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Searching for multibaggers? Look for these traits: Raamdeo

There are plenty of approaches in which one can go trying to create wealth in the stock market. While some investors are the hands-off types, looking to invest in a well-diversified portfolio that will likely mirror the market’s returns, others are more active, constantly evaluating the prospects of one stock versus the other.

For the latter, Raamdeo Agrawal, co-founder of Motilal Oswal, has an advice: look for the Lollapalooza effect.

The term, coined by Berkshire Hathaway vice chairman Charlie Munger, who describes it as a state in which several factors act at the same time in the same direction.  In the investing context, it means investing in a company that has several factors going for it.

Agrawal was exclusively speaking to CNBC-TV18 ahead of the launch of the 20th edition of Motilal Oswal’s marquee Wealth Creation Study, authored by him.

The study’s theme year is ‘Mid-to-Mega’, or companies that can go from being ranked between 100 to 300, market capitalization-wise, into the top 100 in five or so years. “These could give returns of 10-12x,” he said.

While the report shies away from naming names, it lays down a strong investing framework from which to draw, driven by the lollapalooza effect of MQGLP (mid-size, quality, growth, longevity and price).

Citing examples from the past, Agrawal said Eicher Motors was blessed with each of these factors back a few years back when its leadership in the cruiser bikes, a segment that exploded with the consumption boom, drove it from a market value of Rs 2,000 crore to about Rs 43,000 crore currently.

Interview transcript to follow.

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