D-Street veteran Ramesh Damani shares his magic formula for stock picking

Veteran investor Ramesh Damani says time spent with high quality businesses is more important for wealth creation than timing the market.

Speaking at a webinar, the market veteran said benchmark equity Sensex was somewhere around the 800-mark in 1987-88 when he joined the markets. Now, it is hovering at record high levels of over 44,500 levels. This shows the index has managed to deliver over 13 per cent CAGR return (without counting dividends) despite some major hiccups like the Kargil War, Global Financial Crisis and change in governments, among others.

“Time spent with high quality businesses is more important than timing the market,” Damani said, adding that India is aspiring to become the third largest economy from a Third World country.

The ace stock-picker said there are lots of opportunities in every sector, including retail, cement and technologies. “Investors who have stayed bullish on this country and invested in high quality businesses have made a fortune,” he said.

Historical data of blue chip companies, which are a part of the BSE Sensex now, shows players like Bajaj Finance have rallied 1,86,303 per cent over the past 20 years. Titan, Kotak Mahindra Bank, Asian Paints, Axis Bank, HDFC Bank and L&T have gained between 5,500 per cent and 52,500 per cent during this period.

Other players like HDFC, IndusInd Bank, M&M, Sun Pharma, Nestle India, RIL, ICICI Bank, SBI, HUL and ITC also gained between 1,000 per cent and 4,500 per cent since November 2020.

So have the rules of investing changed now? Damani said the Law of Gravity cannot change. The same thing applies to the rule of investing. These are the universal principles.

“To pick the right stock, you have to buy good business with some margin of safety. Investors should also invest with a long-term view and pay less than what you expect a few years from now. These principles will never change,” he said.

Damani highlighted the fact that the market moves between fear and greed and this pendulum keeps on swinging. Therefore, the concept of buying with a margin of safety is never going to change.

Sharing tips for novice investors, he said one should understand the value of compounding and start early. “Compounding is the surest thing to make you rich. The earlier you start, the better off you are,” he said.

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Invest-Wealth-Economic Times

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