Up to 45 times return! This Kolkata IT guy knows multibaggers better than coding
As a tip for new investors, Basumallick says a stock is a part holding in a business.
Abhishek Basumallick, 41, is one of them. As many of his ilk, this IT professional-turned-investor considers legendary investors Warren Buffett and Charlie Munger as his idols.
He spotted a couple of smallcap as well as midcap companies early in his life and they have delivered multibagger returns over past 10 years.
Basumallick claims to have bought Supreme Industries in 2007 at around Rs 24-25. The stock gave him 45 times return, excluding dividend, when he sold it at around Rs 1,100 a few months back. During all these years, he kept adding Supreme Industries shares in bits and pieces.
Basumallick has a bachelor degree of electrical & electronics engineering (BE) from Bangalore University and has done an executive management programme from IIM-C.
Early into his life, he earned his bread working as an IT professional, but his heart and soul lay in the investing domain.
Basumallick says Robert Kiyosaki's ‘Rich Dad and Poor Dad’ enthused him to enter the stock market.
“The book resonated perfectly with me. With no business background and very little money, investing was the only option left for achieving financial freedom. The journey started in 2000 and somewhere along the way, it turned into a passion and love for the market. Initially, my major knowledge sources used to be Economic Times and investopedia.com,” he said.
Later on, he started reading Warren Buffett. Being a voracious reader, Basumallick read up everything about him and his investing style.
Since 2004-05, Basumallick started buying quality stocks at reasonable valuations. “I looked at different approaches, but my instincts are always to go where there is value,” he said.
Commenting on his investment style, Basumallick said he tries to look for companies with a demonstrable track record of earnings, large opportunity size, reasonably ethical management and relatively cheap valuations.
“Companies with differentiated business models or superior execution skills attract me. I mostly look for stocks with a three-year investment horizon,” Basumallick told ETMarkets.com.
Some of other stocks he has been holding for some three years now include PI Industries, Hester Biosciences and Bajaj Finance, all of which have more than doubled his wealth in this period.
ETMarkets.com could not independently verify his holdings at present or back then.
Basumallick also claims Cera Sanitaryware, Mayur Uniquoters, Astral Poly Technik, Symphony and Century Plyboards gave him multibagger returns in a range of past five to eight years. However, he has exited these names when valuations got stretched.
“I keep track of these businesses even today. If Mr Market gives an opportunity to buy them back at more reasonable valuations, I will do so,” he said.
Indian equity benchmark Sensex has corrected some 5 per cent from its peak point in just over a week following worries over a spike in fiscal deficit, a new levy that the Union Budget has imposed on long-term equity gains and also a spike in bond yields globally amid inflationary concerns.
What gives Basumallick the conviction to hold a stock even after getting multibagger returns? If a business continues to perform well, there is no problem in holding it longer, unless valuations become too expensive, says he.
However, the Kolkata investor feels the term ‘multibagger’ is grossly misused these days. “If you buy a quality company at reasonable price and sit patiently, it will inevitably become a multibagger. The idea of sound wealth creation is to identify strong businesses and just sit and do nothing,” he said.
Basumallick has a detailed self-made checklist to judge a business before investing in a stock. The checklist contains such factors as quantitative, qualitative, valuation, promoter behaviour and reasons for past mistakes.
“I have made it discipline to not buy any stock before going through my checklist. Also, I keep updating this checklist with new learnings regularly,” says he.
As a tip for new investors, Basumallick says a stock is a part holding in a business. If the business does well over time, the stock will do well too.
“Try to buy stocks in businesses that you understand. Read as much as possible about the businesses and industries, where you are investing to get a better understanding. Read annual reports, magazines, newspapers, trade journals, books on the industry, conference call transcripts of the company and their competitors and global peers,” he prescribes.
One should also try to keep things simple while investing and not try to go for complicated businesses, which s/he does not understand.
Legendary investor Warren Buffett once said, “Never invest in a business you cannot understand.”
Basumallick says one should invest with a long term (five years-plus) horizon. But keep checking how the business is performing every quarter.
“Long-term investment does not mean you invest and then forget about it,” he insists.
Basumallick did have his share of failures, which he now considers the pillars of his success. Basumallick says he failed many times in the past, but that rate has been coming down progressively.
“My mistakes have been mainly of three kinds, i) where I have not allocated sufficiently when my conviction was high, ii) selling too early and iii) when I ignored an opportunity because I was lazy enough not to work hard on it,” he confesses.
Basumallick rues missing out on Royal Enfield (Eicher Motors) and Maruti Suzuki in the recent past, also selling Avanti Feeds too early by overanalysing the risks. Shares of Avanti Feeds have soared over 11,000 per cent in last six years.
“Another thing that I do is sell my positions early if I am losing more than what I thought I would. Basically, when I get into a position, I write down what I would do if the stock suddenly spurts or declines, say 20 per cent or so. So, that way, I don’t have any stocks where I have seen any major downside,” he said.
Considering the present market conditions when the benchmark equity indices are hovering near their all-time high levels, Basumallick thinks equities, especially midcaps and smallcaps, are clearly overvalued.
He sees pockets of opportunities for long-term investors in some of the unloved sectors such as pharma, capital goods and cyclical stories like cement (especially south-based players), hotels and metals.
“But one has to be aware that you are not buying long-term secular growth stories. So there is need for extra vigilance,” he said.
He believes 80 per cent of investing success depends on one’s behaviour. This is an area which very few people talk about. For investors to get good results, it is as important to work on their own psychology as it is to refine their investment process.
“An investor can be, and most often is, his/her own worst enemy. This is why I try to use my checklist-based approach,” he said.
Being an avid reader, Basumallick prefers reading biographies, histories, behavioural psychology, value investing and market manias.
Another value investor Hitesh Patel, who has known Basumallick for past five years, said: “Abhishek is a wonderful investor. He usually sees what others miss out. I often interact with him to discuss stocks.”
Basumallick closely follows Charlie Munger, Howard Marks, Seth Klarman, Peter Lynch, Michael J. Mauboussin, Bharat Shah, Parag Parikh, Rakesh Jhunjhunwala and Prashant Jain, among others.
The Snowball, The Most Important Thing, One Up on Wall Street, Beating the Street and Margin of Safety are among his favourite books.
He said Prof Sanjay Bakshi’s writings on investing is must read for all investors, because they inculcate the right approach to thinking.