Magic rule of 26 per cent for identifying multibagger or 10-bagger stocks!
Investment odyssey began with a singular, audacious dream – to transform a humble USD 1 million into the stratospheric realm of a USD 1 billion fortune
Have you ever wondered what it takes to discover the mythical 10 or 100 bagger stocks in the world of investing? Is there a secret or a magical formula that only a select few are privy to? Well, the enigmatic Mohnish Pabrai not only unravels this mystery but also hands us the keys to the treasure chest in his enthralling quest titled "The Quest for 10-100 Baggers."
In this captivating journey through the labyrinth of wealth creation, Mohnish reveals the hidden truth – compounding is the elixir, the secret formula, behind the allure of 10-baggers and 100-baggers. He lays it out crystal clear from the very beginning: the real magic lies in finding stocks that possess the incredible ability to compound their earnings at a breakneck pace, and then, and this is crucial, holding onto these golden gems for the long haul.
Now, imagine a number, a number so bewitching that even the ace investor Mohnish Pabrai himself swears by it – 26 per cent. This, my friends, is the mystical rule of 26 per cent. In one of his spellbinding lectures, he unveils the charm of this number. At a compounding rate of 26 per cent, your principal investment magically doubles, achieving a mind-boggling 100 per cent gain in just three short years. Fast forward a decade, and that very same sum, left to dance with compounding at 26 per cent, metamorphoses into a staggering 10-fold fortune, a true ten-bagger. But hold your breath; if you have the patience to let time work its wonders for two full decades, brace yourself, for you'll be cradling the coveted 100-bagger. And for those willing to embark on a 30-year odyssey, an awe-inspiring 1000x treasure awaits at the end of the rainbow.
The revelation couldn't be clearer: find a stock that's on the 26 per cent Compounded Annual Growth Rate (CAGR) express, and you'll effortlessly have a 10-bagger in your possession after a decade, and an exhilarating 100-bagger after two. Mohnish Pabrai, the maestro of compounding, has spoken.
But here's the real kicker - Mohnish has walked the talk. In the magical span from 1995 to 2014, his portfolio soared at the enigmatic 26 per cent rate. Sure, there were a few bumps in the road after that, but the promise of redemption beckons on the horizon.
Now, let's talk about dreams. Mohnish's investment odyssey began with a singular, audacious dream – to transform a humble USD 1 million into the stratospheric realm of a USD 1 billion fortune, all through the power of 26 per cent compounding.
But how does one unearth these mythical 100-bagger stocks? Mohnish unveils a tapestry of five distinct models:
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(i) Companies blessed with an exquisite business model, capable of running on autopilot – think timeless giants like Coca-Cola and American Express.
(ii) Companies adorned with a brilliant business model but in need of sharp-witted managers, echoing the success stories of Amazon and Geico.
(iii) Companies shrouded in uncertainty, yet offering low-risk potential, especially during cyclical downturns like those in shipping or commodities.
(iv) Companies poised for value revelation through bankruptcy or mergers, thriving in the realm of special situations.
(v) Companies riding the exhilarating winds of mega-bubbles, such as the legendary dotcom bubble that once set the world ablaze.
So, as you set forth on your own quest for those elusive multibaggers i.e.10-100 baggers, remember that the magic formula is compounding, and Mohnish Pabrai's wisdom is your guiding star in this thrilling adventure through the world of investments.