Every bear markets give an immense opportunity for a new era of Wealth Creation in Financial Markets, there will be new sectors, new entrepreneurs, new stocks which will create immense wealth, I heard a veteran of stock markets, and he fairly told that every decade comes with 10 stocks which grow more than 10x and you have to find 2 of them, but the fact here is that the stocks which were great wealth creators in last bull markets hardly some will be in the new markets, the stocks which did great in Harshad Mehtas era 1990’s didn’t do great in Y2k IT Bubble, the stock which did great in IT bubble were not immense wealth creator in Housing Bubble time of 2008, and the stocks which did great in 2008 were not great in last bull market like I still remember in 2008 when everything was going for a toss, stocks like HUL, PNG, Nestle, etc were showing up strength and the defensive stocks like this created 10x wealth in last 10 years, that’s just majestic!
In 2017 the commodity and the chemical stocks like RAIN, HEG, Gujarat Alkali did 5 to 10x upside, eventually came at the same price it started, I still remember we moved out of Rain at 300 and shifted our investments to Nestle, that time it was judged as a stupid decision but today one of the most brilliant moves of History of Turtle Wealth, so market may again inch up but the millionaire dollar question is will the stock selected will be a wealth creator or a profit creator, are you buying for 10x or 10%?
In this fall there are 4 types of companies:
- Great Company, TINA category (There is no alternative) near to 0 debt, superior leadership in markets this type of stocks has corrected average 20-25%
- Good Companies – decent companies doing fairly we which have corrected 35-40%
- Mediocre Companies – 50-60%
- Bad Companies – 70-80%
Now most of the human mindset will go forward for buying the 3rd and 4th type of companies to make the fast chunk, and nothing bad in that, but 90% of probability is that they will never be a wealth creator, because it will take them to average 700-800% to come back to its peak, which is merely impossible, I still remember in 2009-10 people were still betting on real estate, infra, power, which never created wealth in last decade, stocks like Bajaj Finance, Speciality Chemical, FMCG, etc were not wealth creators in 2008 rally, as we summarize that the wealth will be created in 2 categories:
- The 1st type of companies – Great Companies, these companies have shown character in the current markets.
- The new companies which are showing promises, by their Price and Profits showing stable growth and discounted by the mass, e.g. Stock like Bharat rasayan went 80x in 5 years.
So this article came to my mind is when a friend of mine called me to ask which stock I should buy, and my recommendation was some of TINA Companie (the 1st type of companies), but he was like rohan give some great companies, and I was like Jay this are great companies, as he told no give me companies like Bandhan Bank, or Tata Motors, that time I understood that he is not here for 10x but 10% and as usual, my answer to him was, I am not great at 10% profit trades I am great at 10x wealth calls.
So on Monday if you are going to buy anything think 10times before where your money is going to be allocated, in my latest podcast I had summarized the 6 biggest falls of financial history, and the most common thing is after every fall there has been an unbelievable recovery in the world, as such humans are meant to grow and grow sustainably, but the players will change, so kapil dev can be the best player but will you pick him or Virat Kohli in your current team is what we need to answer to ourself and take the call.
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Disclaimer: This blog is only for Knowledge and education purpose, all stories are true and not fictional, should not be taken as a recommendation, please consult your Fund Manager for the same, the author is a Fund Manager of SEBI Registered Portfolio Management Services, for more details kindly visit www.turtlewealth.in