“You don’t predict 100 baggers, they just happen,” Shah told a PMS AIF World’s webinar on “wealth creation in the post-Covid world.”
Shah, Executive Director at ASK Group, says all it takes is astute and intelligent stock picking in a foresighted way. “It is the role of wisdom, longevity, patience and constant attempts to keep refining the investment thesis along the journey, which are critical for multi-bagger outcomes,” he said.
Shah said one of his initial 100-bagger investments was Wipro, but it was just for a brief period.
“It was unthinkable. The speed at which it rose made me speechless. I remained in a state of sleep for too long, and when I woke up I realised I spent the journey a bit too long,” he said.
Shah said valuations for that business at that point did not make sense. He said a rupee invested in
30 years ago has turned into Rs 1,100 apiece.
“It teaches you how something done patiently, something that looks like a normal business, which most people may regard as commodity business and which prima facie is unlikely to attract the attention of most people can offer mind-blowing returns,” he said.
Shah said in the last 10 years,
has shown speed, agility and phenomenal governance and ethics. It does not miss out on any opportunity, he said.
Asian Paints, Shah said, suggests the power of sheer compounding and longevity.
“Terrific growth and terrific capital efficiency, when they combined, like
of the 1990s, magic happens,” he said.
The Dalal Street veteran said more than 90 per cent of the businesses globally are either designed to fail or may produce non-consequential results as an outcome.
“Only single-digit businesses all over the world have got what it takes to create value,” he said.
He said more than the size of the fish, it is the size of the pond that matters. Whether the fish is capable, that is the next question, he said.
“The size of the opportunity, along with the management competence, leads to growth. That growth should not particularly be the highest at any particular time, but solid, predictable and sustainable,” he said.
Also, the quality of growth, capital efficiency, pricing power and the moats that make a business an invincible entity, he said.
Long-term growth is a great proxy of long-term returns, but the quality of growth is a way to lubricate the journey, he said. Finally, an investor has to look at margins of safety, Shah said.