All there is to investing is picking good stocks at good times, and staying with them as long as they remain good companies.
- Warren Buffett, Chairman, Berkshire Hathaway
You cannot fault Warren Buffett for making his art of successful investing sound so easy. He is after all the most successful investor of our times.
But then, is investing really as simple as Buffett makes it appear to be?
Well, honestly, it is not. And the reasons are not far to seek. How does one identify "good stocks at good times"? At Equitymaster, this is how we define "good stocks" and "good times" -
"Good stocks" are those where underlying companies have visionary managements at helm, strong business models, consistency in financial performance. And "good times" are those when such stocks become attractive investment opportunities i.e., good stocks are available at attractive valuations.
A classic example for a "good stock at good times" currently is TCS. It is a great business, run by a brilliant management team, and available at attractive valuations. But the traders/punters, shortsighted as they are, have run down the stock on account of exchange rate related issues.
Equitymaster subscribers are however aware that even after adjusting for currency appreciation, business at TCS will continue to do much better than what stock markets seem to be forecasting. We do not know when the stock markets will acknowledge this fact, we do not know. But at some point in time, they surely will. And that's when you, the smart investor, will make your money.
At Equitymaster, we focus on identifying good companies, in good times (like TCS), with the aim of delivering attractive risk-adjusted returns to our subscribers.
But, has this "good companies at good times" approach to identifying stock ideas delivered at Equitymaster?
The answer to this question is a resounding YES!
What follows is a performance report of all the Buy/Hold recommendations we have given as part of our StockSelect service since January 2003.
Our Recommendations - Best ever
| Date |
Scrip |
Reco
Price (Rs) |
Current
Price (Rs) |
Returns |
Sensex
returns |
We beat the
Sensex by... |
| 30-Jun-03 | Voltas | 8 | 204 | 2,623% | 458% | 2,165% |
|
| 19-May-03 | Thermax | 36 | 891 | 2,407% | 554% | 1,853% |
|
| 7-Apr-03 | M & M | 54 | 756 | 1,290% | 531% | 759% |
|
| 20-Jan-03 | Tata Power | 113 | 1,297 | 1048% | 493% | 555% |
|
| 11-Oct-03 | TV18 | 50 | 505 | 904% | 319% | 585% |
|
Current price as on 2nd Nov, 2007; Prices adjusted for bonus / rights
For this table, we have considered only those stocks on which we have never recommended a 'Sell' post a 'Buy' or 'Hold' recommendation
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In 2003, we identified Voltas, a stock which went on to become our best recommendation ever. The company was in a phase of restructuring and was fast becoming "good" at what it was doing. However, valuations rated it as "poor". What else do you say for a stock that trades at 1.7 times EV/EBIDTA (a valuation measure like P/E; normal range is 12 to 16 times) and just around 20% of sales per share? We identified this asymmetry between price and value. And the rest, as they say, is history.
Then there was Tata Power, a company with strong fundamentals but trading at extremely discounted valuations. Imagine a company rich in power assets and having tremendous growth potential, but trading at 50% of book value and just around 4 times earnings? Tata Power was a case like that. And, in retrospection, we can say that we identified the opportunity when others did not.
Although it appears that our best recommendations were all made in 2003, take a look at the table below, which lists our best performing stock ideas by year.
Our Recommendations - Best performers (year-wise)
| Year |
Scrip |
Reco
Price (Rs) |
Current
Price (Rs) |
Returns |
Sensex
returns |
We beat the
Sensex by... |
| 2003 | Voltas | 8 | 204 | 2,623% | 458% | 2,165% |
|
| 2004 | Thermax | 77 | 891 | 1061% | 291% | 770% |
|
| 2005 | L&T | 550 | 4,461 | 711% | 195% | 516% |
|
| 2006 | Axis Bank | 273 | 929 | 240% | 87% | 153% |
|
| 2007 | IDFC | 85 | 189 | 122% | 46% | 76% |
|
Current price as on 2nd Nov, 2007; Prices adjusted for bonus / rights
For this table, we have considered stocks on an exclusive basis i.e., if a particular stock has been the best performing in more than one year, it is considered only for the year in which it was first recommended.
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The consistency with which we have picked multi-baggers only proves that the 'good companies at good times' approach to investing works! You can see a detailed list of all our Buy/Hold recommendations by clicking here.
Equitymaster Research strives to identify profitable stock ideas for its subscribers. Our track record only endorses the fact that our process for identifying "good stocks at good times" has delivered fantastic results.
Now, it's time for you to empower yourself with Equitymaster Research and start making profitable investment decisions!
You can subscribe to StockSelect for just Rs 2,000 per annum. A 2-year subscription comes at Rs 3,200 (a saving of 20% on the 1-year rate). Don't consider this as a cost; look at it as an investment that will help you improve your overall portfolio returns.
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Take a look at what StockSelect offers
 | Solid Research = Better returns |
| 52 buy / sell / hold recommendations every year |
| Each report includes target prices and investment time frame |
| Based on fundamental facts and figures, not tips or rumours |
| Independent and unbiased stock advice for retail investors |
| Access the report online or download it in PDF format |
| Includes access to
52 stock ideas (one per week, every Saturday) [Sample]
EcoSelect newsletter (Monthly Newsletter, PDF Format) [Sample]
Investment Ideas Note (Monthly Newsletter, PDF Format) [Sample]
IPO Reports [Sample]
 Features (over 500 features every year)
Portfolio Tracker service
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Write to us at marketing@equitymaster.com | Or Call Faiyaz at 092232-63403