Forget Sensex 100,000. Only 1% Stocks will Wealth that Lasts Forever

On 23 March 2020, the Sensex fell below 26,000. That day, probably no one thought the index would breach 55,000 in 17 months.

The stunning rise of the Sensex had traders, speculators, and market geeks in frenzy last weekend. They seem to have had a busy weekend congratulating each other over this milestone.

The next milestone of the Sensex is once again a top of debate. 60,000, 75,000, 100,000?

For me, it has never been a question of 'whether' or 'when' but of 'why'.

Recognising the pathway to Sensex 40,000 back in 2014 was easy, as I saw several compelling megatrends.

Similar was the case when I wrote about Sensex 100,000.

You see, at Equitymaster, I'm known as the safe stocks expert. I believe in making money in stocks by not losing it in the first place.

But over the years, I've taken my skill of identifying safe stocks in a whole new direction.

I wanted to guide investors, on a journey where you have an opportunity to potentially make massive profits from stocks over long time frames.

I'm not talking about stocks that could go up 2 or 3 times. I'm talking about huge multibagger returns that would change your life forever. The kind of wealth that lasts generations.

As a research analyst, I've studied hundreds of stocks across multiple sectors for more nearly 17 years. I've recommended more than 200 safe stocks to my premium subscribers.

But for the first time in my career, I am seeing a culmination of many megatrends in India happening at once. Most countries witness such an event only once in several centuries.

Here are few lines from economist Robert Gordon's seminal book - The Rise & Fall of American Growth...

• Though not a single household was wired for electricity in 1880, nearly 100 percent of US urban homes were wired by 1940, and in the same time interval the percentage of urban homes with clean running piped water and sewer pipes for waste disposal had reached 94 percent.
  
  More than 80 percent of urban homes in 1940 had interior flush toilets, 73 percent had gas for heating and cooking.
  
  In short, the 1870 houses were isolated from the rest of the world, but 1940 houses were 'networked', most having the five connections of electricity, gas, telephone, water and sewer...Networking inherently implies equality.
  
  Everyone, rich and poor, is plugged into the same electric, water, sewer, gas and telephone network. The poor may only be able to hook up years after the rich, but eventually they receive the same access.

The 19^th century was the period of American Revival. For Indian companies, the post Covid revival will be a once in a century opportunity.

So, I suggest you forget about near term Sensex milestones, dear reader. It would be a futile exercise for investors wishing to create wealth that lasts forever.

I think the high valuations of the Sensex can make stocks gyrate over several months or quarters. But that should hardly matter to you if your focus is on buying strong businesses with the ability to create wealth for yourself that lasts forever.

In my study of the market, I have concluded that barely 1% of all listed stocks today are geared to create such wealth.

No matter whether Sensex stays at 55,000 or leapfrogs to 100,000 in few years, these 1% stocks will be the biggest winners.

Warm regards,

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