Before I start I want you to read this:
Even if you start with 1 Lakh, a kid who is starting at the age of 20 and goes on till 70 has a better chance to make it to 1Lakh Crore. The reason for starting early is because of the power of compounding is not as much about the rate but more about the longevity of the rate. I mean 25% is a very high rate but 25% in 5 years is 3 times, in 10 years it is 10 times, in 20 years it is 100 times and in 50 years it is 100,000 times.
– Raamdeo Agrawal, MD & Co-founder, Motilal Oswal
So let’s get to the subject here. Picking a company is the billion dollar work for any investor. I mean our business will run irrespective of whether we sleep or work or spend time with friends and families. But the only work for us is finding great businesses and allocating capital that’s all. After that our money will start working for us until you tell him to stop.
So I’ll explain how you can pick a company of your choice to invest your money.
There are about 5,000 listed companies in BSE(Bombay stock exchange) and 1,600 listed companies in NSE (National stock exchange). So both combined we have 6,600 public companies in India. Out of those 6,600 companies we only need 15-20 companies to actually succeed. That’s like finding a needle in a haystack. But that number is also not mandatory number you can pick 100 companies or you can pick 10 companies it’s totally your choice. Currently I have stakes in just 7 companies, you can work with your own numbers too.
When Peter Lynch had 1000 stocks, Warren Buffett had just 10 stock, Ray Dalio had zero stocks as he invested only in index funds that actually mimic the entire index. They all made it to the billionaire list in their own ways. So you can choose your own way too.
Now take a paper and write all the products that you use in your day to day life and the products you love the most and the products you can’t live without. I think many of us can come up with huge list of products. If you like watches look for watch companies, if you’re into modelling look for designer companies, if you love apparels like shoes look for footwear companies. Also you can ask your friends and families whether they like those products or not it will give you some insights. So write all such products and Google those products to know who manufacture those products, are they listed in NSE or BSE and if you love those products then go ahead and buy those companies.
As Warren Buffett once quoted “if you invest in companies whose products you use and love you can do lot better than 75% of investors”.
If you still confused about what I’m saying, let me explain in detail for you.
Some of my Investment ideas came from our small kirana store. By supervising the store I noticed what sells the most and what not. I’ll give you one good example “Clinic Plus Shampoo”. That shampoo sells at 10X rate compared to other shampoos. So usually we stock that shampoo 15X than others even then it’ll be one to get sold quickly. From this I came to know that in shampoo space clinic plus beats all their peers with huge margin. So I looked up who owns the brand and it turns out it is owned by “Hindustan Unilever Ltd”.
It is India’s biggest FMCG ( Fast moving consumer goods) Company with the turnover of 4Billion US Dollars. They are serving more than 2 billion happy consumers for about 85 years. They’ve huge product portfolio of 35 brands across 20 categories that includes hamam, Lifebuoy, Lux, Dove, Axe, kwality wall’s, magnum, Ponds, Rin, Clear and lot more. I’m stunned when I first came to know that HUL is the parent company for all these products that we use in our day to day life.
The rural economy is still the biggest part of our Indian economy and the demand for HUL products in rural areas keeps on increasing sequentially. After knowing about these crucial stats I thought there is no way that HUL can go bankrupt with this kind of dominance over consumers. And I decided I should own a piece of this. So here it is my first company.
By just looking around us we can get a lot more ideas for our investments. Hope you find this useful.
So you’ve taken the first biggest step by picking your favorite company. The next step is to analyse that company inside out before actually investing in that company.
We will discuss more about that in the next post. Until then keep finding your favorite companies.
The way to get started is to quit talking and begin doing.
– Walt Disney