never seemed toi happen.I think that if the underlying business is tring it would be taken over faster then we think!!!

Can any body please throw some light regarding market cap. How to shortlist  a stock based on market cap, How to select a stock whether it is cheap or expensive based on market cap.

                    Welcome to equity desk.You could check out the link called investment school on the top of the home page.There you have excellent articles by Basantji explaining market cap and companies.Infact i would also recommend you to visit the board of TV18,Pantaloon,Infosys in the equity desk website,where you can gather a lot of informations.There each boarder comes up with good set of questions and gets it answered.That could be really the starting point.-Courtesey Basantji and his team of all boarders.

Investing is a journey and not destination,So Jack start your journey...

Thanks Jack

 

Havell Indias sales is higher than its market cap and it should catch up subsequently...keep an eye on it..

 

Are there any examples like this

 

 

Basant sir, I wanted to have greater clarity on his "Five-year payback outlook". Considering this and his ROE & ROCE funda, how do our TV18, EDUCOMP, YES BANK stocks come in light, at their current price and keeping in mind next 5 years for each of them.

 

 

 

Really BasantJi....that is why i am really confused why MOST gives an award to the wealth creators of the past...rather than try to identify stocks which could be wealth creators.  

 

Absolutely. I have always thought that this is a publicity stunt an event to get some media and investor attention. I mean how am I affectred except academically whether Wipro has created  wealth 10 times over or 1000 times over. WIth due regard to Ramdeo (baba) these events are more of data collection rather then an exhibition of analystical skills.

 

Champagne Indage is a fastest growing wine company and looks a good long term bet (though I am not sure about the quality of Indian wine as I  have not tested Indian wine  so far..) with a good growth potential and very few entry barriers ..Have this been discussed before or has anyone tried to analysis?

Basantji what are your views ? Can we have this in our multibag list?

 

The best in the lot ONGC had a CAGR of only 20% while wealth increased 6.5 times. So the concept that elephants cannot dance should be taken with that perspective that the maximum wealth that can be created is 20% CAGR while in case of a small cap Unitech (freak buy if only someone could do it) was only 80% CAGR which made a 340 bagger on the stock. Though I have not checked it most of these gains would have been in the last 3 years.

 

I think that buying and holding Unitech from 1996 could only be accidental. It could not have been planned but as they say it might have just happened. But it was all right and quite normal to buy it around 2003 when it was at Rs 50 odd and even from there it has been up multi fold.

Most money is made when stock is unknown known as accidents. Owning known is a plan. This table indicates accidents have upper hand over plan.

 

Well said. "Sleep with eyes open"! SOmething like Omshivaya's well analogy. DIscussing this does not guarantee its implementation but it surely creates an option.

 

 

 

 

 

Yes, I have thought about that. That is why I keep saying that at Rs 1500-Rs 2000 we would reach terminal value for Bharti Airtel. ANything more then that does not seem possible as of now.

 

 

Are they still not in the popular category? If that is so then this is a very good signal.

However, if you get a big thing at the price of a small thing.... thats the bst bargain..... and if you get a small thing at the price of a big thing..... its a total avoid.

 

I also had the same feeling, but then converted my cash to stocks ... who knows we might just keep waiting for years/infinity/bear_mrkts, in order to achieve lower/better price points for our favourite shares.

 

The biggest dilemma i have is NOT which stocks to buy, is NOT whether my portfolio is justified for higher returns, BUT IS ALWAYS, that when i add to my portfolio .. i do NOT know if i COULD have added it more by buying at lower levels later ....

 

and i have come to terms and accepted this dilemma ... since i have almost given up timing the market for my buying price points ...

 

Cheers,

Prosperity !

 

Correct. We all know that timing the market is impossible. So I follow these ...

Prepare with some cash (not from stocks) and when all mugerilals say sell, sell, start deploying 1/10 at a time. I believe in not selling stocks in fall. Having said that, we all are learning.

 

Modifying Shakesphere's words..."To buy or not to buy, that is the question"

If you decide to buy 1/X at a time, where X = 10,

 

Q1) How do you decide value of X ? How do you arrive at X = 10 ?

 

Q2) Don't you fear that though next 2-3 times - your price might be cheaper than today and then you would buy 4 lots of 1/10 at lower prices ...  but then after 4th lot buying, rebound might be sharper and may take prices much much above than even today and hence you end up spending remaining 6 lots of 1/10 at prices higher than today... 

 

So your average price might work to be more than today's prices... even though prices went below and then came up !!

 

And more than that ... it brings anxiety and frustration 

 

For me, one thing works better - i decide what price would make me feel happy and does not look unrealistic ... i keep 100% money (i.e. X = 1 for me) at that limit price ... my limit can come in 1 day or 20 days or never ... but i don't feel i am playing hide and seek with Mr. Market !!

 

 

Sorry!!, It was typo. Offcourse it was .."and when all mugerilals say sell, sell, start deploying 1/10 at a time".

In my case 1/X is 5% of existing book. It is kind of SIP, which I am trying to do myself. 100% Timing of market is impossible. I am aiming for 30-40% of timing. When markets were down 400 points, I put one part. This way not only I am hedging my old book (against fall) but deploying fresh commitment at reasonable levels. Personally I think 3200 nifty is quite reachable but in case it does not, such SIPs will help me.

There is no mathematics here also there is no full proof logic. All strategies are correct and wrong in markets. When I am sure about some stock I buy like no tomorrow. I picked yes bank in couple of weeks only, it is huge 46% of my existing book. This time I am putting money in MFs, so trying to take advantage of steep fall of a day (if any).

 

http://www.dspmlmutualfund.com/downloads/SMALLMIDCAPPPT_260906.pdf - http://www.dspmlmutualfund.com/downloads/SMALLMIDCAPPPT_260906.pdf

 

 

Now for the sad part this is the portfolio of the fund: Isn't there is an indication of very low knowledge to application ratio? That is a worry when these guys are on sales pitch they say different things and when they actually go in to invest they behave like   http://www.theequitydesk.com/forum/forum_posts.asp?TID=240 - Zebras

 

http://www.moneycontrol.com/mf/mf_info/tophold_full.php?im_id=MDS056&im_ffid=DS&im_desc=DSP-MLSmall%20and%20Mid%20Cap%20Fund%20%28G%29&ff_desc=DSP%20Merrill%20Lynch%20Fund%20Managers%20Ltd - http://www.moneycontrol.com/mf/mf_info/tophold_full.php?im_id=MDS056&im_ffid=DS&im_desc=DSP-MLSmall%20and%20Mid%20Cap%20Fund%20(G)&ff_desc=DSP%20Merrill%20Lynch%20Fund%20Managers%20Ltd .

 

 

 

 

 

Congrates you have crossed 100 posts.

 

My personal view is:

 

1. unless we are confident enough in our ability/ judgement/ knowledge about stocks and particlulary when we are taking it up as an additional acitivity along with our salary earning, one need to work on asset allocation seriously understanding the risk associated with the stock market and also the likely price we may have to pay for our lack of expertise.

2. i personally do not agree to put any money in share which is borrowed or which is likely to be required in next 3 years of time

3. having certain investments of risk free/ tax free nature like ppf, insurance is must.

4. if one is likely to use the house for own purpose, buying decent property (along with benefit of staying and enjoying it) is minimum real estate investment i would like to go for.

5. bying any depreciating assets like car etc (u may read Basantji's post some where of he using scooter and avoiding investment on depreciating asset like car) must be avoided or to be minimised

6. Gold etc required for minimum social reasons/obligations should be purchased.

7. health insurance is must if not covered by organisation

8. no purchase on credits/ credit cards and all required purchases based on cash on hand.

9. some amount to be available for immergency fall back.

 

After allocating all these, i would put rest of my salary in stocks.

 

Of course, this is my personal view, different ppl will have different perspective to the same issue.

 

I beleive there's a lot of confusion to the word safety/risk......the biggest risk is not knowing your personal orientation....its not absolute returns which should be the giuding light, it should be risk-adjusted returns.....the biggest trap in the market is low risk-high return type of stocks.....for the very term is a mis-nomer. People think that high betas are only dangerous, in my opinion negative betas are no less dangerous.....its a perception, that those who had not rose till a particular point in the bull markets are high returns and low risk stocks..... however, those stocks are equal risky as the bull market may continue its march without they getting out of their range. In that very sense, I am quite a risk taking investor and hence I tend to use debt instruments as a safety tool, and hence my regard for fixed income securities. Most of the value stocks, will fit this bill of riskiness.... rather someone can also say they are low-return and high risk stocks, which they may turn out to be....

 

So, Vipul may say I am contradicting myself.....but the scenario may change totally, if the bull markets chages its shape......thats the point valie stocks become extremely valuable.....thats when their character changes to low risk high return ........dont know Vipul, but I beleive the markets are making a march to this safety now.....some companies price behaviour is baffling me.... Castrol, GE Shipping, ONGC etc....utilities which are considered to be very slow movers are doing their bit as well......some high profile performers like IT, Construction etc. are reeling under pressure....its not a comment....but an observation and may be wrong in that....

 

Regards,

 

Vivek

Please share your views on above msg. I found it very informative.

TED should have star rating to messages, this way writer will get to know rating given by other Teddies.

Vivek, please start few stock specific topics under TED, like Castrol, GE Shipping, ONGC etc and provide your guidance to other members. This way teddies will also write their own suggestion etc. For example there are threads dedicated for Pantaloon, TV18 etc.

 

Thats why Vipul, when stocks are inherently risky why not take a greater risk by getting into value stocks. Its a common fact that most people lose more in this market than what they earn from this market, so why not trade the other way round, to lose money while the people make money and to make money while they lose money. I would like to stay put in my portfolio but I also consider debt instrument as a part of my portfolio....so cash in never an option (generally) for me....

 

I think we are discussing it inappropriately here....the post may be moved to a better place.

 

Regards,

 

Vivek

 

I recently found this chart from the ever-helpful http://www.moneychimp.com/ - moneychimp.com :

	Value	Growth
Large Cap	12.4%	9.6%
Small Cap	15.4%	9.3%

Those are historical returns from 1927 to 2004 (not adjusted for inflation). The terms "value" and "growth" are taken from data from Fama and French, whose work is highly respected.

That's a persuasive case for putting small-cap value stocks to work in your portfolio. (We'll get to just how persuasive later.) And you've probably seen plenty of other data showing that small caps outperform large caps and value outperforms growth. Why, then, doesn't small growth outperform large growth? And why does small growth, on average, end up being the worst choice for your money?

Moneychimp.com offers a theory, and I think it's worth seriously entertaining, at least when it comes to how you invest in small caps. Just think about how investors might mentally categorize large- and small-cap value and growth companies. It might look something like this:

	Value	Growth
Large Cap	Well-known boring businesses.	Well-known exciting businesses.
Small Cap	Unknown boring businesses.	The next Microsoft is in here somewhere!

Thanks, moneychimp. You're on to something.

What do value and growth look like?
What's the price difference between what might be "the next Microsoft" and the unknown and boring? Let's look at the data.

There's never been an official ruling on what separates "value" from "growth." There are dozens of ways to make those distinctions, and the data that Fama and French produce comes from their own method of sorting out what makes a value stock and what makes a growth stock. Let's look at a more accessible listing of stocks, to give you an idea of what value and growth look like according to recent data. We'll take the two largest holdings from each of the Vanguard small-cap and large-cap value and growth index funds as of the end of November 2005.

	Price-to-book	Price-to-earnings
Large-Cap Value
ExxonMobil (NYSE: http://quote.fool.com/summary.aspx?s=XOM - XOM )	3.5	11.5
Citigroup (NYSE: http://quote.fool.com/summary.aspx?s=C - C )	2.2	11.1
Large-Cap Growth
Microsoft (Nasdaq: http://quote.fool.com/summary.aspx?s=MSFT - MSFT )	6.0	22.8
Procter & Gamble (NYSE: http://quote.fool.com/summary.aspx?s=PG - PG )	10.7	21.5
Small-Cap Value
Colonial BancGroup (NYSE: http://quote.fool.com/summary.aspx?s=CNB - CNB )	2.0	16.0
Martin Marietta (NYSE: http://quote.fool.com/summary.aspx?s=MLM - MLM )	3.1	20.9
Small-Cap Growth
Joy Global (Nasdaq: http://quote.fool.com/summary.aspx?s=JOYG - JOYG )	8.6	38.9
Intuitive Surgical	11.9	87.5

These companies aren't selected to imply that any one or two is likely to do better than another over time. Rather, they're selected to show you what some of the larger players look like when you compare their price to both their book value and their earnings. Obviously, to justify their prices, those companies categorized as "growth" need to grow their earnings much faster than the companies in the value quadrants. The numbers attached to these small-cap growth companies are particularly startling. That's not to say that Joy Global and Intuitive Surgical are necessarily overpriced, nor that they won't grow their earnings sufficiently to be good investments. But to the extent that they represent the other brethren in the small-cap growth field, we can see why the returns for the quadrant as a whole end up disappointing investors.

Taken as a whole -- as measured by thousands of companies, not just two -- small-cap stocks are going to be more inaccurately priced than large caps in the market, but not necessarily better-priced. The inaccuracies work both ways. Those that are overpriced (growth) will be more overpriced than their large-cap brethren, and those that are underpriced (value) will be more so than their large-cap cousins.

What's the cost?
The rewards of being aligned with the right quadrant instead of the wrong one over 78 years are absolutely staggering. Consider: Compounded over those 78 years, $100 would translate to:

	Value	Growth
Large Cap	$898,967	$130,165
Small Cap	$7,307,903	$103,626

Is 78 years a relevant investment period? Sure. It's just slightly longer than an average American life span. So the difference between small-cap value and small-cap growth over a lifetime has been a multiple of more than 70 times the end result. That's right: 70 times.

There are literally thousands of companies in that small-cap value quadrant that you should be concentrating on, none of which can possibly be described as "the next Microsoft." They might not carry the wallop of a potential Microsoft over the short term, but over many decades, and taken as a group ... wow.

Source: http://www.fool.com/investing/small-cap/2006/01/12/70-times-better-than-the-next-microsoft.aspx - http://www.fool.com/investing/small-cap/2006/01/12/70-times-better-than-the-next-microsoft.aspx

 

1) If someone got into Pantaloon at 400 odd rupees recently, it would be more inclined towards a growth large-cap or value large-cap?

 

2) TV18 at 600(before split), what do you think it was more inclined towards?

 

3) What do you think Nucleus Software Experts is more inclined towards: a value small-cap or a growth small-cap. It's growth rate is going to be 40% at least for the next 3 years and the it is trading at currently 29.5 PE TTM.

 

 

1) If someone got into Pantaloon at 400 odd rupees recently, it would be more inclined towards a growth large-cap or value large-cap? Largecap with growth and retructuring (spin off) kickers. 

 

2) TV18 at 600(before split), what do you think it was more inclined towards?Mid cap value with growth and restructuring kickers!

 

3) What do you think Nucleus Software Experts is more inclined towards: a value small-cap or a growth small-cap. It's growth rate is going to be 40% at least for the next 3 years and the it is trading at currently 29.5 PE TTM.Mid cap with growth.The lower PE is offset by the concern on dollar rupee etc so though it appears cheap it carries the uncertainity - I am no expert on Nucleus though.

 

It's like being a "construction company". Once the whole design and plan is setup for building a colony, the last part is employing the construction workers who will actually lay those bricks down.

 

Hence, my "water purifier" system for healthy water:

 

1) Management filter(credibility, vision, shareholder-friendliness, transparency, aggressive): 50% of the system

 

2) Past growth rate filter (viewing financial reports, visiting websites for news): 20% of the system

 

3) Future growth rate possible: 20% of the system

 

4) Getting a "value-zone" price entry(Usually, try my best to keep a PEG of less than 0.5 between Forward PE and Future Growth Rate.): 10% of the system.

 

 

 

 

 

 

Lumbering

The Law

All of this leads to Pabrai's Law of Large Numbers. The ultimate principle of this law is that one would be best off never making an investment in any business that generates more than $3 billion to $4 billion in annual cash flow and is considered a blue-chip. These businesses are very unlikely to be able to endlessly grow cash flow.

 

Earlier I was also a big fan of the small cap thgeme. But over the past 12-18 months I have realised that mroe then the cap it is the scale of opportunity that matters for example cap is important but not the endall.

 

A small cap to make larger returns has to be cheaply valued relatively to a large cap. FOr example if City Union Bank and HDFC bank trade at equal valuations I would prefer HDFC bank and would buy City only if the valautiosn are relatively cheaper!

 

You always learn new things in life and this is something I learnt and intend to practice.

 

YEs. True.

Regards

Can we have a TED XI of potential multi baggers.

I was trying to find potential companies under 1000K market cap.

Jamna Auto Industries, Kaveri seed ae the two companies i could find but not sure of the oppty size in this area.

can some one help here pls.

 

Thanks