Single stock investing: does it work?

Single stock investing: Does It work?

Deep dive into the river

The primary objective of investing in stocks is to make decent returns—returns that are fairly attractive when compared to bank deposits. We do not want to keep our money idle even for a day. Because every other guy in the street is making money in the stock market—easy money that too, without any monumental effort. We want to be there at any cost, to feel the excitement at least. We decide to jump into the river—shall I call it the ocean? —without knowing the basics of swimming.

Euphoria, excitement, luck

There is what is known as beginner’s luck. So, when you put your hard-earned money to test—based on the noise created on television channels, seeking expert advice from friends/relatives, and doing your own research—you tend to buy stocks with low Price-Earnings Ratio, fat book value, and available at a fair price (according to you) and usually from the small-cap space which are quoting below INR 100. To spread the risk, you buy a basket of say half a dozen stocks pouring the entire savings into the well within no time. In a rising market, as the saying goes ‘‘every idiot can make money’. Aided by luck, one or two of the invested stocks will touch the sky and your investment tends to double within no time—despite the laggards that do not seem to wake up from deep slumber. Every morning you tend to look at the screen with a winning smile and begin to build castles in the air. Before you could think of buying a new vehicle with the paper profits, the merciless Market gets brutally crushed by forces over which you do not seem to have any control. The prices crash slowly or suddenly—it does not make any difference since you are in no mood to leave the arena with a loss—and the rosy paper money melts down under your own nose. You remain paralyzed for a painfully long time and the shock begins to work on your nerves. When the pain becomes unbearable, you exit after losing your pant and shirt.

Doom and gloom

When you look around, almost everyone seems to have a similar sordid story to tell. If everyone is losing who is making money is the moot question. Obviously, those who have the knowledge, skills, and experience to understand the nuances of the Market. The experts always say: spread your risk, do not keep all eggs in one basket—the age-old wisdom that does not seem to work in your case. In hindsight, when you look back you are certain to find that one stock has definitely made rapid strides ahead of the pack—offering mouth-watering returns. You never booked the profits, expecting a further rise. Other stocks proved to be duds. All in all, to cut short a long argument, only one horse and several donkeys in the portfolio. The story is the same in almost all cases. Some stocks move very fast, some other stocks linger at a slow pace; many others go down the drain without a trace. Is there any alternative to arrest this trend?

Single stock betting

Yes, concentrated investing is a perilous game, the oft-cited appropriate menu for the experienced souls. But it can be a good bet, especially in situations where the resources are limited. To achieve success, you need to gain a grip on the basics:

v Volume: Look for stocks with rising volumes. Look for stocks that exhibit a lot of momentum—stocks that become topics for the dinner table.

v Price: Look for stocks that have a lot of price momentum as well. Stocks that seem to register a steady rise in price over a 5-day/10-day cycle

v Delivery: look for stocks that are seeking a lot of action in terms of delivery. If the delivery percentage is rising along with momentum in terms of volumes and price action—keep a vigil over those stocks

v Beaten down badly: Every expert on the street is giving a negative picture? Every television channel is advising you not to touch those stocks. Identify those stocks and keep them on the radar screen—to pick those fallen angels. Some examples should clear the fog

v Example: Stocks like RBL Bank Tanla Platforms, Persistent Systems, PFC, and NMDC have been at the receiving end of the stick for a long time. There was no soul on earth recommending those stocks. RBL has fallen to INR 80 levels, Persistent has fallen to 3200 levels, PFC was lying at 100, Tanla fell to 550 levels NMDC was a forgotten story.

How to achieve success?

Did you ever clean up the books completely? I mean, selling every stock in the portfolio and marrying the beaten down, fallen angels, putting all eggs in one basket? When a stock reaches the maximum point of pessimism, as Sir John Templeton did, if you have the courage to liquidate your entire portfolio and bought the fallen angle in truckloads, and wait for a rebound patiently—not only your losses will be recouped, you will be rushing back to the bank with a winning smile. All the above-cited stocks have recovered sharply within a 30—60-day span. RBL rose from 80 to 150; Tanla rose to 900; Persistent crossed 4000 effortlessly; PFC rose to 140. (caveat: the chosen stock should have good fundamentals, fallen out of favour due to the negative sentiment over some bad news like in the case of Divi’s Labs—interestingly LIC has been buying this in truckloads in recent times)

Any current example that meets the criteria?

Yes, excellent stocks like LTMindtree, Mphasis, Mastek, and Sonata have fallen out of favor. Every analyst is talking about doom and gloom in the software sector. Have they reached the point of maximum pessimism? Difficult to say, but you can safely liquidate your entire portfolio—sit on cash, pick these fallen angels slowly in lots of say 10,20, or 50 depending on your appetite, and wait for the rebound within a 6-monthly span. I am sure, the tide will turn and bring in rosy returns

Momentum investing

Alternatively, if you have limited resources say INR 2 to 5 lakhs, momentum investing should be your cup of tea. Let me take two recent examples. IRFC and Yes Bank. IRFC was showing all signs of momentum from the INR 17 level. Volumes were rising, price action was positive daily it was topping the volume charts; fundamentals were good—zero NPAs, tax-free status loans to the Railway stocks enjoying monopoly status, etc. If you had bought say 20 or 30K in one go, liquidating the entire portfolio consisting of a dozen stocks with varying degrees of success, you could have reaped a rich harvest. Why go that far? The stock in the news, YES BANK could be a potential winner in the near future. The volumes are humongous. The price action is excellent. Volume topper currently. A lot of hedge funds playing the game excitedly. Can you play the one-up game against the street and win? Yes, possible. Certainly achievable. For that, you need to pool all your resources and play the game patiently buying in lots of 50, 100, or 200 in a 5-hour span daily. After buying say 2000/3000 you take a pause, and look back if the price is rising or falling; if it rises by 50 paise, you begin to sell and get back your entire money. At every fall you should have the money ready to buy small lots; and whenever the price action picks up, you need to exit and sit on cash. The primary goal should be to make money by playing on price and volume action and get back your money without getting dented. If you remain happy with small gains on a daily basis, like a typical hedge fund, you can stay in the game for a long, long time—making decent money all the while.


Most of the people who go broke in stock market follow this strategy.

  1. Buy 1 stock.
  2. Sell if it goes up, so that you don’t get any big winner.
  3. Keep on buying if it goes down.
  4. Put your entire portfolio in this company.
  5. Stock keeps falling and trading stops.
  6. Go broke, say stock market is gambling and never return.

Unless you are the promoter and have operational control over the company, it makes no sense to put all money on a single company from risk reward perspective.


Recently Motilal Oswal presented their 27th valuation study. They proved beyond doubt that instead of betting on volatiles and cyclicals, its far far better to trust consistent compounders, who are growing each day without any surprises.
Your startegy of one stock , that too of fallen angels , is a sureshot way of making thousands of rupees in the market by invetsing crores of rupees.


@Mudit.Kushalvardhan Just want to clarify. By avoiding cyclicals and investing in just one consistent compounder, say HINDUNILVR, would that be good enough?

Personally I’ve found it hard to track more than one or two stocks at a time. Being a novice in investing I held 10 stocks (10% weightage) two years ago and almost went mad following all the price gyrations, the earnings calendars and related news. Couldn’t even get thru 4 Annual reports. Thus I trimmed it to 3 (33% weightage each) and now even that seems too much :grinning:. Thinking of just going with one stock. Plan is to blindly trust the pedigree of management and let it ride for the long run.

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First of all, you need to avoid following price gyrations.

We need to learn a lot about Portfolio Creation from mutual funds.
Each economy has some sectors which contribute to its GDP in a meaningful manner.
Banking, IT, FMCG, Chemicals, Retail, NBFC, FMEG etc. Your portfolio cannot be called a balanced ,and level headed portfolio until you invest in atleast 6-7 prominent sectors of economy. And in each sector , you need to choose atleast 2-3 sector leaders to diversify among sectors to avoid company specific risks. Most mutual funds have 25 to 30 minimum number of stocks. Sensex has 30 stocks, Nifty has 50 stocks. There is a reason for that. Its not an arbitrary number.
Coming to your following up of so many companies…You need to segregate your portfolo companies into two distinct categories.

  1. Need constant follow up
  2. need infrequent and quarterly or half yearly follow up.

Just to give your example, What wil you achieve by following Hindustan Unilever daily?
Its not going to change its course suddenly?
Nor its going to achieve greater heights in 6 months, nor its going to the dogs in 6 months.
Once you read its 2-3 annual reports and understood its business and then you may just have to listen to their quarterly concalls or management interviews. Beyond that, what will you do? And what will you achieve by giving it dedicated time?
And if your 75% portfolio stocks are of this nature, your work is considerably reduced.
Even in case of constant follow up type.companies, in the first place you wont select such companies where you need so much involvement. If that is the case, i would start my own business. Secondly even if you pick such company, once you understant the business of that comapny by reading 2-3 annual reports, what else to.know about it? There is not going to be quarterly exams that you are preparing for.
You may read concalls transcript. Corporate announcements, Rating reports. Beyond that what a retail investor can do?


The single stock chosen by you should be fundamentally sound, nurtured by good management and has fallen out of favor due to some negative news. Like it is happening in the case of Divi’s Laboratories. i understand the perils, but if you buy truckloads of LTMindtree, Persistent or LTS or even Mphasis when they are beaten mercilessly, chances of rebound are great, and making tonnes of money is a strong, distinct possibility. I did the same thing and the rebound started happening already in almost all three cited cases. Divi’s Labs i am waiting patiently for further correction. When you buy a consistent compounder chances of losing money are remote

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The chosen stock must be of sound quality, backed up by ethical management having a great appetite for growth, and should have delivered stellar results over a 5-year cycle. The stocks that I mentioned fit the criteria admirably. I am not talking about HLL, PG, or Novartis type of stocks. I am referring to stocks that have been beaten down due to negative sentiment, undue noise created by tv channels or the so-called experts trying to call the shots on a minute-by-minute basis. Please mark my words, sir, the day is not far off when the likes of Persistent LTMindtree, LTS, Mphasis zooming past our own wild expectations.

You are having a mentality of a hunter, where you are too obsessed with one particular company and want to make most of it.
In case of portfolio, you need to adopt the mentality of a farmer, selecting diverse companies, and waiting patiently for their growth. Not dependent on one particular stock for their lifetime wealth or financial.goals.


Two stocks that may help you decide; Divi’s Laboratories and Polyplex. Excellent quality stocks that have fallen out of favor. Both are quoting at attractive prices right now. Divi’s of course may correct further, due to reasons beyond my comprehension. Polyplex will get past 2500 once the bidding process begins.

i like your comparison between hunter and a farmer; yes, the hunt for the treasure has produced many block busters. The world likes the excitement that is inherent in the script. Instead of marrying too many stocks that produce varying degrees of success over time, i like to focus on a typical winner like Polyplex (or Mindtree or Persistent at the most three) and reap the benefits without losing sleep or mental balance. if you have a basket of say 10 stocks in the name of diversification, two will run, two will lag behind; two will pull the portfolio value down and another two will turn you sleepless. For me, one or two typical winning stocks will do for the kind of money that we have, instead of chasing too many stocks that seem to take the portfolio nowhere. Mutual funds by nature are forced by Law to diversify; we need not.

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this is how nearly all billionaires have made their wealth - they are invested in a single stock - their own company :slight_smile: [the rest are inheritance]

If you are externally investing in a single stock, you lose out on the ‘control’ factor and are unaware of what is going on inside the company.

By investing in a single stock, you are shunning diversification. So let’s look at diversification. Diversification is an excellent tool which is geared towards wealth preservation and gives up on some potential upside. So you ought to avoid diversification if you don’t need it, which is one of the two cases: (A) you don’t have much downside if you lose all OR (B) a diversified portfolio will most certainly not lead you to financial freedom.

If it’s case (A) - I suggest you go for it! After all, there’s nothing to lose!
If it’s case (B) - you need to be far more diligent here. Why a particular stock and not some other one? Why would it lead you to financial freedom? What are the triggers? And so on … many many questions. But by and large, look at (1) how founders of companies think (2) how intelligent risk takers think (Annie Duke’s book for example, etc) and (3) how bridge players, sportsmen and coaches or other strategists think.


The very conclusion drawn here doesn’t seem factual one. The billionaires are promoters of the respective companies but here we are retail individual investor. However, it can be said the super investors have very very concentrated portfolio. We cannot equate the promoters with the retail investor. Even, when Buffet was investor only, he never had a single stock portfolio. It may be seen from the Book Ground rules by Geremy Miller.

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The first couple of axioms in the book ‘Zurich axioms’ make a good reading for this topic.
Minor Axiom 3 is “Resist the allure of diversification”.

Do read it. It gives a way to play undiversified bets (meaningful stakes). Overall, you can chose a method but know to play it right. There are a list of things that come along when you do not diversify etc.

Edit: I am not saying it works or does not. Only saying there is some literature on this that can be read

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Betting on only one stock only is also being too lazy. Instead of finding few ideas (out of many in the market), we are not doing much work. Also, from a long term perspective, its tough to bet only on one stock as you may buy only one stock in a very small portfolio relative to your income. But what happens when portfolio grows? Until you have studied many sectors and stocks, you cant make a big portfolio. Only one stock will give you many a sleepless nights even if the success ratio is high.

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Contrary to belief of that most active and thorough investors can do concentrated investing, IMO and out of knowing some folks who have done 1-5 stock investing are one of most passive and buy and forget investors…they don’t even track couple of companies they hold…only then such concentrated investing is possible to execute over long term without causing panic…

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Argument against concentration


This is like drawing a lottery and testing your luck with a single digit stock portfolio. If you get lucky you will make big, but what are the odds that you will make big.

If you go n buy some smallcap in the hopes of making big, there’s a good chance your capital will be wiped out. Or if you buy HDFC or TCS then you will make more or less the same index returns in the long run. Then there’s no point in taking all the risk.

The people who made big in some stocks, that happened because of the overall markets were doing phenomenal. And the chances of you lapping one of those became very significant.


This is a high risk high reward strategy. Some of the pre-conditions one where identify

  1. A proven business model is mandatory. Can’t do this on unproven business models, nano and microcaps. Preferably a midcap so that there is enough growth
  2. The sector/industry/company must be going through a temporary and fixable problem.
  • Divis correction in 2017 -company specific- I took advantage of it
  • Cement stocks going through margin contraction due to raw material costs right now
  1. Valuations must be very cheap. It is a corollary of point 2
  2. Some biggies started accumulating
  3. Good strategy to trail once in a profitable position
  4. Good un-emotional exit strategy
  5. Being invested or invest at the beginning of a bull market to make sure that the stock’s trend is confirmed as well as market conditions are conducive

Open to more suggestions


I really do like concentrated portfolios. I started my investment journey around July 2021 and by oct 2022 i was roughly invested 55 percent in pfc. Now I am much more diversified. Pfc is about 34 perc of my portfolio now. (Sold 45 perc pfc) and incremental capital in other stocks :slight_smile:

I have also uploaded a hypothetical deep value portfolio which is more diversified, would be glad if you can add something on it.(Deep Value Portfolio)

My top 3 bets make 60% of portfolio, following this successfully for last three years, than my top holding stock went down by 40%. So no strategy is perfect.

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