You need to lose some money in stocks to learn the ropes of the market. This wisdom comes from an investor who is known for picking multibaggers, some of which have swelled up to 6,000 per cent in last four years.
Delhi-based investor Ashish Chugh says stock investing is about being able to look at the big picture, and not about nailing big returns very next quarter.
He looks at the bears as taskmasters, who teach hard lessons. “Every investor needs to go through a bear .. bear market,” he insists.
Known for his ability to spot potential multibaggers early, Chugh says he has learnt the tricks of the trade after “whatever money I made in a bull market was lost in a bear market.”
Chugh’s preferred way of dealing with stocks is what he calls ‘Big Picture’ investing. ..
I am not too keen on identifying stocks that will deliver big the next good quarter. I am on the lookout for companies whose stock prices have got hammered because of one or two bad quarters but have good long-term outlook,” says he.
Some of his ‘pet’ stocks have delivered big returns over the years: NatcoBSE 1.73 % has surged 67 times in less than 10 years, Avanti FeedsBSE -2.53 % has grown 60 times, or 5,900 per cent, in four years.
Chugh took to stock investing seriously in the early 1990s, when a Rs 1,000 investment in the IPO of CadilaBSE -1.13 % Hospital Products grew into Rs 13,000 in two months.
“I was lucky to get allotment. This made me realise that stock market is a place where money does not just add up; it multiplies,” he recalls.
Chugh says his best investment so far was Rs 11,000 he spent in 1992 to subscribe to The Stock Exchange Official Directory by BSE, a compendium in 18 volumes. ..
This enabled him to get balance sheets and other information about all the companies listed on the BSE, which was not so easy to get at that time.
Bears are true teachers
A stock investor needs to go through a few bear markets to evolve as a better investor, says Chugh.
“Bear markets change your perspective about investing. Most investors who have not seen or experienced a bear market would get seduced by rising stock prices and are focused entirely on ..
returns and stock prices. Risk management is not important for them,” says the market veteran.
Chugh is the founder and director of Hidden Gems Advisory.
“A bear market makes you think and rethink your investment style and strategy, sobers you down and you evolve as a mature investor,” he says.
Chugh says he started doing better after witnessing bear markets from 1996 to 1999 and from 2001 to 2003. “My entire focus on investing has since switched from chasi ..
Top multibagger picks
This 49-year-old trader has a knack for spotting multibaggers among microcaps. He picks up stocks that are beaten down because of short-term negatives, but have inherent strength to bounce back once the negatives are out of the way.
Many of the stocks he has picked over the years have risen 50 to 70 times. He picked up Natco PharmaBSE 1.73 % when the stock got hammered down after the company acquired some drug stores in US.
Future growth is one of the important parameters. A value stock remains a value stock unless there is growth, says he.
Cash flow is another important parameter he watches closely. Most investors think only about returns. But risk management is important because equity investing is less about returns and more about probabilities and risk management, he insists.
Management quality is important
Chugh says while investing in microcap companies, it is ..it is difficult to select a good management as they are not talked or written about too often.
In a number of the multibaggers that he has discovered, the market had initially perceived their managements to be questionable, as these stocks were available at low PEs with small market caps. The perception changed after the stock prices grew 5 to 10 times and large HNI investors and then institutional investors got into these stocks.
Chugh says for him a good management i ..
has high promoter holdings and shares the wealth with investors through share buybacks and dividends.
Often, companies do not pay dividends because of high dividend distribution tax, but uses earnings for regular capital expenditure to scale up a business without equity dilutions. This also enhances shareholder value.
Stocks you are eyeing right now
Chugh refused to talk about his stocks due to Sebi regulations. However, he said: “I am sector agn ..
tocks you are eyeing right now
Chugh refused to talk about his stocks due to Sebi regulations. However, he said: “I am sector agnostic in investing. I keep my eyes and ears open to anything that satisfies my investment criteria, which is about future growth, low valuations owing to curable, short-term negatives or past legacies. I am looking for companies that have done capex in last few years, but it has not started yielding results because of lack of adequate demand or ..