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During the 20 years 1994-2014, the Wealth Creation Study identied 47 enduring 100x stocks i.e. companies which had meaningful size of operations and which did
not zzle out after achieving 100x. The top ve 100x stocks are (year of purchase and price CAGR in brackets): Infosys 2,902x (1994, 49%), Lupin 1,170x (2002, 80%),
Wipro 875x (1994, 40%), Motherson Sumi (775x (1999, 56%), and Shree Cement 644x (1998, 50%). The average price CAGR of the 47 stocks works out to 47% i.e.
100x in 12 years. (Note: The multiples are based on stocks being purchased at the lowest prices for the respective year, and held on to 31st March 2014).
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pool for the industry (and hence the company), opportunity for value migration, competitive landscape, potential for sustained above cost-of-capital return on
investment, etc. The toughest part of QGLP is quality of management, as it is subjective, non-quantiable, and hence more of an art than science. We suggest 3
aspects of management quality: (1) Integrity, (2) Competence and (3) Growth mindset.
Size: A good starting point is companies with market cap of less than Rs 3,000 crores (US$ 0.5 billion).
Quality of business: Sectors which offer play on value migration are the most suited for 100x IT, pharma (in both cases value migrating from developed world to
India), private banking (from public sector to private sector), and other select export-oriented industries.
Quality of management: While this is a highly subjective issue, some objective indicators of quality of management are: (1) Detailed and transparent annual
report, (2) RoE consistently higher than 15% and also higher than competitors, and (3) Dividend payout ratio of at least 15%.
Growth in earnings: To indicate earnings growth momentum, it would be good if prot growth in last two years is 25% or higher.
Longevity: Investors need to assess how long the company will be able to sustain its quality and growth, depending on size of opportunity e.g. IT, pharma,
banking and consumer goods (including durables) seem to be large, secular markets.
Price: Here, lower the P/E better are the chances of 100x. In any case, investors will be better off not paying higher than 1.5x market valuation of 16-17x P/E i.e.
overall ceiling of 25x P/E.
Source: Motilal Oswal 19th Wealth creation Study 2014. Data as on: March 31, 2014.
The Stocks and sectors mentioned above are used to explain the concept and is for illustration and comparison purpose only and should not be used for development or implementation of an
investment strategy. It should not be construed as investment advice to any party. The stocks may or may not be part of our portfolio/strategy/ schemes. Past performance may or may not be
sustained in future.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully
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