Rahul Shah's Secret to 94%, 116% and 144% Gains in a Year...

• Please refer page 6 and page 9 of Warren Buffett's 2007 letter to shareholders.

Our readers often come across such suggestions from my colleague Rahul Shah.

When asked about great books or articles on investing, I typically suggest names and authors. So do most of my other colleagues.

But Rahul remembers and tells you the exact page number too!

Rahul's love for numbers is seen in his passion about the Benjamin Graham-style of quantitative value investing.

Here too, Rahul has some firm beliefs he applies to his stock picking.

First, Rahul believes the more experienced an investor gets, he tends to feign intellectually humility. But it's usually just a strategy to signal mastery of their craft.

Investment firms often spend decades and billions of dollars building software and data sets to overcome human bias and mental inaccuracies.

But according to Rahul, the most solid investment philosophy rests on the idea - "I don't know."

I agree with Rahul that as humans we can achieve only a certain of accuracy in predicting the future. We could all benefit from saying "I don't know" more often.

The second idea that Rahul keenly follows is that of probabilistic thinking.

Probabilistic thinking is described as trying to estimate, using some tools of math and logic, the likelihood of any specific outcome coming to pass.

For instance, the probability of a stock trading near book value correcting further. Or the probability of a company with high cash reserves going bankrupt.

And finally, he looks at company specific numbers to decide the incremental rate of return versus risk free rate (e.g. income from fixed deposits).

He loves businesses that pay back most of the profits to the shareholders and need to reinvest very little back in the business. He compares the return on such entities which grow year after year, to the interest on fixed deposits.

If you have been reading Rahul's writeups, you would know that Rahul has successfully applied these beliefs to fetch returns from some of the riskiest category of stocks.

Most investors fail to fetch return of capital, forget return on capital, for penny stocks. But his deep value, quantitative style of stock picking has allowed Rahul to make some remarkable recommendations in this segment for more than a decade.

If you don't believe me, take a look at some of these returns...

94.1% gains in 9 months.

116.1% gains in 6 months.

144.4% gains in 15 months.

In my recent interaction with him, Rahul revealed that he has made few tweaks to his screeners to suit a completely new group of stocks, which he is tracking.

These stocks may belong to slightly larger marketcap. But the same quantitative screeners can be applied to these stocks too.

More importantly, Rahul expects relatively quick gains from the unique opportunity in this segment of stocks, which he calls 'India's third giant leap'.

So, what exactly is this third leap? How can you reap huge profits from this once in a lifetime opportunity?

Rahul will share it all in detail on Monday, 13 February at a special online event.

I highly recommend you attend this event. It could change your financial life for the better.

Reserve your seat for the event here.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)