How to find companies or business with 30 % CAGR?

Donald Sir, Hitesh paaji, Hemanth sir, Ayush, Rajesh help me out on that. Are there any classic books to identify sustainable business ?

Request other members to help me in identifying business, which can grow 20-30% CAGr

Regards

Mallikarjun

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Hi mallikarjun I am not a expert like hiteshbhai or donald but since you are looking for businesses which can grow at 30% CAGR for a prolonged period,which is a similar startegy to my investing style I would like to contribute here.

1)Companies with good managements , established brands ,operating in sunrise sectors,with high ROE and ROCE,high sustainable growth ratios,scalable business models can grow ar 30% CAGR profitably without equity dilution or increasing debt burden.

2)These companies are usually placed at the top of any screener and usually value investors start looking at the screeners from bottom and invariably miss them.

3)These companies have a lot of optimism built in them and the managements have to keep on delivering to keep up valuations.

4)These companies trade at 30 + PE and for first year of your buy you don’t earn any money but from there you can get very good compounding.

5)These companies do not give a thrill based investing experience where you win big and loose big but actually it is a boring routine.What these companies allow you is that you can just forget about markets and so called professors or self declared financial blogists

and their fancy way of market analysis and just concentrate on your career,actually put in a lot of reading and bookwork in your field and advance in your career. Hence your effective earnings are great as on one side these companies return you 20 to 30% and on other side allow you to grow 30% in your career.

6)Reading financial books and try and justify your actions with some of the stalwarts does not help in making money.What helps is to keep your eyes open and what is happening in real economy around us.What products our mothers,sisters,daughters or friends are buying and why they are buying that.Reading high funda professor blog is no alternative to actual on field research/visits to shops/retailers/hotels/schools etc.

  1. Hence I buy companies based on quality of their products and user popularity and read books for fantacy or related to my field.

8)Spending a lot of time on analysing balancesheets and debating on them is another fruitless excercise because had it been true it would have made all CAS billionaries.

9)Hence there are no text book way of identifying a 30% grower for 10 years.Usually these companies are already identified by market we just need to invest in them regularly without trying to time them and over a period of time we make money.

10)HDFC BANK,INDUSIND BANK,YES BANK,GRUH FINANACE,HAWKINS,PAGE IND,POLI MEDICURE, are examples of some good long term wealth creaters and you can trust them more than any of the wisdom of charlee or beating street lynch style or intrinsic value by ben style or developing business model by WB style etc.

Regards

2 Likes

I think prasad has summed up the matter perfectly.

Nothing new to add.

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Books from Pat Dorsey might help you define & identify moats which help in sustainable growth. However I think that with time most moats erode in value so if you pay too much for a great business you’ll end up with mediocre returns. This 10 yr 30% growth businesses are pretty tough to figure out & profit from yr 1 or 2 and much easier(but less profitable!) after 10 yrs :wink:

Prasad,

+1 to your fan list :slight_smile: Some excellent wisdom in that post. I am starting to understand your style better now. I think, am also following a similar style, as all the stocks(except yes bank)you mentioned in the list are in my portfolio, but the %tage allocation is not in place as i also have few more stocks in portfolio :frowning:

Hope with time my thought process will mature enough to concentrate on what works for me and chuck what i don’t have time and inclination for. Few years in the market with guidance from right folks could make all the difference in thought process i guess.

Great pearls of wisdom.

When you find 30% CAGR company growing till eternity, time to bet your house. It is the right allocation to these stocks that will determine portfolio returns.

Here is a word of caution from Howard Marks :slight_smile:

"All other things being equal, the price of an asset is the principal determinant of its riskiness.

The bottom line on this is simple. No asset is so good that it can√Ęt be bid up to the point where it√Ęs overpriced and thus dangerous. And few assets are so bad that they can√Ęt become underpriced and thus safe (not to mention potentially lucrative).

Since participants set security prices, it√Ęs their behaviour that creates most of the risk in investing."

Prasad V. K

Thanku for your forthright and sane words Sir

Regards

Mallikarjun

1 Like

;))

Donald Sir, Hitesh paaji, Hemanth sir, Ayush, Rajesh help me out on that. Are there any classic books to identify sustainable business ?

Request other members to help me in identifying business, which can grow 20-30% CAGr

Regards

Mallikarjun

GreyFool

Will try to get the book… Ya if we pay too much for a great business we will end up withmediocrereturns … Thankuu :slight_smile:

Lalit

I am not good in visualizing 30 % CAGR company… Since almost everyone here were talking about growth, i asked the query. Hmmm will surely bet real estate for equities :slight_smile:

Regards

Mallikarjun

:)) canat itas canat itas

Raj Sir

True :slight_smile:

‚ÄúSince participants set security prices, it‚Äôs their behavior that creates most of the risk in investing‚ÄĚ

Hi Mallikarjun,

Reading Books will certainly help. Read Peter Lynch and PAT Dorsey. As a newcomer to markets (I am assuming you are one) we do not have any framework/patterns in our head to evaluate/qualify what other seniors/analysts or fellow investors are saying. We dont have comments of our own - whether Business A is superior to B or say much more riskier, etc. What factors we can ignore - there impact can only be marginal, but what is strictly NO No…a newcomer has not much idea…except commonsense…and general analytical mind to come to his aid. Atleast I needed to read books, and calculate ratios/simple spreadsheets myself - to make these concepts sit in my head.

The flip side is what Prasad so rightly mentions )- you can endlessly take the easy way out - keep reading one book after another - be on an intellectual trip (read trap, actually) - and fail to apply what you are learning - to everyday business that you come into contact with. And justify/validate/spar with seniors -thinking you are learning a lot.

You will learn effectively - when you have done original work yourself - I agree 100% with Prasad. But you need the initial base - for which you need some books. just a few will do.

And then just pick a stock you like immensely…have a feel for…collect all the information/analysis that is available on the business yourself …become that one person at say ValuePickr who knows the most about that business, track it diligently for a few quarters…be the first to report all developments on that stock…minor or major…news…anlsysi…reports…whatever…become that one person everybody goes to for a quick answer/ratification on that business:)…add value to everyone around you…

I am a sincere believer in hardwork. for me that is the only practical way to grow… you don’t have to be brilliant…rules of investing are pretty simple end of the day…as you add value…you will see every interaction taking you up the learning curve…you will see that people will seek you out and make you better, wiser:)

Don’t worry about 20-30% growers; fast growers vs consistent growers, etc etc. right now. You will need some time …exploring with an open mind…certainly > 2-3 years of active investing…before you find your own niche style…basically what you are comfortable with…you will find success with a certain style/philosophy of investing that works best for you…till such time… I have found in every walk of life…it is always a good idea to copy and improve…following stalwarts like Hitesh & Ayush is infact a great way to start…the best thing about that is you will avoid making the usual mistakes…Ayush & Hitesh’s mental screens/filters have been honed by practically churning through 100’s of businesses…they KNOW WHAT TO AVOID…as proven time & again to me in the last 3 years.

Sometimes you will see these seniors pointing to something…when they say something is worth investigating further…be the first to volunteer to do all the hard work on a stocklike say… digging out information on the business/competition…speak to dealers distributors…whatever it takes…in whatever capacity you can…depending on the bandwidth you have…usually 2-3 hours every weekend is more than enough. all it needs is sincere hard work & some passion!! passion to learn…to grow…will allow you to find the time:)

-Donald

Donald Sir

Was eagerly waiting for your reply… Your gentle words reinforces, every new investor will be looked after with care and proper guidance. Thankuu…:slight_smile:

Will try to read PeterLynch & Dorsey…

Will & will try my best.

Extensively i use screener.in Thanks to Pratyush & Ayush.

Some of the no go areas for me are,

debt/equity > 1, preferably high roce & roe, Altman Z score > 3 , Comfortable promoter holding, zero/comfortable miscellaneous expenses and inventory turnover ratio.

Will try to add value. ( Will be happy if someone says,i really did add value from here on )

Regards

Mallikarjun

Hi Mallikarjun

1.I have a theory on which I personally base my investmentDecisions. Look around for any ( almost private sector bank in India) Eg- Yes, Karur Vysya, ICICI, AXIS, ING Vysya, INDUSIND, HDFC etc. They all have one thing in common. On an avg. their share prices have grown by 10-20 times over the last ten yrs.

2.Their growth rates have not slowed down by any means in the recent past.

3). Their ROEs are generally the best after FMCG and some select pharma companies.

4). Their corporate governance is generally the best.

5). Just because they are sensitive to intrest rate cycles, they do not get exorbitant valuations like FMCG and Pharma companies. But their track record of wealth creation is as good as the ‚ÄėBluest of blue Chips‚Äô.

6). Their CAGRs are in excess of 20% and 30% in case of smaller ones like Yes, Indusind etc.

7). They are easy to analyse. One just needs to monitor their gross and net NPAs, restructured loans and you are almost there.

So, why not place big bets on them? Moreover when the intrest rate cycle turns for the adverse, market will give us ample opportunities to load them up even more unlike in FMCG where market hardly give us that opportunity.

Regards,

Ranvir