Kolkata-based Basant Maheshwari has made a name for himself as a value investor and has the credit of spotting several multi-bagger stocks. Mr Maheshwari took to full-time investing in 2001 after his family business failed to take off.
Kolkata-based Basant Maheshwari has made a name for himself as a value investor and has the credit of spotting several multi-bagger stocks. Mr Maheshwari took to full-time investing in 2001 after his family business failed to take off.
Between 2001 and 2014, Mr Maheshwari invested in companies such as Bharti Airtel, Trent, Pantaloon Retail, Axis Bank, Titan, Page Industries, Hawkins Cookers and Gruh Finance successfully.
He is the founder of investment portal The Equity Desk and author of "The Thoughtful Investor". Besides investing, Mr Maheshwari is passionate about teaching.
Investment strategy: Mr Maheshwari told NDTV that he prefers companies which generate large profits by employing little cash. Such companies tend to be cash flow positive, and in bad years, the free cash flow turns into dividends, he added. (Watch the full interview here)
Mr Maheshwari's investment mantra:
1) Invest in companies that have a return on equity (in excess of 30 per cent) and that pay regular dividend. These two factors are a sign of sound management, he says.
2) Invest in companies with high sales growth: Companies that generate 25-30 per cent sales growth for 5-6 years are unlikely to be loss-making propositions, he says.
3) Never buy into a company which is not a sector leader.
4) Buy companies, which are trading at market price/face value of more than 100.
5) Companies with debt can also be good bets provided the growth in debt is significantly less than growth in sales.
Mr Maheshwari's multi-baggers and his rationale for investing in them:
1) Page Industries: bought at Rs 350; return of 20 times between 2008-14. Criteria for selection: Consistent growth of 40 per cent for 11-12 years and kept on capturing market share. Best growth in the industry. Did not take debt or dilute equity.
2) Hawkins Cookers: bought at Rs 350; return of 8 times between 2008-14. Criteria for selection: Bought the stock for dividend yield and stability in portfolio after the 2008 global financial crisis. The kitchen appliances markets was growing at a fast pace.
3) Pantaloon Retail: Held between 2003 and 2008, return of 40 times. Criteria for selection: It was a bull market story, which ended with the global financial crisis. Initial thought that it could be India's Wal-Mart, but later convinced that it required heavy doses of cash, which would have been difficult in a bear market.
4) Titan: Bought in 2008 after selling Pantaloon as a retail play. Between 2008 and 2013, it gave return of 6 times. Criteria for selection: Big brand, high RoE. Sold last year after announcement of restrictions on gold imports.
5) Gruh Finance: Held between 2011 and 2014 for return of four times. Criteria for selection: A home finance company that outgrew HDFC. It lends in semi-urban and rural areas, where there is little competition from big lenders. Small ticket-size of loans and good risk management. Repco Home Finance is another good bet.
Story That Did Not Go As Planned:
Mr Maheshwari bought Voltas in 2008 and had to sell the stock at a 60 per cent loss. He says, "It was a bad decision and I paid the price." Criteria for selection: Voltas fell from Rs 250 to Rs 160 and after the sharp fall it appeared cheap. However, the stock continued to slide.
Mr Maheshwari's Tips for Retail Investors:
Companies associated with housing sector might do well as the economy is looking up and interest rates are likely to come down. Companies such as Kajaria Ceramics, Whirlpool of India and Symphony and finance companies such as Gruh and Repco may turn out to be good bets in future.
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