Kanpur-based Ekansh Mittal (34), who enjoys playing tennis, watching web series and reading books, is also one of the youngest equity investors who has spotted several multibaggers in his 20s. His passion for equities helped him to spot at least nine stocks that have multiplied his wealth in the past five years.
In an interaction with Business Today, Mittal said that Acrysil delivered him around 700 per cent return to him in the past five years. It was followed by Shri Jagdamba Polymers (over 500 per cent), Suven Life-Suven Pharma (500 per cent), Aarti Drugs (400 per cent), FIEM Industries (350 per cent), National Aluminium (225 per cent), Chaman Lal Setia (200 per cent), Pondy Oxides (200 per cent) and Insecticides India (100 per cent).
“Barring Acrysil and Suven Life-Suven Pharma, all the above stocks have been held for less than 5 years,” Mittal said.
How to spot such multibaggers?
While sharing his investment strategy, the market investor said he follows a couple of strategies for picking stocks from the domestic equity market.
“I invest in growth stocks at reasonable valuations. Like from the examples given earlier -- Acrysil, Shri Jagdamba, Suven Pharma (Suven life before demerger) -- were reporting consistent growth across the years and were still available at reasonable valuations and therefore gave enough opportunity to accumulate the stocks,” he said, adding for these kind of players he looks at the opportunity size, industry growth and whether the company seems capable enough to capitalise on the vast opportunity.
For cyclical businesses, he further added that there are certain commodity-based stocks like metals and cement which have their business cycles. In such sectors, he tries and invests when they are going through a lean phase or when the commodity prices are extremely down or the company's profits are down significantly and try and sell the stocks when the margins are historically high.
He also looks for good companies which are going through a bad phase. “There are companies like FIEM and Aarti Drugs which are overall quite good, but occasionally go through a lean phase. It could be either because of the slowdown in industry or their internal issues. So, we analyse such companies to determine if the current problems are temporary and if the company can bounce back. If the company can bounce back, we get the advantage of both earnings and PE re-rating,” Mittal said.
Change in investing style
On asking if is there any change in the investing style amid the ongoing uncertainties in the equity market, Mittal said that over the past few years, he has started appreciating the cyclical nature of the businesses more.
“Other companies, even though good, still go through lean phases, periods of slowdown or periods of major capital expenditure after which it takes some years for the companies to fully benefit from such a capex. In the interim, their performance hurts because of several factors like higher depreciation cost, OPEX and financial charges. So, as an investor, I have started focusing a lot on such companies which have a seemingly good overall track record but currently facing one or the other issue due to which the performance is hampered and the stock is down,” Mittal said.
When to sell a multibagger?
Mittal usually sells a stock when there is a better opportunity available in the market. He also offloads cyclical business when things look extremely rosy like historically high margins.
“In certain stocks, when I start believing that valuations are stretched and the outlook for next 2-3 years looks uncertain, I have also started using trailing stop loss strategy for such stocks and exit from the stock if it hits stop loss,” he said.
The road ahead
Sharing his thoughts on the current market conditions, he said that the markets have already done quite well over the last two years. “In the short term there could be consolidation or some correction considering the global scenario,” Mittal said.
The investor is positive about banks and NBFC. “These themes are coming out of a bad credit cycle and the valuations look reasonable. In addition to this, it looks like paper stocks have still some steam left,” Mittal added while adding auto ancillary could also do well as the last 2-3 years were bad for the industry.
(Ekansh Mittal is a Sebi-registered research analyst and currently owns the following stocks out of the ones mentioned - Acrysil, Shri Jagdamba, Suven Pharma, FIEM, Chaman Lal Setia and Insecticides India. Stocks mentioned in the article are for information purpose only.)
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