How to Find Compounding Multiplier?

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Bharat Shah is a legendary veteran investor who needs no introduction. Having 25 years of experience in the field of investment management, he has a considerable understanding of global businesses and stock picking is his forte.

His investment philosophy emphasizes buying quality businesses enjoying superior growth but at reasonable valuations. In 2013, he authored a book entitled “Of Long-Term Value & Wealth Creation from Equity Investing: Observation, Ideas and Reflection”.

Bharat Shah’s book offers a great investing framework which I found very useful. I have made a detailed video covering this framework explaining step wise method to find multibaggers:

Bharat Shah uses a very interesting framework for finding wealth creators stocks. I believe that The holy grail of investing is Investor’s ability to identify Earnings Growth Quality. He uses the concept of Compounding Multiplier (CM).

What are Compounding Multiplers?

Compounding Multiplier  is a formula which is defined as

CM = CAGR of investment returns/ CAGR of profits over a period.

It basically denotes returns generated per unit of profits. There are 6 categories but we shall be focussing on Top 2 in this article.

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Category 1: Winners

Formula: CM>2

(Note: We have used CM=CAGR of investment returns/ CAGR of profits over 5 yr )

Here comes 6 interesting stocks satisfying this criterion:

Stock ROCE
Alkyl Amine 56
Divi’s Lab 32
Borosil Renewable 29
Bajaj Auto 25
Indo Count 23
Infosys 35

I have made fundamental analysis video on Alkyl Amine :

Also Borosil Renewable have been detailed threadbare below:

Category 2: Aspirers

Formula:1.2<CM<2

Stock ROCE (%)
1. Atul 25
2. Deepak Nitrite 40
3. Balaji Amines 36
4. HLE Glascoat 43
5. Asian Paints 35
6. Bajaj Finance 9

Disclaimer: Invested (excluding Atul, Deepak Nitrite)

HLE Glascoat’s detailed Stock Analysis is presented here

Hope you find this framework useful !

Here comes the Final list of interesting Winners and Aspirers for your portfolio:

I have created a Portfolio of stocks satisfying these criterion to certain extent which have helped me find 6 Multibaggers in 6 months ! You can also benefit from my learning of my 6 years of investing experience and get  Alerts on What I buy & Sell on daily basis so that you can create a #ModelPortfolio. Follow My Portfolio https://wealthsutra.wordpress.com/202…

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Amitabh Vatsya

Amitabh Vatsya

Amitabh Vatsya is an active Investment Vlogger (http://youtube.com/c/Sadhansimplified) | Loves to share his ideas at http://wealthsutra.wordpress.com | Follow him @amitabhvatsya
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