In the evenings when I go for my regular walk near Mishra’s junction, I often seen the ace investor and financial guru Basant Maheshwari walking briskly and talking on his phone. The locals including me stare at him with awe, because he is a celebrity out here in Kolkata as well as in Dalal Street and not without reason.
Basant Maheshwari built his multi-crore networth based on his own acumen and magical stock-picking abilities, and personally my best day in life has been the day when I read his “The Thoughtful Investor” after being recommended by another super-star investor from Kolkata Abhishek Basumallick of Indian Value and Contrarion Investor.
So whenever Shri Basant-ji gives any advice, for novice investors like us, it is a golden opportunity to savor the pearls of wisdom. In this post I will discuss and analyze Basant Maheshwari’s Top 7 Golden Advice for Multibagger Stocks.
# 1 Focus on Making Big Money
Basant Maheshwari is a big believer in making big life changing money (zyada paisa as opposed to paisa jaldi banana).
He says: “Most people start buying shares thinking they will make Rs 2,000 or Rs 5,000 a day. But that cannot change your life. What can change your life is making Rs 2 crore or Rs 5 crore over many years” (4)
Speaking to SafalNiveshak, he says: ” I will never buy a stock unless I think I can make 10-times out of it. Many ideas look good to me for a doubler for next year, or say 50% in six months, I don’t touch them. This is because my thought is that if you play for a 50% game and you get it wrong, you can also lose 30%. But if you play for a 1,000% game and you get it wrong, you will at least get 100%, 200%, or 300%.” (5)
# 2 Invest Big and Concentrated
Basantji is a big believer in investing big and holding concentrated portfolios. Nobody becomes rich by investing small amounts in a lot of companies. He says: “You are not poorer by 10 or 15 per cent in life. You are poorer by 10 times. So, you cannot create wealth by investing Rs 50,000” (4)
He says: “Concentration is for creating capital. Diversification is for protecting capital. If you got 40 stocks, you will do only as good as a normally diversified mutual fund or an index fund. A new investor should start with a certain sense of diversification. And when he starts understanding the companies he owns, then he got to concentrate.” (5)
# 3 Exposure to companies with very high potential
Basant Maheshwari advises investors that: “Bulk of the portfolio should comprise of companies that generate stable earnings, but there must be a small exposure to companies with very high earnings potential. These types of the companies should always be at the bottoming end of the portfolio. And they should be allowed to expand in weight-age on their own by stock price going up, not by putting incremental amount into that.” (1)
In an interview with Safalniveshak he says: “Nobody is interested in buying a company that is growing at 18%. Many are interested if it grows at 25%. Plenty will be interested if it grows at 35%. And everybody will be interested if it grows at above 50%. So, the percentage change in growth is only 10-15%, but the amount of incremental investors it can draw in is huge. So 25% and 35% is like day and night.” (5)
# 4 Asset and Portfolio Allocation
Asset allocation is one of the most important factors as per Basant Maheshwari, and when he is convinced about his ideas he is willing to go all in including borrow money to buy more stocks.
He says: “This is because I am willing to put a lot of my own capital and a lot of borrowed capital also. So when you are on leverage, you just cannot take any chances. I figured out that having 50% of your net worth in equities and 50% in bank FDs, and buying inferior grade companies for a 40% jump on the 50% you put into equities, is not that good a strategy as having 120% in equities in high-quality companies that can give you 20-25% return. Most people would allocate 50-60% to bank FDs and FMPs and those things, and for the balance 40% they want to maximize returns by trying to chase 40%. Of course, I also aim for 40%, but that has to come with very reduced amount of risk.” (5)
# 5 Timing the Market
He says: “Many people threw in the towel and they said we have had enough of it. They said let us just save 60-80 per cent of what we have and we will come back when things are good… Money will be made by people who had their demat accounts filled for consecutive period of 15 years. Markets never give an invitation to come back.” (1)
# 6 Gold and FD
Basant says: “With markets falling, no one has become rich by buying gold, no one becomes rich by taking out bank FDs. Rather, when you become rich, you buy gold and you do bank FDs. So the retail investor first has to think what is his objective in life. If his objective is to make money, you cannot do it by buying gold and FDs but if you have already made your money and want protection, then go out and buy gold and bank FDs.” (3)
He explains the futility of investing in FD, taking a concrete example of HDFC. He says: “For a normal investor he makes 8 percent pre-tax FD. Even if he makes 16 percent compound annual growth rate (CAGR) on HDFC limited for which you don’t need a analyst, you don’t need me, you don’t need a channel you don’t need anybody just one has to go and buy the stock. 16 percent post tax on HDFC Limited is always better than doing an 8 percent pre-tax.” (6)
# 7 Knowledge and Reading
All super-star investors agree on one thing – the importance of knowledge. Value investors swear by what is known as “lattice-work of mental models” and try to avoid common investing biases. Basant Maheshwari also gives a lot of stress to knowledge and reading. This aspect is not much use in Fixed Deposits or gold, where one does not need to known much.
He says: “First is, he has to read. There is no substitute to it. Reading also isn’t enough. You have to practice what you have read. A person who practices 5 books that he has read is much better off than a person who has read 100 books and practices nothing.” (5)
He goes on to add: “If you don’t have a good idea about investing, just go to a mutual fund. It won’t pay off like individual stocks but it will still work out better than bank deposits. Just consider the opportunity cost. Good funds have managed 22-25 per cent, which is still better than 8 per cent.” (4)
To summarize, Basant Maheshwari’s Top 7 Golden Advice for Multibagger Stocks are:
- Focus on Making Big Money
- Invest Big and Concentrated
- Exposure to companies with very high potential
- Asset and Portfolio Allocation
- Timing the Market
- Gold and FD
- Knowledge and Reading
I hope you enjoyed these pearls of wisdom from the investment rock-star Basant Maheshwari. His phenomenal track record in spotting multi-bagger stocks and making 10x or more returns is proof that his ideas are not bookish knowledge but practical actionable insights.
As amateur investors, we should learn from investing greats like Basant Maheshwari and try to see how much we can apply to our own portfolio and mint money like him.
(1) Own A Few ‘Yusuf Pathan’ Type Of Stocks In Portfolio: Basant Maheshwari [May 16, 2016]
(2) Basant Maheshwari Breaks Taboo & Recommends A Potential 100-Bagger Pharma Stock [May 5, 2015]
(3) Housing fin cos, pharma midcaps and hi-tech IT are favourites: Basant Maheshwari, Wealth Advisers [Mar 11, 2016]
(4) Finding Multi-baggers the Basant Maheshwari Way [Mar 24, 2015]
(5) Interview with Basant Maheshwari – Part 1 [Sep 10, 2014]
(6) Basant Maheshwari bullish on housing finance, NBFC stocks [Sep 14, 2015]
A Few Last Words
Before making any investment decision, please contact your financial adviser.
I am not registered with SEBI under SEBI (Research Analysts) Regulations, 2014. I do not offer any opinion concerning securities or public offers. Whatever analysis I provide is through public media only on Mkerj. I am not covered under RA Regulations.
I have provided this article for educational purpose only.
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