Visualise earnings before buying

Considered one of the wizards of the Indian stock market, Ramesh S Damani has an eye for high quality value stocks that go in time to become multi-baggers. An individual equity investor, he is also the founder of Ramesh S Damani Finance and has a net-worth of $1.24 billion. He is also a director of Aptech.

Damani holds a Master’s in Business Administration from the California State University. He became a member of Bombay Stock Exchange in 1989.

Having seen the prospects of IT industry in the US, Damani bought Rs 10 lakh worth stocks in Infosys when the start-up got listed in 1993. In six years, the stock gained 100 times and became Damani’s first multi-bagger. Some of the early picks of Damani, which turned out to be multi-baggers, include liquor stocks like United Spirits and PSU companies like CMC.

Investment strategy

As a value investor, he picks up stocks when the valuations are low. In order to find whether the price of the stock is right, one has to visualise the earnings of the stock for the next five years and compare it with the current market cap. The investor also has to see whether there is a trigger for growth that can provide high yields in the future. According to him, carefully studying the stock and evaluating the prospects for the future will help build fortunes.

Damani believes in investing for the long-term and the power of compounding. In order to have a long-term strategy, one has to start early. As long as the underlying business prospects of the company are intact, one doesn’t need to worry about short-term corrections and losses. He also wants investors to have a clear exit strategy before making investment in a stock.

While identifying a company, he looks at the industry and understands the business of the company. Some of the key areas to see while evaluating the company are balance sheet, operating history, quality of management and management of capital.

As for the economy, Damani is bullish about growth in the medium-term. In three years, he believes that India's GDP growth will be on track.