Big bull Rakesh Jhunjhunwala is called as king of Indian stock market. Rakesh Jhunjhunwala has started n stock market with investment capital of just 5000 Rs/- and right now his net worth is more than 5000 Cr. Rakesh Jhunjhunwala has proved that if you adopt correct strategy and select right stock you can win the market and earn good returns.
Many individuals today follow rakesh jhunjhunwala and always eager to know about investment secrets & stock selection criterion of Rakesh Jhunjhunwal. We are herewith 11 tips of Rakesh Jhunjhunwala for stock market.
Rakesh Jhunjhunwala‘s Tip No. 1: Don’t Look For Multi-baggers
Rakesh Jhunjhunwala‘s first investment mantra on how to find multibaggers stock is surprisingly different from what you would expect. Rakesh Jhunjhunwala says: “Don’t look for multibaggers. Don’t seek them at all. Let the multibaggers come to you!”
Rakesh Jhunjhunwala says: Don’t go out into the investment world saying “I only want to invest in potential multibaggers”. Instead of that “Go back to the old-fashioned way of making investments try to do enough homework and select fundamentally sound companies with good growth prospects, your investments will by themselves become multibaggers after some time”.
Rakesh Jhunjhunwala‘s Tip No. 2: Forget ‘Large Cap, Small Cap’ – Look For Value
We always hear debate from analyst whether large cap, mid cap or small cap stocks are better.
Rakesh Jhunjhunwala says “Forget all that and Look for Value, If there is value in Large Cap, buy it. If there is value in Small Cap, buy it. But don’t obsess on irrelevant matters”
But Rakesh Jhunjhunwala makes his preference quite clear. He says that given a choice and all things remaining equal, a mid-cap or a small-cap is a preferred bet because the valuations will be low and they can scale it up quite quickly.
‘Rakesh Jhunjhunwala‘s Tip No. 3: Don’t Look for Profits; Look For Sources Of Profits
Rakesh Jhunjhunwala cautions that most investors obsess about the current sales and profits. They look at each quarter and focus obsessively on short-term profits. “That’s missing the wood for the trees” says Rakesh Jhunjhunwala.
Instead Rakesh Jhunjhunwala says “Look at the sources of Profits. What are the reasons/factors that will give rise to Profits in the medium and long-term term”.
Rakesh Jhunjhunwala gives classic example: That of Praj Industries, a company engaged in manufacture of bio-ethanol fuel. When Praj Industries started out, nobody realized the massive demand that would arise for alternate fuels like ethanol. An investor could have foreseen that would have had his multibagger.
Rakesh Jhunjhunwala‘s Tip No. 4: Give it Time, Be Patient:
Rakesh Jhunjhunwala repeats what investment guru Warren Buffet have been advising over the past several decades. Warren Buffet was plain in his advice “Our favourite holding period is Forever”. Rakesh Jhunjhunwala gives the same advice: “Give your investments time to mature. Be Patient for the World to discover your gems”. Rakesh Jhunjhunwala cites the examples of Crisil, Titan and Pantaloon Retail which he has held on for several years now and has absolutely no intention of divesting them any time soon.
When Rakesh Jhunjhunwala bought Lupin it was just another mid-cap pharma company starting out into the world of generic drugs. What Rakesh Jhunjhunwala saw was a good efficient management which knew its job, a debt-free status, a good product line up and a growing market. That’s all. Rakesh Jhunjhunwala bought and played the waiting game. When the market matured, Rakesh Jhunjhunwala raked in his billions.
Rakesh Jhunjhunwala‘s Tip No. 5: Don’t get carried away by short-term aberrations:
Rakesh Jhunjhunwala cannot stop criticizing investors who are obsessed with short-term trends. Rakesh Jhunjhunwala emphasizes that he does not worry about quarterly results. If the results are bad in one quarter, he does not get disturbed. What Rakesh Jhunjhunwala is looking for is: Is there a trend? Are the quarterly results showing a trend and suggesting something or are they a mere aberration?
Rakesh Jhunjhunwala also cautions that one should not get carried away by short-term trends. He cites the oft-repeated example of 1999 when investors bought truck loads of Himachal Futuristic, Global Tele, Pentasoft while he used to buy Shipping Corporation and Bharat Electronics because he saw long-term value in them. The Oracle of Mumbai says “Never get carried away by aberrations, recognize and respect them but do remember that the market corrects its aberration though it takes time.”
Rakesh Jhunjhunwala‘s Tip No. 6: Invest in a business that you can understand:
If you look at it hard enough, you will realize that Rakesh Jhunjhunwala‘s reluctance to buy Himachal Futuristic, Global Tele and Pentasoft even in their heydays and his preference to stick to Shipping Corporation, Bharat Electronics and the other tried and tested names reveals another great investment tip from the Prince of Dalal Street: Buy what you know. Do you understand the business enough to be able to know what will happen 10 or 20 years from today. With Shipping Corporation, you can because shipping of goods will continue to happen for our foreseeable future. But you can’t tell that with technology companies which may have a great product today but which may become obsolete in 5 years.
Rakesh Jhunjhunwala‘s Tip No. 7: Don’t worry about the macro stuff like fiscal deficit, inflation etc which are unknowable. Focus on what is knowable:
Another immensely practical tip from Rakesh Jhunjhunwala, India’s greatest investor, for us folk who keep obsessing about currency fluctuation rates, inflation, fiscal deficit, political turmoil is: “Don’t worry about things that you neither know about nor can do anything about. It’s not important. Instead focus your energies on what you can and should know well enough – the business of the company you are investing in“.
Rakesh Jhunjhunwala‘s Tip No. 8 : Don’t Try To Time The Market:
Rakesh Jhunjhunwala endorses the validity of investment advice that has been propounded time and again by the wizards of investment time and again. Never try to time the market because you can never find the bottom of the market. Instead if you are getting the stock cheap in terms of its intrinsic value and future prospects, buy it.
Rakesh Jhunjhunwala simply resonances words of the Oracle of Omaha when he says that you must get right is the business. If you get that right, everything else falls into place.
Rakesh Jhunjhunwala‘s Tip No. 9 : If it’s cheap, buy it- Don’t pass up something cheap today in the hope that it will get cheaper tomorrow:
Rakesh Jhunjhunwala says: If you see the opportunity today, GRAB IT! Many wonderful opportunities are lost to postponement and then you rue your missed opportunities. Rakesh Jhunjhunwala says that it is not only important to identify the opportunity but then to be decisive and to act on it. Rakesh Jhunjhunwala cautions against getting stuck in a trap where you are perpetually seeking extra information to validate your idea.
In this, Rakesh Jhunjhunwala echoes the wisdom of Warren Buffet, the Oracle of Obama, who in the depths of the great stock-market depression of 2008 inspired investors by his clarion call “If you wait for robins, summer will be gone”.
Rakesh Jhunjhunwala‘s Tip No. 10: Don’t buy stocks that have a fixed return:
Rakesh Jhunjhunwala‘s next tip seems to be a no-brainer but it is surprising how many investors overlook it. What is the point of buying shares in a company such as an electricity company where the return on investment cannot by law exceed a certain amount, asks Rakesh Jhunjhunwala. But, Rakesh Jhunjhunwala, emphasizes that this logic does not mean that electricity and utility companies should not form part of your portfolio because they offer an excellent defense mechanism to the vagaries of the stock market with the undemanding demand for their product and their predictable cash flows.
Rakesh Jhunjhunwala‘s Tip No. 11: Ride your winners!!
The one question on everybody’s mind is “When do I sell my multibagger?” Rakesh Jhunjhunwala answers with aplomb “Never”.
One must be careful to understand what Rakesh Jhunjhunwala is saying here. What the Greatest Investor in India is saying is: “Don’t sell for the sake of selling because you can never say that the 10-bagger today will not become a 20-bagger tomorrow”.
But, Rakesh Jhunjhunwala hastens to clarify that this does not mean that one will never sell a multibagger. He gives two situations when even he may sell his beloved multibagger. The first is when he is short of funds and he needs capital to invest in a stock that will give even better returns than what the existing one will give. And second, when the stock market has become so irrational that the perception of earnings and the P/E is unsustainable. Rakesh Jhunjhunwala gives the example of what happend in 2000 when euphoric investors laid bets that Infosys’ earnings would double every year for the next 10 years. Infosys’ P/E at the then current earnings was 100-150 times. So, says Rakesh Jhunjhunwala, when the expectation of earnings peaks and the P/E is unsustainable, that is the time to sell.