Ambareesh Baliga shares his multibagger formula

Ambareesh Baliga, who has witnessed various events at Dalal Street with great personal and professional interest, believes in the mantra of being updated on a daily basis. This has helped him in acing the stock market.

The Mumbai-based analyst looks for stocks that have potential for growth, but are yet to be discovered by the others.

Baliga prefers to keep things simple. He does not watch the market continuously throughout the day. However, he prefers to catch the opening and closing action daily for about thirty minutes. Intraday volatility does not bother him much. Over the years, his top stocks have delivered up to 400 times return!.

While sharing some figures of hidden gems he has spotted in the past, Baliga said: “The best return which I have got till date is from Praj Industries, which gave me a 400 times return in about five years. This was from 2002 to 2007. We had re-entered in 2016 and booked partially recently with a five-time return. Himatsingka Seide too has given us manifold return a couple of times – ranging from 4 times to 7 times and we have done 3 cycles in this stock in the last 7-8 years. Garware Polyester was a quick mover which gave 5 times in a year whereas Nikhil Adhesive has given a 10x in 4 years.”

In an interview with Money9 for the Money Spinners series, Baliga shares insights on on his investment philosophy.

Edited excerpts:

Q. What is your multibagger formula?

Baliga: I generally look for stocks with the potential for growth but yet to be discovered by the markets or those which have been abandoned or written off due to poor performance but are showing signs of getting back on track. As against momentum stocks or those which are under the radar of many analysts and investors, stocks like these provide me enough time to research and understand the potential. However, investing in such stocks also needs a lot of patience as they could tire out investors.

Q. How do you time the ‘Hold’ or ‘Sell’ decision?

Baliga: We usually buy a stock because we are able to tick most of the boxes in our research toolkit and we are comfortable with the valuation. We keep a regular tab on the performance and news flow to decide whether to continue holding the stock or to book out.

Q. What are the lessons you learnt from your mistakes?

Baliga: About 35 years back when I started investing, stationed in Calcutta, I didn’t have any access to company management. Most of the understanding of the company was based on available material in the public domain – mostly the annual reports, a few clippings of business papers and magazines. And more importantly the discussion we would have with ‘friends’ in the stock market. My family didn’t have a background in stock markets. My father was a Nuclear Scientist who barely had any savings, so it never went beyond bank fixed deposits.

In 1992, one of the then leading publisher came out with a database of listed companies and this was the beginning of some serious research work. However, shifting to Mumbai in 1995 to start one of the first Sebi registered PMS for a leading financial institution opened up a huge opportunity for me.

Initially, we would tend to believe the stories doled out by the management as long as it was backed by data. However, this was one of the first blunders which I did. I learnt that even the data needs to be verified from independent sources to ensure its genuineness. This is despite my audit experience. Secondly, I did have to study body language to prevent falling into a trap of stories given by the management.

Q. What is your daily routine?

Baliga: My day still starts in an old fashioned way. I go through five newspapers over a coffee and make my markings of what I need to read later. However, most of the news would be what I have read the previous day on websites and social media – but glancing through it in the newspaper is a habit that probably improves the aroma of the coffee and sets my day in motion. I also check my emails and browse through specific sites for global news as well as business news. Another piece of noise that is difficult to ignore is the social media groups – I spend about 10-15 minutes to see if there is any interesting discussion or a point of view or information which could be useful for me. Otherwise, there is a lot of clutter.

A normal day would mean a couple of client calls and some time for discussion with my small team of analysts. Fortunately for me, I am doing diverse work beyond stock market research. I advise few small and mid-sized corporates on their business strategy and communication wherein I hand-hold the promoters. This provides me an in-depth understanding of the sectors from a practical standpoint, very much unlike how an analyst would view them.

Thereafter, I start my late evening shift post 10 pm which goes on till about 1 am or beyond at times when I get down to some serious reading as well as research.

Stock investments started off as a hobby for me when I got into college and I consider myself fortunate that the economy opened up and I could convert my hobby into a profession, being in the right place at the right time. Another hobby of mine is gardening which I pursue from time to time.

Q. Do you follow any investment guru and which book are you reading currently?

Baliga: My alma mater, Rishi Valley School, gave me an excellent grounding. They encouraged us to question, to think independently & differently. I also realised early that in investing I should not be trying to ape anyone blindly as investing is very personal and depends a lot on one’s mental make-up. I did read a lot on the strategies followed by some of the leading investors, took my learnings from those and created my own methodology which I felt comfortable with and has been working well for me.

The one book I am currently reading again is Winning the Loser’s Game – Charles D. Ellis and 21 Lessons for the 21st Century – Yuval Noah Harari.

Q. What is your advice to individual investors?

Baliga: Create your investment methodology and don’t ape anybody else. What works for somebody else may not work for you. And maintain the discipline of not veering away from the path. Stick to asset allocation and keep greed at bay. Learn the art of “sell and not regret” even if that investment does exceedingly well post that.