If Benjamin Graham was Alive Today, He Would Want to Meet Rahul Shah

If I own a vada paav franchise in Mumbai, how fast can the business grow?

Does this sound like an apt interview question for the position of equity research analyst? Maybe not, in the conventional sense.

But scores of CA, CFA and MBA qualified candidates have had to brace for such questions at our office over the past decade. Courtesy my colleague and co-head of research Rahul Shah.

I have known Rahul for over fourteen years, right from our earliest days in Equitymaster's research team. And if there is one thing that has been consistent about him all these years, it's his uncanny ability to hunt for ideas that defy convention.

Little wonder that Rahul found the drudgery of working for a global investment bank, during his short stint there, intellectually unstimulating.

He promptly returned to the place which allowed him to nurture his unconventional thinking. Especially with the motive of helping retail investors create wealth with stocks.

I had the privilege of listening to Rahul as he stumped interview candidates and company managements alike with his questions.

Candidates proficient in complex financial jargon like 'discounted cash flow analysis' and 'the Black Scholes option-pricing model', often took more than a minute to answer.

Company managements, proficient in impressing analysts with growth presentations, often wrote down Rahul's questions to think over before answering!

If you are wondering where such unconventional questions came from, its Rahul's voracious and multi-disciplinary reading. The pile of books at his desk range from ones on finance and the stock markets, to autobiographies, to behavioral economics, and even philosophy!

And Rahul puts his reading to the best use at the most opportune times.

For instance, months after the Lehman bankruptcy roiled stocks markets in September 2008, our team was busy recommending stocks to buy. We had already recommended quite a few. But there was one stock Rahul was particularly interested in.

The market was punishing Tata Motors for acquiring Jaguar Land Rover (JLR). There were indeed clouds of uncertainty around the business. But in his true unconventional style, Rahul was not interested in the company's earnings projections. Rather, he checked if the stock would make money for him even if the company was to go bankrupt! Once the stock started trading below book value, he sent out a special report urging our subscribers to load up on the stock.

The result?

Tata Motors gained a whopping 661% in three years!

Rahul literally put his reputation (and possibly his job) at risk with this recommendation. But that's what differentiates him. His conviction in unconventional ideas that are simple, logical, and known to work.

But it was not until 2014 that we got to know the extent to which Rahul had been testing his ideas.

Investors were dumping stocks in the months preceding the general election. We were meeting to discuss stocks to recommend. And Rahul brought with him a print of Benjamin Graham's last interview, published in 1976.

He handed me a sheet in which he had highlighted the following lines, spoken by Graham, the father of value investing, himself...

• I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when our textbook "Graham and Dodd" was first published; but the situation has changed a great deal since then. In the old days any well-trained security analyst could do a good professional job of selecting undervalued issues through detailed studies; but in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost.

The irony is that while everyone in the room had read Graham's Intelligent Investor, some of us multiple times, no one had really paid much attention to this four-decade old interview!

In the interview, Graham had laid out an investing approach that he had back-tested for over 50 years.

And according to him, the approach trounced every other known value investing approach because of three virtues: sound logic, simplicity of application, and an extraordinarily good performance record.

Of course, Rahul was not convinced when he had read it the first time. So, he applied the approach to Indian stocks, over different time frames.

And when he showed us the results in the meeting, we were nothing short of amazed.

The rest, as they say, is history.

Rahul condensed his learnings from Graham and his own back-testing results into Equitymaster's first ever service on microcap stocks - Microcap Millionaires.

I have yet to come across any other service that makes investing in the otherwise riskiest group of stocks, so simple yet so enormously profitable for retail investors.

Microcap Millionaires has not just beaten the index by over 2x since 2014. Almost 9 out of every 10 stocks that the service recommended went on to perform brilliantly, some fetching gains like 545%, 206%, and 175% within just two years!

I'm sure if Benjamin Graham would have been alive today, he would want to meet Rahul Shah. To tell him how jealous he is of Rahul's performance!

Chart of the Day

Speaking of Rahul's successful recommendations, let's take a moment and think about his most spectacular winner: Titagarh Wagons.

Titagarh Wagons: Rahul Shah's Blockbuster Recommendation

The stock went up six and a half times in less than a year!

Now that's what I'd call a blockbuster recommendation. When Rahul recommended the stock in March 2014, it was not only trading cheap but it also had a lot of potential to go up.

A lot would depend on orders from the Indian Railways. When the market realised the Modi government was going to give a big funding push to the railways, the stock took off...and the rest, as they say, is history!

Rahul has, over the last few months, perfected his Accelerated Profits strategy that could deliver big winners in a matter of just a few months.

He is set to reveal his strategy on Friday, 24 August 2018 in an 'Invitation-Only Summit'.

You can sign up for it here.

Warm regards,


Tanushree Banerjee (Research Analyst)
Editor, The 5 Minute WrapUp

PS: Dear reader, at 5 PM, on 24^th August, Rahul Shah will reveal his proven 'Accelerated Profits Strategy'. This strategy helped him identify stocks that generated double and even triple digit returns in a matter of months! The best part is that he did it with an almost 90% success rate. I highly recommend you sign up for Rahul Shah's Accelerated Profits Summit.