20x in 12 Years: Watch this Strategy 

Hello everyone, Rahul Shah here, trying to make investing accessible and profitable for the average investor.

In our last video, we looked at a simple strategy. Buy 30 micro-cap stocks trading below book value. Hold them for a year. Reset. Repeat.

The results were stunning. Over 12 years, the strategy turned your money into 16 times. That is a 26% CAGR.

But I got a few questions. One question came up again and again.

What about debt?

What if a company is cheap for a bad reason? What if it is drowning in loans?

That is a fair question.

So today, we test that. We add just one more filter. We only buy stocks with a Debt to Equity ratio between 0 and 1.

That means the company has manageable debt. It is not over-leveraged. It is cheap and safe.

So, let me go through my universe of stocks once again

Think of the stock market ranked by size. The first 100 stocks are large-caps. The next 150 are mid-caps. The next 500 are small-caps. That is 750 stocks in total. Our strategy looks at the next 500 stocks after that top 750. This is our micro-cap playground.

Within this universe, we buy stocks with a Price to Book value between 0.3x and 0.8x.

We cap it at 0.8x because we want a margin of safety of at least 20%. We set a floor at 0.3x because stocks trading cheaper than that are often value traps. They are cheap for a terrible reason.

The strategy is simple. We buy 30 equal-weighted stocks that fit these rules. We hold them for one year. At the end of the year, we sell everything. We reset, find a new batch of 30 stocks, and rebalance.

If more than 30 stocks qualify, we choose the ones with the lowest PBV ratio

Let us look at the data. I ran both strategies side by side for 12 years. The first strategy uses only Price to Book. The second uses Price to Book plus the Debt filter.

The results may surprise you.

Let us start with the year 2014. The only-PBV strategy gave a 96.6% return. That is massive. The PBV plus Debt filter gave 106.6%. Slightly better.

In 2015, both strategies had a good year again. The only-PBV strategy returned 50%. The filtered one returned 43.3%. Not a huge difference.

2016 was a slow year. Only-PBV gave 16.6%. The price to book value plus debt filter gave just 6.6%. The filter underperformed.

Then came 2017. Both strategies exploded. Only-PBV returned 93.3%. Filtered returned a massive 113.3%. That is an extra 20% gain. The debt filter helped you capture more upside.

2018 was painful. Only-PBV lost 43.3%. Filtered lost 35%. The filter saved you from some of the worst falls.

2019 was another down year. Only-PBV lost 36.6%. Filtered lost 26.6%. Again, the filter protected you better.

2020 was a recovery year. Only-PBV gave 23.3%. Filtered gave 30%. A small edge for the filtered strategy.

Then came 2021. A monster year. Only-PBV gave 110%. Filtered gave 123.3%. That is a massive outperformance. The filter added 13% more returns in a booming market.

2022 was flat. Both strategies gave 16.6%. No difference.

2023 was a strong year. Only-PBV gave 83.3%. Filtered gave 76.6%. The filter slightly underperformed.

2024 was a decent year. Only-PBV gave 47.3%. Filtered gave 47%. Almost identical.

2025 was a down year. Only-PBV lost 18.7%. Filtered lost 30%. The filter actually did worse in this final year.

Now let us look at the total 12-year journey.

The only-PBV strategy turned your money into roughly 16 times. We saw that in the last video.

The PBV plus Debt filter turned your money into roughly 20 times. That is a 27% to 28% CAGR.

Adding just one filter gave you 25% more returns over 12 years. That is a considerable improvement.

The logic is simple. Debt is a killer. A company with too much debt cannot survive a downturn. It cannot invest in growth. It cannot pay dividends.

When you buy a stock below book value, you are buying assets. But if those assets are funded by debt, they are not really yours. The lenders own them.

By filtering for Debt to Equity below 1, you ensure the company has more equity than debt. That is a margin of safety.

Plus, many value traps are heavily indebted companies. They look cheap. But they are cheap because they are dying. The debt filter helps you avoid these traps.

Now, no strategy is perfect. In some years, the low price to book plus debt underperformed. In 2016, it gave just 6.6% versus 16.6%. In 2025, it lost 30% versus 18.7%.

Why? Because some debt-heavy companies recovered faster. They took more risk and got more reward.

But over the long run, the debt filter won. It won by a wide margin. It also gave you smoother returns in the worst years. In 2018 and 2019, the filter lost less. That matters. Your portfolio did not crash as hard.

The filter does not remove all pain. You still saw losses in 2018 and 2019. You still saw a crash in 2025.

But the pain was less. That makes it easier to stay disciplined. And discipline is what makes this strategy work.

So, here's the final takeaway

You do not need a complex model. You do not need to track earnings or management quality.

Just two numbers. Price to Book between 0.3 and 0.8. Debt to Equity between 0 and 1.

That is it. Simple. Logical. Powerful.

Over 12 years, this two-filter strategy turned your money into almost 20 times.

That beats the Sensex.

That beats the Small Cap index.

That beats the only-PBV strategy.

So, if you are ready to start, just add that one extra filter. It could keep you on the path. And if 12-year track record is any indication, it could make you good amount of money.

Would you rather have 16x or 20x? The answer is simple. Add the filter. Stay disciplined. And watch your wealth grow.

That's all from me today. I will see you again in the next session. Good bye and happy investing.