Multibaggers.........ways to find
Well I have my own way of finding multibaggers where I have been successful many times.
My preferences are listed as under:
1)First and the biggest preference will go to Low Equity.Because low eq. is an advantage when company plans expansion and Eq dilution takes place.Even a right of 1:1 or even 2:1 will not expand the eq in a big way and hence earning can match the eq.
Another reason for low equity preference is even though the earning is not coming because of slow down of economy or a bad year for the company , then when the tide turns and with slightest turnaround company can show good EPS which is one of the most important criteria for investing as it is related to P/E.eg.Acrow India which I even recomended it.
2)Next is Promoters Holding.I have many times just invested in stocks on just looking at one parametres.Promoters Holding, apart from ofcourse Low eq.Above 55% is almost a must , with exception in IT Sector where it is seen that you almost get very less company where the promoters holding is above 55%.I will give an Example for this.I bought Narendra Properties at just Rs 18/- at just looking at promoters holding which was as high as 72% and moreover one of the promoters was also hodling some 8% in Public holding.Of course the sector also palyed a role for me to take a decision fast.Narendra Properties is in Construction Sector.Narendra Properties touched Rs 77/-.Another is Lancor Holding.Promoters holding is as high as 72% and almost over 20% is held by FII's.I bought at Rs 166/- and now it is Rs 481/-.Both these stocks I bougth after May Carnage and one can calculate what return I got and am still bullish on both of them.I am of the view that Lancor Holding can touch Rs 1000/- and above by Feb 2007.
Both have very low Public holding and that is a trigger according to me.
3)Sector also plays a very important role while choosing stocks.
4)Now the most improtant criteria is earning visibility.This is very important.eg.Navin Flourine.Though it comes in Chemical sector actually I see it as a Carbon Credit Story.A very very big CC story.Never try to look at inetrnational prices of CC.They fluctulates.No need to worry on that front.What I compare is if Guj Flouro a 2 paid up stock can quote at Rs.630/- then Navin a 10 paid up stock will quote much much more.The reason is both have almost equal CC to sell.But thing for Guj Flou is that they have already started to sell CC while Navin is still on nascent stage and hence it is available cheap.
5)And, yes as feltra said , I almost do not go for already splitted stocks.It is obvious that splitted company say, 2 paid up has to earn more to show higher EPS as it is splitted in 2 paid up.
Same is the case of 1 paid up.Unless you are sure of the earning of that company that it will be able to match the splitted shares one can buy.Like Aftek Info where the earnig is coming in a big way.Actually I try to find stocks which have the capacity to give exponential earning(eg Navin) and can go for Splitting rather then buy which have already splitted and hence gives fabulous return.Means that I will not buy stocks that have already become a mutibaggers by already becoming XB or XS or XR.No use to buy those stocks that have become XB,XR,XS.Of course if even after it looks good after XB and XR then one can buy it.eg JMC Project.It is still a buy even after JMC has given 2 right issues.I have not written XS.
6)Now comes the promoters Gr.I don;t think one should look at it in a big manner.I do not put much weigh on Management.Who was knwoing Narayan Murthy when Infosys came out with IPO in 1990's?Those who went for lookig at management lost the oppertunity to invest in bluest of blue chip.
7)Yes,P/E is important.eg,Garnet Const.It is still available at just around 7p/e.A stock which is in hot sector where the P/E is high Garnet is available under 10 p/e is a bargain.
8)Now comes the BV(Book Value).I have invested in stocks just looking at BV and come out winner.eg.Titagarh Ind which I bought at Rs 3/- and sold at Rs 30/-.I bought it just because I saw that price of Titagarh Ind was very very less then BV.I remeber when I bought Titagarh Ind the BV was over 30or 40 and price was just Rs 3/-.I just went and buy it.Thoug I am not a big player I bought just 1000 shares.
So BV also plays an important role while buying a stocks.One more example I would like to give.Maestros Mediline.It's BV is as high as 75 and it is available at Rs 18/-?I am holdong Maestros since long.
9)I use to buy everything I like buying.I do this because no one knows which is going to turn out as multibbagers.I have written elsewhere that buy even 100 shares.Even a small exposer is enough to give you big returns if it turns out to be a big big multibagger.
10)Hold the position.Hold it as much as you can.I bought MilkFood Ltd at Rs 40// and I remember I also recomended here at the same time and some of the members have bought also.Whether they have sold or not I donno , but I am still holding MilkFood which I purchased at Rs40/-Everybody knows that MilkFood is making newer highs and is at Rs/- 380.
11) Try to find all info where you have put money.This is very very important.These will help you in taking decision whether to hold or sell.
12)Try to find stocks on your own because this gives more conviction because conviction plays bigger part in buying stocks as well as holding it.If one have no conviction about the company you sell it cheaply.
13)Almost never buy stocks above Rs 100/- If you are buying stocks at Rs 500 how it can become a multibagger?
Friends these are some of my RULES that I always am on a lookout.
Best Regards,
Raju Desai