Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Is Pristine Balance Sheet imperative for a prospective multibagger ?

with 9 comments

Which company is this, with Debt Equity ratio of 2:1 , losses in two out of previous five years ?


Balance Sheet

Revenues























PAT



 

Written by amitdipsite

October 1, 2013 at 6:46 am

Posted in Uncategorized

9 Responses

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  1. I don't know the stock mentioned. And honestly, I don't know how you would find out based on just the liabilities side of the balance sheet. Maybe that's a skill I need to learn.

    Besides the stock question – I don't think it's imperative to have a pristine balance sheet. But the probability of a multibagger with a pristine/near-pristine balance sheet is higher.

    It's almost the airline analogy if you will. Won't there be any multibaggers in the airline industry? Sure, they will. Indigo runs a pretty tight ship. Southwest runs a tight ship. But on a broad basis, you wouldn't want to touch this industry.

    Similarly, given our limited time resource, I would think it would be better for us to search for improving balance sheets (reducing debt, reducing working capital, much akin to your last post of improving RoE) than search for screwed up balance sheets and look for multibagger potential.

    The way I evaluate a multibagger or a steady compounder (I generally look for more than a steady compounder, but if it turns out to be a multibagger, then great) is the scale of opportunity, management integrity and improving B/S.

    Kiran

    October 1, 2013 at 3:33 pm

  2. Thanks for your thoughts Kiran, thats exactly right, its rare to be able to call a 20 bagger in advance, we aim for compounding. I have cheated a bit by not posting the full picture, skipped

    A) Cash Flow, most important part
    B) Internal/External reasons for such a performance

    Direction is all that matters for long term. Same applied in personal life. You just don't suddenly become great at anything. That flywheel analogy from good-to-great book.

    One binding theme for great stocks though is a market leadership in a segment or geography. The wider the segment and geography the better and direction of

    -market share
    -return ratios
    -selling unrelated business
    -anti dumping duty on imports (eg: la opala 2009)
    -large part of unorganised sector going bankrupt
    -brand building actually working (it fails 70% of the times)

    Amit Arora

    October 1, 2013 at 8:10 pm

  3. Hi Amit.. What are your views on following stocks from long term point of view..
    1. Blue star
    2. Elecon engineering.
    3. Gulshan Poly.

    yogesh

    October 3, 2013 at 7:43 am

  4. I am not sure if i understand your question correctly. However all i can say while relating to life is when people buy a house they take more liability than they are supposed to…slowly as income increases and debt decreases they become financially stable or surplus. So a pristine balance sheet need be the starting point of a multi bagger.
    I do agree with points mentioned by Kiran

    Venkat

    October 5, 2013 at 4:23 am

  5. Gold imports jump 102% in Pakistan; ban imposed. With most of the gold smuggled to India, the Pakistan authorities have decided to suspend imports for a month

    http://www.mineweb.com/mineweb/content/en/mineweb-political-economy?oid=199685&sn=Detail

    Nepal’s smugglers cash in on India’s love of gold

    http://www.taipeitimes.com/News/biz/archives/2013/09/08/2003571594

    Amit Arora

    October 5, 2013 at 9:21 pm

  6. Hi Amit,
    Do you follow companies which have just turned the corner in terms of performance? I am specifically talking about Ashapura Minechem, Arrow Coated products and Marksans Pharma?

    Pratul Lobo

    October 9, 2013 at 4:14 pm

  7. Interesting articles for Long Term Investing.

    “Every company will eventually get disrupted. There's a steering wheel for every buggy whip.”

    http://www.fool.com/investing/dividends-income/2011/04/21/the-best-dividend-stock-for-the-next-100-years.aspx

    “my” (0.000001% share) Unilever is missing from the list as it is listed as British ADR. Also, Nestle should be in Top 5.

    HUL introduces Toni and Guy in India

    http://www.mydigitalfc.com/news/hul-focus-premium-range-unveils-tony-guy-155

    Habib (Hair Dresser) IPO never took off in India

    http://www.sebi.gov.in/dp/hmvldrhp.pdf

    Hair Cutting business looks set for takeoff with 99% unorganised sector.
    —————————————————————————————

    95% companies just do not achieve the scale over long term. They may have class, devoted clientele, niche products, near monopoly. That's when moat or neighbour's goat is not enough.

    “89.4% of the companies with more than 100 years of history are businesses employing fewer than 300 people”

    http://en.wikipedia.org/wiki/List_of_oldest_companies

    —————————————————————————————
    100 Corporations That Will Survive 100 Years – study on sustainability

    http://www.forbes.com/2009/01/28/long-lived-companies-leadership_0128_sustainability.html

    —————————————————————————————

    Check this wonderful chart from 1928-2012 on returns based on size of company

    http://www.ifa.com/12steps/step8/step8page4.asp#ChartFlashID187

    —————————————————————————————
    Debunking Dividend Myths
    http://canadiancouchpotato.com/2011/01/18/debunking-dividend-myths-part-1/

    Wisely said, “Keeping calm is your best asset in long-term investment”

    Amit Arora

    October 10, 2013 at 12:24 am

  8. Short term portfolio of all value investors down

    http://jeetay.com/content.php?id=80&type=f

    Amit Arora

    October 10, 2013 at 6:18 am

  9. Hi Amit,

    Any updates on Photoquip India?

    totalview

    October 11, 2013 at 2:58 pm


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