Ramesh Damani tips on how to grow your portfolio to Rs 100 crore
Ramesh Damani outlined his investment philosophy on how to buy stocks.
Do not buy in the red: Discussing the stock market crash of 1992, Damani said he used the time to develop his investment philosophy. "I read very carefully that for example you don't buy stocks that have gone down a lot in bear market, because you know they would tend to fall even more.
Spot great ideas: Recalling his first major trade, Damani outlined the importance of spotting good stocks. He cited the example of CMC Ltd -- which later merged with TCS -- a public sector company that saw first round of divestment in 1992. The stocks were available at around Rs 10-15 a piece. The company had developed Indian Railways' reservation and ticketing system, revolutionising the experience. Despite, few people opting for the stock, Damani purchased heavily and it eventually went up to Rs 800 a share within a year.
Stick with your investment: Echoing Warren Buffett’s idea of value investing and highlighting the power of compounding, Damani said if an investor is doubling his investment every three year, eventually, in 30 years, it would be 1000 times. “Suppose you start with Rs 10 lakh and double your money every three years over 30 year period, Rs 10 lakh become Rs 100 crore. So that's a phenomenal amount of money to have.
Being a contrarian: Again echoing Buffett’s principle of being greedy when others are not, Damani said a good investor is not afraid of placing bets even if the market says otherwise. “It is the art of good value investing, to be a contrarian. A lot of the picks when we bought was not met with popularity in the market. So that's part of the game, I mean, if you are scared to be contrarian you will probably not going to be a good value investor.
Every Bull market must make you richer and powerful: Talking about learning from every market crash, Damani said, “I think each Bull market I have learnt something and in the next Bull market implement these lessons and become stronger. But the underlying lessons in all of this is buying great businesses and double your money every 3 years. If you do these two things right I think you are well ahead of the game.
What is a great business? A great business is one that has some pricing power. If they can't raise prices or they have to pray to god before they have to raise prices, it is not a great business.
I have rebooted myself. I have seen the biggest wealth in India has been created when stocks moved beyond 25 PE. It is totally contrary to what people think. The best return in stocks come at those stocks who are above25. Go and do your screener on 5-10-year horizon and tell me how much of the time these stocks have spent above 25 PE. When stocks cross 25 PE, it’s actually the best phase in stock prices performance. Go and do the screener of even three years and plot it. You’ll find that the big money has been created by high PEs.
For example, MNCs which are always expensive in this country, but we know where the wealth is being created. I have seen billion dollars created in one stock. When was the stock cheap? May be in first year somebody bought it but after that it has always been expensive.
You will have to reboot or readjust your mindset. It’s not the only way but my way. That’s not the only experience because it gels with my and philosophy. There are many people who mostly do it other way. But everyone has a . Over the years you spend in market, you’ll realise there is no use of cloning anybody. You start having a of your own. Your will be different because your personality is different.