Equity investing is more like a banned sport – hunting. More people are in it for the thrill, fun, excitement and less to get food for eating.

When you see hunting as a sport, easily the most difficult animal to hunt has to be the TIGER. It is cunning, hunts alone, and does not come into the open.

In the Investment context the ‘100 bagger’ share exhibits similar characteristics. In a country with 5000 mutual funds and 9000 listed shares, you need to spot a few POTENTIAL multi baggers – 100 baggers to be precise. Not easy.

Also you need to spot it, buy it, be convinced and stay put in the whole journey from Rs. 10 to Rs. 1000.

And you need to have a few of them if you need to create a multi bagger portfolio. That is a far bigger challenge.

First: How do you spot a multi bagger before the world spots it? 

A company should be growing fast, and have a low price earning ratio. This combination will ensure that it is a multi bagger. Now such companies may not be listed!! Obviously we have all heard of Private Equity, have we not? It is the job of the private equity player to identify such shares. A case in point is Icici Prudential Life Insurance. It has come to the public at a high price earning ratio and will soon have a flat growth rate – and selling a product where the margins should keep falling. Can it ever be a multi bagger for the person buying it on the bourses? Unlikely.

Are there listed companies which can become multi baggers? I did not know that I was buying a multibagger when I bought Apollo Hospital at Rs. 9 that this would be a multi bagger. So was it a 100 bagger for me? NO. I bought it at 9..and that was for the excellent dividend yield that I was getting. At 150 I realised that it can no longer be a dividend play..and I sold it – a nice 15 bagger, but not a 100 bagger. Then the PE changed – from a dividend yield it became a growth stock – and people started accepting hospital as a business. I missed the second phase.

I bought Sanathana Gurukulam – a corporate school and lost my capital. Well not exactly, but sold off at more or less the same price in a couple of years.

I bought Eid Parry, Coromandel International, Cholamandalam…all in the mid teens or late teens. They all have turned multi baggers – but I have traded in and out of them a zillion times and thus the dramatic improvement in yields of these investments.

The skill lies in

a) identifying – low pe, high growth rate

b) being available to buy

c) having some credibility – so that you have the guts to hold till it hits there

d) conviction to buy decent quantity. In a Rs. 25 crore portfolio putting Rs. 2L in a multibagger makes no sense…

e) making sure that the ongoing noise does not trouble you

f) having the guts to sit through the whole process. Remember a 99 bagger is just as good as a 100 bagger!!