The stock market is full of fascinating stories like how an investment of INR 10,000 made in Wipro turned to 800 crores or like how an investment of 1 Lac made in HDFC Bank in 1995 is now worth 8 crores! However, rarely do we find investors who actually made such huge returns from the stock market. Prasenjit Paul, an investor based out of Kolkata, is one such example. The shareholding data from BSE India website suggests that he made more than 33 times return on investment from Chemcrux Enterprises and still holds the stock. BSE bulk deal data confirms his first investment in Chemcrux dated back to 30th March 2017 and since then the stock price jumped by more than 33 times as of August 2022. Chemcrux is not an exception, Prasenjit Paul raked multibagger returns of up to 10-12 times from stocks like Lancer Container, Can Fin Homes, Caplin Point Lab, Ajanta Pharma and many others.
In this interview, Prasenjit shares insights from his investment journey.
Q1: Can you walk us through the initial days of your investing journey?
I started investing in the stock market when I was 19 years old studying in college. I am from a middle-class Bengali family where job security is prioritised over the stock market or doing business. However, the book “Rich Dad Poor Dad” by Robert Kiyosaki influenced me a lot and I was determined to do something big in the stock market. I am a self-taught investor who had no formal education in economics or the financial market. Bestselling books by Peter Lynch, Benjamin Graham, Pat Dorsey, etc shaped my investment philosophy but I struggled a lot reading those books as they were based on the US stock market & written in very sophisticated English. So, in 2015, I published my book, “How to Avoid Loss & Earn Consistently in the Stock Market” focusing on the Indian market with an easy-to-understand language. The book was an instant hit and since 2015, mostly remains in Amazon India’s #1 Bestseller in its respective category and since then there was no looking back.
Q2: What are the primary parameters you follow while investing in multibagger potential stocks?
There are only two triggers behind multibagger return, earning & P.E ratio expansion. If any of your portfolio stocks experience EPS & P.E expansion over the long run then the stock must generate multibagger return. More than sales growth it is the growth in profit margin that determines EPS & P.E expansion. Balance sheet strength is of utmost importance. While searching for multibagger potential stocks among thousands of smallcap & microcap names, I outrightly discard companies having high debt, low ROE & poor cash flow. After that, I discard companies having low promoter holding or if promoters pledged any amount of holding. Finally, I prefer companies having non-cyclical business with some sort of competitive advantage and has the potential to improve margin while continuing growth. So, my framework is more of what NOT to do than what to do.
Q3: Great, share some stocks where you succeeded in earning multibagger returns.
There are many! In the initial years, my investment in Can Fin Homes, Caplin Point Lab, Ajanta Pharma, Atul Auto, SNL Bearing, etc generated multifold returns. Although the investment amount was minimal, the overall portfolio jumped by more than 10x in those years. From 2017, I started making sizable investments in stocks like Chemcrux Enterprises, Lancer Container, KP Energy, Sirca Paints, etc which further amplified my wealth. I have also lost big money from stocks like MRSS, Focus Suites, Sysco Industries, Sintex Industries, Bhushan Steel & many others but on the overall portfolio level profit always outperformed the overall loss.
Q: Tell me some future multibagger potential stocks that you recently invested in.
Well, I will share one name but before that investors need to understand that investing in small companies always carries a high risk. If you invest blindly without proper research & analysis and have no proper exit plan then you will surely suffer loss. Stocks like Lancer Container generated 9x return for me but I know investors who lost money from the same stock. So more than the stock name, it is the proper entry-exit timing that determines multibagger return. Additionally, one of my recent multibagger bets is Prevest DenPro. My first investment was in November 2021 and then I made a few repeat purchases in 2022. The company manufactures dental products and aspires to become a global name. The expansion plan, pricing power, clean balance sheet, experienced management everything is in place but don’t take my words blindly. If you don’t have a proper entry and exit plan then you will suffer loss even from the best companies in the world. I keep sharing my investment process with entry & exits in multibagger potential stocks, if interested you can refer here.
Q: What would be your suggestion to new investors seeking multibagger returns?
A: Never seek any shortcut and always remember that every quick money-making option is actually a money-losing opportunity. More than how to make money, you first need to learn how not to lose money. Small Cap multibagger potential stocks always carry a high amount of risk, if you don’t have a high-risk appetite stick to high-volume mid cap or large cap stocks. For a more conservative approach, stick to index funds. It took me more than 10 years to generate meaningful wealth from multibaggers. So have patience, be a lifelong learner & maintain humility.