When I was enroute to office today I started reading Dr Reddys balance sheet in the car. It had a interesting piece of data that I thought of sharing.
Dr Anji Reddy the chairman writes and I quote
“ If any shareholder had purchased 100 shares during your company’s IPO in Aug 1986, plus the 60% rights issue in Aug 1989, and held on these till date, the person would be owning a total of 5760 shares at a face value of Rs 5 per share. Against a outlay of Rs 2500 ( Rs 1000 in the IPO and Rs 1500 to purchase 60 shares of the rights issue at Rs 25 per share), that investor would have earned a total of Rs 1.95 lacs of divided, including current years proposed dividend.
On 31st March your company’s share on BSE was being quoted at Rs 488.65. Thus, the value of the investors portfolio would have been Rs 28.15 lakhs”.
Now that’s a 1000 bagger in 23 years. A fixed income instrument assuming doubling every 6 years would have been grown 16 times in that period.
If only I had spent less time and money chasing girls in my teens :-). Now I know where Warren Buffett got it right by starting early.
Disclaimer: I am not recommending the Dr Reddy’s stock and I own all of 10 shares, kept just to get the balance sheet :-).
10 comments:
i think chasing girls was still time well spent as teenager :) far more fun than reading annual reports.
btw, i think for every reddys lab and infosys which has been a multi bagger, there are 100s of companies which perished. so there is a survivorship bias in this case. unless one has the skill to identify and hold such companies for the long run, i dont think too many investors are able to benefit in the same way
regards
rohit
Hi Rohit
Unfortunately all that running behind girls didnt result in anything. Maybe reading balance sheets would have got me the money which would have resulted in girls chasing me :-). Hindsight bias I guess :-)
I am with you on the survivor bias thing. For every Infosys & Dr reddy there is a Mafatlal and Arvind. I put out the note on Dr Reddy bcos the financial press and the analyst community always talks about how Infosys is a 1000 bagger or more. So it came as a surprise to me that Dr Reddy was also a 1000 bagger. To be honest i never realised that it would be one or cant think of anybody talking about it.
Cheers
Ninad
Hi ninad
infosys has been a 1000 bagger over a shorter time frame, they have a better PR also.
you can read annual report anytime in life ..but chasing girls has a small window of opportunity only :)
if you had girls chasing now ? well just hope your wife is not reading this
Hi Rohit
It is important to use the "Anchoring Bias" for the right things in life. My wife can think 2things
1) Her husband is chasing women.
2) Her husband could potentially chase other men.
If i anchor her mind to the second possibility, she would be relieved with the first option :-).
On a side note as u said i hope she is not reading this. Its not without reason that they say "The female of the species is more deadly than the male ( Case in point the black widow spider)". :-)
Cheers
Ninad
anchoring, chasing men ..black widow ..dude you lead a dangerous life :) .delete these comments before your wife sees this blog !!
it will be the end of blogging career and who knows what else :)
:-). The occassional streaks of bravado.
Ninad,
This is an example of dividend investing. Just image the yield of original cost.
I think survivorship bias is real and cannot be addressed by buy n hold. Continued holding of the stock should be based on yearly review. any change in fundamentals should be used to decide next action. Blindly following buy n hold is not good strategy.
Chasing girls was fun and good too. At least that told you what not to marry ;-)
Hi TIP Guy
I am completely in sync on survivor bias. So i am at no stage advocating blind buy n hold strategy. I personally periodically review each of the company's that I hold and take a call.
My way at looking at dividend is that if the company can earn more than the cost of capital then I would prefer companies to retain incremental capital. If it cannot then i would prefer that they distribute these profits to the shareholders in the form of either dividend or preferably share buyback.
Cheers
Ninad
My main problem is to hold onto a stock once it starts giving me profits. Like if its a 1000 bagger if I feel the stock has given me a certain percentage of profit I take it out and invest in cheaper stocks. This patience is the main factor which will help to get such returns.
Hi Sumi
The important point is to define what is the fair value for the business. If u define that and keep that as the benchmark to wait for a stock price to reach then u will be able to hold on.
Cheers
Ninad
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