Investing For Growth by Terry smith… And
Dr Vijay Maliks blog has an ocean of knowledge forunderstanding fundamentals
4 Likes
-Zerodha- fundamental analysis
-Dr Vijay malik
2 Likes
Romancing the balance sheet is also a good book
1 Like
Just finished reading this book;
. It is an investment tragedy for a sort to think people have owned these stocks (100 baggers stocks) and not reaped those gains because they were trying to time the market or trade in and out.
. To make money in stocks you must have the Vision to see them, the Courage to buy them and the Patience to hold them. Patience is the rarest of three.
. If a business earn 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you will end up with fine result. _Charlie Munger
. A truly great business must have an enduring MOAT that protects excellent returns on investment capital.
. A company with a moat can sustain high returns for longer than one without. That also means it can reinvest those profit at higher rates than competitors.
. People often do dumb thing with their portfolio just because they’re bored. They feel they have to do something. If you can find ways to fight boredom and not take it out on your portfolio, your returns will benefit.
. Instead of planning the guessing game, focus on the opportunities in front of you. And there always, in market, many opportunities.
. The great investors concentrate on their best ideas.
. The best ideas are often the simplest
27 Likes
Hundred bagger studies have always fascinated me. Recently I did a research and wrote an academic paper (under publication). The results of the study are startling, let me share some approximate conclusions for individual investors.
- individual investors should not pick stocks in large cap/midcap space, as they are most likely to lose there. Picking Nifty500 QMVL 50 is great there, which may give a hundred bagger in 25 years time.
- Even Microcap Index is likely to give 100 baggers in 25 years.
- Investing for hundred bagger is not an option, it is mandatory if you want to beat the nifty factors index.
- Searching for 100 baggers is the only skill rewarded in stock market, and stock picking skill is the skill to identify those hundred baggers, as early as possible.
- Investors should welcome volatility.
- Ideal stock picking universe is market cap between 100 crores to 2500 crores, preferably less than 1000 crores.
There are others finding too, but crux is simple… Look for 100 baggers potential in 20 years, and insist on 4 times trigger in next 4-5 years.
Further stock picking is not sufficient. Stock picking is merely 25 percent of the equation… You need a strategy to add, hold or exit; which are qualitative and behavioural factors. Difficult to concise here, but certainly I will explain here sometime.
Sorry, if the findings look provocative.
15 Likes
Can you explain this further, nifty500 QMVL with example or reference. Would be a interesting study.
We have nifty50, the primary index.
Various finance studies [most notably Fama 5 factor model] says that Value, Size (smaller is better), Momentum, quality, etc, gives better than average return.
So various indexes were created to catch this return. So you have the Nifty50Value20 index, which selects 20 best value buys from Nifty 50. Nifty500quality50 choose best 50 quality companies from Nifty 500. Then there are multi factors indices.
Nifty Smallcap250 Quality 50 Index choose best 50 quality companies from small cap universe- capturing size and quality. Nifty500QMVL50 choose 50 stocks from Nifty 500 universe based on quality, momentum, value and low volatility. There are numerous such indices. Let us compare these performances—
Thus, beating nifty with factor investing index is not very difficult. My own assessment is that one facotor index will outperfrom nifty by 2% over a long period, and almost by 4% if you use 2 factors. Playing the same in small cap index/microcap can give you another 2%.
Thus a well-chosen factor strategy can give you 20 odd percent easily, doing the same in small cap universe can add another 2%. if you get long term return of 21-22%, you will get a 100 bagger in 25 years.
One can add another layer of performance thorugh behavioural finance. One can choose some funds- says smallcap value, small cap quality and small cap momentum in equal proportion. Thus is investor is taking four factors in account. We know that sometime value works, sometime quality works and sometime momentum works. Now, from fresh saving, whatever one want to invest, invest in the worst performing fund. This contrarian approach can add some more value in the mutual fund portfolio.
As a stock picker, one has to aim higher. If one is aiming 20% only, why pick stocks? Picking sotcks is very risky in the sense that 90-95% of stock pickers are not able to beat index.
7 Likes