The Exact Formula to Pick Stocks in 25 Mins by ₹4,000 Crore Wealth Manager Formula — Transcript

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1. 0:00Today if you see the stock, it has grown 20x over the past 4-5 years.
2. 0:03For a pharma company, it is very important if you are not continuously doing R&D.
3. 0:07I just told you that the number one drug is Manjaro.
4. 0:11Eli Lilly, the one who did it, whose sale it is, you see where its number is.
5. 0:15So you have to do R&D continuously here.
6. 0:17And if you have seen the Murugappa group, Chola, Tube Investment, CG Power.
7. 0:22They call it Tata of South.
8. 0:24Right!
9. 0:25There is an external committee there which screen the family member whether he is fit or not for the leadership role.
10. 0:31You must have heard that the promoter of Shree Cement gave the CAT exam.
11. 0:36Some promoter groups have never made money for anyone.
12. 0:39In India, majority companies are non-investable.
13. 0:57Hi Gurmeet, welcome to Money Talks by Groww.
14. 0:59Today's topic is one of our most requested ones which is;
15. 1:03How to find the underdogs, the multi-baggers in the stock market.
16. 1:07So, very psyched for this conversation.
17. 1:09Thank you, thank you for having me.
18. 1:11And congratulations.
19. 1:12Stellar IPO and growing so fast.
20. 1:15I will try to do justice.
21. 1:16Thank you, thank you.
22. 1:17Now, let's start from the beginning.
23. 1:18I know that you have managed your wealth for many years.
24. 1:22Let's say there is a youngster who comes to you and says, Gurmeet, I have one lakh rupees,
25. 1:27which stocks should I select?
26. 1:29So, what are the five questions that you would ask so that the stock filtration process becomes easy?
27. 1:34Very good question.
28. 1:36Actually, the starting point is very important.
29. 1:38So, first of all, I keep a check chart with me whenever I talk to a client.
30. 1:44I keep it even today.
31. 1:45I ask him five things.
32. 1:47Okay.
33. 1:49First, this money, if the market falls by 30-40-50% tomorrow, then what will be your emotional response?
34. 1:57Okay.
35. 1:57Number one.
36. 1:58So, are you prepared that this money, which can be even half, there is a multi-bagger.
37. 2:03But in the middle, Nvidia has fallen by 50% five times in the last five years.
38. 2:08Apple has fallen by 50% ten times in the last 10-15 years.
39. 2:11So, the best of the stocks will go through different falls.
40. 2:15There will be one or two mistakes in between.
41. 2:16So, first, how long term are you?
42. 2:18It should not happen that you are dependent on this to live and die.
43. 2:22They are dependent for living.
44. 2:23Second, are the other things in place or not?
45. 2:25Is the financial plan made or not?
46. 2:27Is your life insurance in place?
47. 2:29Have you covered yourself if you get any illness tomorrow?
48. 2:32Or how much leverage do you have?
49. 2:34So, these things are very important for me.
50. 2:36With that, I determine the dependency of this money on this.
51. 2:41This is very important for me.
52. 2:43Third, how much knowledge do you have?
53. 2:44Okay.
54. 2:45That's a good question.
55. 2:46Yes.
56. 2:47What do you understand well?
57. 2:48Because the market is very big.
58. 2:50There are textiles, chemicals, semiconductors, data centers, banks.
59. 2:55So, not everything comes.
60. 2:57As I am a banker, my banking financial service is strong.
61. 3:00I understand it better.
62. 3:02My father had a distribution business of FMCG.
63. 3:05So, I understand consumption a little better.
64. 3:07I have been to my shop since childhood.
65. 3:08So, everyone has an area of strength.
66. 3:11So, third, I ask you what is your area of strength?
67. 3:13Right.
68. 3:13Because it sounds cool to listen that yes, I have invested in chemical stocks.
69. 3:17But do you know the basics?
70. 3:19Absolutely.
71. 3:19So that you understand that industry better.
72. 3:21I have very bad marks in chemistry.
73. 3:23So, I take less chemical stocks.
74. 3:25Fourth, how much time can you give?
75. 3:27You can do research.
76. 3:28You will attend the conference call of the company, if you buy that stock today.
77. 3:32How closely can you track the company's numbers?
78. 3:34This is a full-time job, not a part-time job.
79. 3:36Someone said, took it and sat down.
80. 3:38Yes, it has become a side hustle.
81. 3:39So, buy and forget is not there.
82. 3:40Buy, keep watching.
83. 3:41And if you like it, then forget.
84. 3:43And fifth, one of my clients said a very nice line.
85. 3:46I had also tweeted that you want to make a fortune and you want to make a future.
86. 3:50So, the future is made when a big corpus is made.
87. 3:52When the money grows a lot.
88. 3:55That you have to take it now. Let there be some benefit.
89. 3:57Put some money in a little fortune and double it quickly.
90. 4:00So, these five questions are very important for me.
91. 4:03If he answers all five questions correctly.
92. 4:05Then I come to the process of how you have to identify these stocks.
93. 4:09Five very very hard-hitting questions.
94. 4:12This is a very good framework.
95. 4:13I have heard that you also have a Miles framework which is very famous.
96. 4:16Tell me a bit about that.
97. 4:17And please explain it step by step with examples.
98. 4:20So, if we have to break Miles.
99. 4:23So, first comes margins.
100. 4:25Growth with margins.
101. 4:26If you are doing top line growth, then the margin is not expanding.
102. 4:30So, there is not much benefit from that growth to the shareholder.
103. 4:33As you can see.
104. 4:34Maruti was a market leader for a while.
105. 4:37Now the share has run up.
106. 4:38In 2015-16, it used to sell 10 lakhs cars, today it sells 20 lakhs.
107. 4:44But its margin came from double digit to single digit.
108. 4:46Because it did not catch the premiumization trend.
109. 4:48It could not do it at the right time on SUVs.
110. 4:50So, the share price did not move that much.
111. 4:52Uno Minda in the same period, in 2014-15.
112. 4:55Its margin was 5-12%.
113. 4:57Sale is from 1700 crore to 25-30,000 crore.
114. 5:01Stock is 200x.
115. 5:04Because margin reflects innovation.
116. 5:07How much you are innovating.
117. 5:08How many new categories you are bringing in.
118. 5:10How much you are pivoting.
119. 5:11That eventually reflects in profit.
120. 5:13That translates.
121. 5:14You are buying plain plywood or selling furniture.
122. 5:17The difference is, the value addition.
123. 5:19You are buying steel or pipe.
124. 5:22So, Astral will make more money than Tata Steel.
125. 5:25Margin expansion as well, with sales growth.
126. 5:28There are many examples, like DBS's margin.
127. 5:30Compare it with Sun Pharma.
128. 5:32You will see in Pharma too.
129. 5:34Wherever margin expansion is there, disproportionate wealth is made.
130. 5:36Because you were doing more R&D.
131. 5:38You were commercializing more molecules.
132. 5:41So, margin reflects how much R&D you are doing.
133. 5:43How much you are focusing on increasing value addition in the product.
134. 5:45Eventually, it reflects in your numbers.
135. 5:48Recently, if you see Maruti's figures.
136. 5:51There sales increased, net sales increased but the margin has decreased.
137. 5:55So, what is its interpretation? I mean its converse.
138. 5:57It can happen in a quarter.
139. 5:58Like inventory, now GST cut.
140. 6:01So, people have cut your inventory stock.
141. 6:02So, it is not of a quarter.
142. 6:03But if the margin is consistently decreasing, which happened in Maruti's case.
143. 6:05In the middle, there was 6-7% left.
144. 6:07The stock gave 0 return of 6-7 years.
145. 6:09So, it can be 1 of.
146. 6:10Till then, it is okay.
147. 6:11So, a quarter is not important.
148. 6:12But if the trend is declining margin.
149. 6:14So, it is signaling that somewhere the customer is not giving you premium.
150. 6:17For the products you are offering.
151. 6:19Understood.
152. 6:19And the margin will be less in the commoditized business.
153. 6:22Understood.
154. 6:23Steel, coal, there will be no margin here.
155. 6:25there will be complex product, value added product.
156. 6:27Or the brand will be strong.
157. 6:28There will be more margin.
158. 6:30So, first is the margin growth with sales. So, M stands for that.
159. 6:33I stands for Innovation.
160. 6:35Innovation.
161. 6:35Very important.
162. 6:36Again, link to margin.
163. 6:37For example, Newland Labs.
164. 6:39Newland Labs used to make generic API before.
165. 6:41Which is active pharmaceutical ingredients, which is basically a part of drug.
166. 6:45Correct.
167. 6:46Then, they moved to more complex API.
168. 6:50Sophisticated, Peptides.
169. 6:52So, peptides is a little technical word.
170. 6:53Peptides are the block of amino acids.
171. 6:57From amino acids, peptides are formed and from peptides, proteins are formed.
172. 7:00The smaller block of amino acids is peptide.
173. 7:04The more complex block of amino acids and peptides becomes protein.
174. 7:09It came in peptides, along with that, it came in CDMOs.
175. 7:12It started contracts manufacturing for innovator companies.
176. 7:15If you look at the stock today, I think it must have been 20X in the last 4-5 years.
177. 7:19It is hugely invested in R&D.
178. 7:20It is an example of contract manufacturing.
179. 7:23In the same business, Aurobindo Pharma is also in CDMO.
180. 7:26But there, we did not get to see so much innovation.
181. 7:27There was a little issue of corporate governance.
182. 7:29Sun Pharma is another example of less innovation.
183. 7:32Now they have started doing a little bit on the specialty side.
184. 7:35So it is very important for a pharma company if you are not continuously doing R &D.
185. 7:39I just told you that the number one drug is Manjaro.
186. 7:42GLP-1.
187. 7:43Ozempic
188. 7:44The one who did it, Eli Lilly,
189. 7:45whose sale, you can see where its number is.
190. 7:48So you have to do R&D continuously here.
191. 7:50Because this is about human life and health.
192. 7:53We had invested in Laurus lab a long time ago.
193. 7:55The stock was doing very bad.
194. 7:56But it was continuously investing in expansion and R&D.
195. 8:00Laurus lab was a company where 25% of the staff was in R&D and scientists.
196. 8:05There were 1200 scientists in 5000 employees.
197. 8:07Fixated on innovation.
198. 8:09Yes, very fixated on innovation.
199. 8:10You see NVIDIA, why do you go far?
200. 8:12NVIDIA doesn't make chips, it designs it.
201. 8:14Correct.
202. 8:15Somebody else makes it.
203. 8:17That's why the dependency was created.
204. 8:19L is for learning mindset.
205. 8:20How much the promoters are hungry to learn.
206. 8:23To learn from mistakes and to grow.
207. 8:25There is a company Astral, it's foudner Sandeep Engineer.
208. 8:28We were attending an earning con call of Astral.
209. 8:31I think it was 2022 or 2023. It was a quarterly earning.
210. 8:34He was not available in the earning call, so somebody asked where is Sandeep?
211. 8:37He said he went to do a course at Harvard.
212. 8:39At 61 years age, if you are doing an executive MBA course for few weeks to learn.
213. 8:47That signals the hunger.
214. 8:49They have become a lifelong learner.
215. 8:51Absolutely.
216. 8:52Lifelong learner.
217. 8:53So if you have seen the Murugappa group.
218. 8:55Chola, Tube Investment, CG Power.
219. 8:58They call it South Ka Tata.
220. 9:00Right!
221. 9:01There is an external committee which screen the family member whether he is fit or not for the leadership role.
222. 9:07You must have heard that the promoter of Shree Cement gives the CAT exam.
223. 9:11Just to keep his mind sharp.
224. 9:13Just to check whether he is getting 99% in DILR or not.
225. 9:15Have you ever heard of Mr. Raamdeo from Motilal?
226. 9:17You will see how much he is hungry to learn.
227. 9:19And when you will interact with the management of the company, when you will attend the conference calls.
228. 9:24You will see that the management will catch the new trends.
229. 9:28In the annual report, there is a column called management speak.
230. 9:32Read about those companies.
231. 9:33Management tells you what they think about the market.
232. 9:36What are the future trends.
233. 9:38Some good companies like Divi's, Infosys.
234. 9:43Infosys share is not doing well right now.
235. 9:45Asian Paints, Pedilite.
236. 9:47When you read their management outlook in the annual report.
237. 9:51They will talk about the future.
238. 9:52You will get to know a lot about their mindset.
239. 9:54And you will get to know what is going to happen in the future.
240. 9:56So that is a place where you can gauge whether they are learning hungry or not.
241. 10:01This seems like it is intertwined with innovation only.
242. 10:03Because they feed into each other.
243. 10:05Absolutely.
244. 10:06M-I-L is done, E stands for Ethics.
245. 10:09Extremely important.
246. 10:10So there is a good and bad thing in India.
247. 10:12You know he is a good promoter or a bad promoter.
248. 10:15A lot of places in India are black and white.
249. 10:17Right.
250. 10:17Some promoter groups have never made money for anyone.
251. 10:20You know that they don't want to invest money here.
252. 10:21They have never made a return on their shareholders in the last 20 years, right?
253. 10:25For example, a promoter gives a loan to his company.
254. 10:29If you know, you know.
255. 10:30Yes, if you know, you know.
256. 10:32You keep taking personal assets on the company's balance sheet.
257. 10:36You spend on the expenses of the travel company.
258. 10:38You pay a lot of excess payments to the auditors.
259. 10:42Right.
260. 10:42Why are you doing that?
261. 10:43You want to hide something on the balance sheet.
262. 10:46I have shared a slide with you by doing forensic checks.
263. 10:50How do you recognize a lot of revenue in this?
264. 10:54How aggressive is the accounting?
265. 10:55There are a lot of criteria.
266. 10:56There are a lot of forensic checks.
267. 10:57If you read some things, it is a big political affiliation.
268. 11:00For me, it is a big red flag.
269. 11:01The government can change at any time.
270. 11:02Yes.
271. 11:03The EPC and infrastructure work.
272. 11:05If they are getting orders due to government contracts.
273. 11:07If the government changes.
274. 11:08You see what happened to JP Group.
275. 11:10Nothing against them.
276. 11:11Yes.
277. 11:11Right?
278. 11:11I didn't want to take a name.
279. 11:13But I was giving an example.
280. 11:14Especially in Infra capital goods, the long gestation projects.
281. 11:18Where they call it B2G business, business to government.
282. 11:21Correct.
283. 11:21You have to check for political affiliations a lot there.
284. 11:24I came to know that a small percentage of the turnover is going to donations.
285. 11:27This is very important.
286. 11:29Look how many times SEBI has fined a promoter entity.
287. 11:32You will get this data.
288. 11:33You will get it in exchange filing.
289. 11:34How many times it has been fined, how many times it has been settled.
290. 11:36There is internet, everything is available.
291. 11:38Which promoters have gone to NCLT again and again?
292. 11:40In fact, let me tell you one thing.
293. 11:42I don't want to say this.
294. 11:43Majority of the companies in India are non-investable.
295. 11:47Actually, this is a job, what not to take?
296. 11:50Versus what to take ?
297. 11:51I will tell you a big filter.
298. 11:53Bharat Shah sir told me this.
299. 11:55He is the founder of Ask.
300. 11:57He told me to go to screener or money control.
301. 12:00Go to any site and put a filter of return on capital of 15%.
302. 12:04You see how many companies in India are making 15% return on capital.
303. 12:07Why are you doing business if you are not making 15%?
304. 12:10If not, then keep the money in the bank or put it in mutual fund.
305. 12:12You will be surprised.
306. 12:13Out of 7000 companies, there are only 400-500 companies.
307. 12:16Oh!
308. 12:17That means less than 50%...
309. 12:18This is a very big filter.
310. 12:19Use it.
311. 12:20I am not talking about a quarter of return on capital.
312. 12:22I am talking about a trending.
313. 12:23Sometimes when you do capex, the return on capital reduces a little for some period.
314. 12:27So obviously you have to link it with a lot of factors, right?
315. 12:30One is that it is coming less and some people are showing less.
316. 12:33There is a tendency in India to show less profit and to give less tax.
317. 12:37So that is why it is very important in risk management.
318. 12:39Okay.
319. 12:40That is why I said that if the margin is not increasing, then it is possible that the promoter is not going to show it.
320. 12:44And last is scale.
321. 12:45Ability to think big.
322. 12:46It is linked to hunger.
323. 12:47Else.
324. 12:48But you can really have to think big.
325. 12:50Like we did not think that eternal will be so big.
326. 12:53Who thought that today, for example, we will be able to export in defense.
327. 12:58We are making our drones, our anti-aircraft systems, pinaka rockets.
328. 13:03Ability to think scale at a bigger pace is very very important.
329. 13:09I think the biggest limiting factor here is your own imagination.
330. 13:12Yes, absolutely.
331. 13:14Absolutely.
332. 13:15Reliance is a perfect example.
333. 13:16Yes.
334. 13:18Now from an oil and gas company, today you are slowly becoming a new energy company.
335. 13:23You are becoming a tech company through Jio platforms.
336. 13:25Hats off to the group.
337. 13:26I mean to turn such a big business.
338. 13:29And to penetrate every sector.
339. 13:31To penetrate every sector and to disrupt it completely.
340. 13:33You see, not every group was able to do it.
341. 13:34The business groups with Reliance.
342. 13:36Yes.
343. 13:37You remove Tata and Reliance.
344. 13:38So in the old conglomerates.
345. 13:40There is so much versatility.
346. 13:42Yes.
347. 13:42So it is a big deal to move such a big elephant.
348. 13:45So it is possible at every level.
349. 13:46It is more possible in a small company.
350. 13:48And here I feel that our small, mid-sized tech companies.
351. 13:51When AI adoption will start.
352. 13:53Now AI is in the building stage.
353. 13:55Infrastructure stage.
354. 13:56You know, semiconductors, hardware.
355. 13:58AI infrastructure, spending money.
356. 14:00Then AI's adoption phase will come, learning phase will come.
357. 14:02I think there Indian companies will be very very important.
358. 14:05And pivoting there.
359. 14:09The company that will be able to do that.
360. 14:11It will become very big.
361. 14:12Got it.
362. 14:13So this is a very comprehensive and robust framework.
363. 14:16Now let's put it in hard filters,
364. 14:18so that anyone who has a 9 to 7 job, they don't have much time.
365. 14:22They are able to assess stocks, identify good stocks in a short time.
366. 14:27Right.
367. 14:27And in a way that we can also sidestep that error, like you said.
368. 14:32When sometimes some people under report.
369. 14:34So we have to take a combination of filters so that we get an accurate picture.
370. 14:38So how does that look?
371. 14:39We are online for 7-8 hours.
372. 14:41We are consuming a lot of OTT content.
373. 14:43Netflix's market cap is bigger than Reliance.
374. 14:47Our biggest company has a valuation of 220-230 billion dollars.
375. 14:51Netflix alone is above 300 billion dollars.
376. 14:54So there will be one OTT platform in India which will become big.
377. 14:57Whether it is Jio Hotstar or anything at some point of time.
378. 15:01So you identify a company in content.
379. 15:05How can you invest in it?
380. 15:07You identify a company in e-commerce.
381. 15:09You identify a company in auto segment in which sales would increase.
382. 15:15You identify a company in travel.
383. 15:17First of all, in the 5-6 broad themes that I have told you, identify in a commonsensical way.
384. 15:22Then get to the return ratios.
385. 15:24Which case is on earning multiple?
386. 15:26Don't pay 100-200 PE. In most cases you will get it wrong.
387. 15:30Don't overpay any business.
388. 15:31And there is one more trend.
389. 15:32If everyone is buying, be careful in that.
390. 15:35I always believe that where the whole crowd goes.
391. 15:37It becomes the peak.
392. 15:39Funnily I say.
393. 15:40When the IPO of the mutual fund comes, the thematic fund.
394. 15:42It is the peak of that sector.
395. 15:44You see, the NFO of defense came last year.
396. 15:47That was the peak of defense.
397. 15:49The NFO of microcap came in November.
398. 15:52That was its peak.
399. 15:53The NFO of digital businesses started coming in the end of 2023.
400. 15:58When everyone starts doing it.
401. 16:00It means that the price discovery has come.
402. 16:01Got it.
403. 16:01Third, you see, every business needs to learn a little bit, you will have to study.
404. 16:07Every business has to be evaluated from different metrics.
405. 16:10You can evaluate the consumer business from PE.
406. 16:12But the financial business has to be evaluated from price to book.
407. 16:15How much is there on the book value.
408. 16:17If it seems very technical, then do mutual fund.
409. 16:21You have to pay 50% fees in the direct plan and you have to pay 1.5%-2% fees in the regular plan.
410. 16:25Your advisor will take it.
411. 16:26Let the best guy do it for you.
412. 16:27Don't try and do everything else.
413. 16:29Let's pick on return ratios for example.
414. 16:31What can be the exact hardline filters?
415. 16:33Like you mentioned, ROCE.
416. 16:35I think ROCE is the first filter.
417. 16:37And ROCE is consistently improving.
418. 16:40Right.
419. 16:41So don't take the ratio of 1 quarter or 2 quarter.
420. 16:43I think second is ability to generate free cash flow.
421. 16:46Don't just look at book profit.
422. 16:48Cash flow generation is happening.
423. 16:51I will give you an example of ZEE, book profit was always good.
424. 16:54But it became bad debt, because they were doing payments to their own companies which never came.
425. 16:59Right.
426. 17:00Whether it is Dish TV or Citi cable.
427. 17:01So is the profit being converted into cash flow or not?
428. 17:04Got it.
429. 17:04There is a cash flow statement.
430. 17:05We see P&L and balance sheet. There is a cash flow statement too.
431. 17:08See if free cash flow is increasing or not.
432. 17:10Vodafone, for example; Free cash flow has been negative for so many years.
433. 17:13Debt is increasing.
434. 17:15That's a good hint.
435. 17:16Right.
436. 17:17See that.
437. 17:18Third is valuation metrics.
438. 17:21For example, there are new age businesses.
439. 17:24Right.
440. 17:24You can see their price to sales.
441. 17:26And if it is profitable then obviously you can see it on PE.
442. 17:29Right.
443. 17:30And if it is a capital intensive business.
444. 17:32Then there is a metric EV by EBITDA.
445. 17:34EV by EBITDA says that with how many years of earnings the company's cost can recover.
446. 17:41If it is 10 then it means that with 10 years of profit its enterprise value..
447. 17:44Can be recovered.
448. 17:45Right.
449. 17:45So the whole focus is on the bottom line.
450. 17:48How much is the earnings, how much is the cash flow?
451. 17:50Don't ignore this.
452. 17:51Sometimes we get carried away by seeing order books and stories.
453. 17:55It has to translate into earnings.
454. 17:57Right.
455. 17:57So this I always say 'EEE'.
456. 17:59Earnings, earnings, earnings, focus on this.
457. 18:02Right.
458. 18:02If this is right then sooner or later the stock will reward you.
459. 18:06It may not be temporary but eventually it will.
460. 18:08Let's say we picked 10 stocks.
461. 18:11Only 3-4 can become multi-bagger.
462. 18:14But how do we ensure that the remaining 6-7
463. 18:17don't give so much loss or negative value that it erodes from the previous 3-4 profits?
464. 18:23This is very difficult.
465. 18:25There will be a mistake.
466. 18:26Rakesh Jhunjhunwala sir also made a zero in some stocks.
467. 18:30There was almost a 50% loss in DHFL.
468. 18:33There was a big loss in A to Z.
469. 18:36Motilal had invested in Manpasand Beverage at one time.
470. 18:40So good fund managers make mistakes.
471. 18:42And this doesn't mean that something has gone wrong.
472. 18:45Mistakes are part of it.
473. 18:46That's why I say diversification is very important.
474. 18:48Tell me 5 stocks or 10 stocks.
475. 18:51I think this metric is wrong.
476. 18:53The portfolio should be good overall.
477. 18:55Be it 10, 20, 50.
478. 18:57The return of Nippon Small Cap is 23-24% CAGR of 10 years.
479. 19:02Do you know how many stocks are there in it?
480. 19:04183.
481. 19:04183?
482. 19:05This was last time when I checked, it must have increased now.
483. 19:07Oh my God!
484. 19:09Peter Lynch generated 28% CAGR for 20 years.
485. 19:12There were 100 stocks.
486. 19:14100 stocks?
487. 19:17They say how many stocks should there be?
488. 19:19Anil Singh also says this.
489. 19:20How many children should there be?
490. 19:22How many can you raise well?
491. 19:24So buy the stocks only how much you can do good research on them.
492. 19:27I understand that a retail investor cannot track 100 stocks, I am not asking to buy a 100 stocks.
493. 19:32But don't be fixated.
494. 19:33I should buy 5 or 10, concerntrated investing is the only way to that makes money, its not like that.
495. 19:38Concentrated investing is a double edged sword.
496. 19:41It can be the case that the market does really well and 2 out of your 5 stocks doesn't do well.
497. 19:45And you din't do anything.
498. 19:47Yeah!
499. 19:47Because at the other end of the spectrum, you will see Mr. Warren Buffett, 45% of the portfolio was Apple only.
500. 19:54Right?
501. 19:54So there are two different investing styles, it depends on the person to person.
502. 19:58I am saying, do you have the ability to take loss on that capital?
503. 20:01That concentration is decided.
504. 20:03I will always say that this world is very disruptive.
505. 20:06You won't know when a business will be outdated.
506. 20:08There is disruption of technology, disruption of government policies, disruption of environment.
507. 20:13If the AQI increases, then the construction stops.
508. 20:15What is the fault of the construction company in that?
509. 20:17Suddenly one or two quarters went bad and the stock fell.
510. 20:21It's not like the stock is bad.
511. 20:22Yeah.
512. 20:23There is a company Tejas Network, I will give you an example.
513. 20:25They make 5G, 4G sites for BSNL.
514. 20:28BSNL is not getting orders for 5G since 6 months.
515. 20:32The old payment is also not being released.
516. 20:33So the working capital is also bad, the business is also bad. The company has made a loss of 2 quarters.
517. 20:37The stock has went up to 1500, now it is also 400-500 rupees.
518. 20:40And it's a Tata company.
519. 20:42Right?
520. 20:42So what I am trying to say is that if you are doing concentrated investing, then avoid cyclical businesses.
521. 20:47The more business to the consumer, the less the government intervention, the better.
522. 20:51So infrastructure, oil and gas, telecom, there are government interventions in this.
523. 20:56So you have to be careful, don't do concentrated investing here.
524. 20:59So I would suggest diversify enough.
525. 21:01I usually don't go beyond 10% in a stock.
526. 21:05That is my personal take.
527. 21:07It's not a hard fast rule.
528. 21:09Second, look at how much liquidity there is in the stock.
529. 21:14If you go to sell, then would you be able to easily liquidate with little impact cost.
530. 21:19Especially when there are small microcaps in a bad time which you are not able to sell.
531. 21:24There are circuits.
532. 21:25Do a combination of mutual funds.
533. 21:27It's good that you have taken 10 stocks, you can also do SIP in mutual funds.
534. 21:30Keep tracking the portfolios of mutual funds, what stocks are they taking?
535. 21:33Keep learning, keep evolving.
536. 21:35Right?
537. 21:36I am an active portfolio manager even today.
538. 21:38I do 50% SIP even today, of 100 rupees, I save every month.
539. 21:42There is a dialogue in a border picture.
540. 21:44If we are we, then what are we?
541. 21:45If you are you, then what are you?
542. 21:47There are a lot of good people in the market. It's not that my style is the best.
543. 21:50I know everything.
544. 21:52Got it.
545. 21:52I think diversification is key.
546. 21:54And learn from people.
547. 21:56You are getting a Prashan Jain, a Naren, a Nilesh Shah.
548. 22:00So many good fund managers by paying 1% fees.
549. 22:03Take advantage of that wisdom.
550. 22:06And then also implement it on yourself.
551. 22:08Don't make it a competition.
552. 22:09I will ask another scenario-based question.
553. 22:11Speaking of Mr. Jhunjhunwala and Mr. Buffett.
554. 22:14Now, Rakesh Jhunjhunwala ji increased Titan's holding in a staggered way, from 6 rupees to 35 rupees.
555. 22:21Whereas Warren Buffett sir put some 45% lump sum in Apple.
556. 22:28So, what is better according to you? SIP or lump sum?
557. 22:30If you are a salaried guy.
558. 22:32It also depends on your cash flows.
559. 22:34If your cash flows come regularly.
560. 22:36In the form of salary.
561. 22:37Then obviously staggered investment is the best way to do it.
562. 22:40But let's say if you are an actor.
563. 22:43Or you are a contractor.
564. 22:45You get paid on an assignment basis.
565. 22:47Then you can't do SIP as your cash flows are irregular.
566. 22:50So, first look at your cash flow.
567. 22:52Second, I believe that conviction is made gradually.
568. 22:55So, you give the company some time.
569. 22:57It is possible that you are doing 1-2 quarters very well and suddenly 1 quarter 1 dollar, 2 quarter 1 dollar...
570. 23:01So, I would always suggest as a retail investor.
571. 23:03Gradually build the position.
572. 23:05Okay.
573. 23:06So, as Warren Buffett says, rule number 1: Don't lose money.
574. 23:08Rule number 2 : Remember rule number 1.
575. 23:11Preservation, risk management is very important.
576. 23:13This was extremely useful.
577. 23:15Thank you so much, Gurmeet.
578. 23:16I love how anecdotal it was.
579. 23:18And the fact that, with so many examples, you have explained the whole concept.
580. 23:23Learn from mistakes.
581. 23:25No, more than that I think you are a true encyclopedia of the stock market.
582. 23:29So, thank you so much for your time.
583. 23:32Thank you, thank you for having me.
584. 23:33Now you know that the underdogs of the stock market.
585. 23:35That is the multi-baggers, how can you recognize it from the beginning?
586. 23:39How do you pick stocks?
587. 23:40Do share in the comments.
588. 23:42This is Arunima Rao signing off.
589. 23:44See you next time.
590. 23:55Investment in securities market are subject to market risks.
591. 23:57Read all the related documents carefully before investing.
592. 23:59Please read the risk disclosure documents carefully before investing in equity shares,
593. 24:02derivatives, mutual fund and all other instruments traded on the stock exchanges.