The stock markets are making new highs everyday. Not sure if one must be elated or cautious during such times. I hear many success stories nowadays. Market update aside, the last few posts on our blog have been more theoretical ‘how-to’ guides and was feeling bit bored.So I wanted to write something original and thought I will share a humbling story (read mistake) – How I missed 100x multibagger in Page Industries.
I have already written a post on how to choose quality stocks for long term investment.
It is not a methodical approach but a basic guideline. In that post I’ve not discussed on reading balance sheets, calculating ratios or doing deep research.
It is just a basic checklist to prevent mistakes and not get into too much greed. Preventing basic mistakes is as much important for stock market success ,if not more important, as it is to identifying great stocks.
Now let me share my experience with Page Industries as an investment and how I missed what could have been a 100 bagger for me. I hope you learn something from it.
How I missed 100 bagger in Page Industries
Every one of us have targets in life. Some of us want to buy a home, some want a foreign vacation, some want to educate our children and get them married.
My aim was to provide for my family expenses and sister’s education. I was the sole earner for the family even when in college.
I was selling insurance policies, mutual funds and naturally got introduced to stock markets.
I burnt my fingers in 2008 crash with huge tuition fees (lost all money I had saved up in last 4 years). Experience, pain and few of good books later I learnt few of the patterns in my mistakes.
How I got introduced to Page Industries stock
Well, I believe I can share the story as my wife does not read my blog as she is bored to death when it comes to money matters.
It was early 2009, was on a weekend shopping with my future wife . We had known each other for 5 years then but I was more like a bike driver during the shopping spree. She was a loyal Jockey fan as were her friends.
She got me introduced to my first Jockey store. We went to the shop and she was doing her purchase.
As usual I sat on the chair with a magazine, but just saw the price on the men’s brief (underwear) case. I was shocked to see it was close to Rs 300 for a pair after discount.
I was thinking of how I’m going to get ripped off. Which idiot would pay Rs 150 after discount for a brief when you can get quality local brand from Rs 60.
When I was still thinking, she finished her shopping and urged me to buy one. I was reluctant but she gifted me with one set (well, technically I paid for everything including hers so I gifted myself 🙂 ).
The next few months I was very comfortable with Jockey compared to my local brand. I’m glad she gifted me and I have been a loyal customer ever since. This was how I was introduced to Jockey and Page Industries.
How and why I bought Jockey – Page Industries stock
As I said I was very comfortable with Jockey. Now let us see why I bought the stock.
In late 2008, during the crash, I came across a book from Peter Lynch.
The book was called – One Up On Wall Street
Rather he explained how one can pick up great stocks by observing things or behaviour around them.
In one of the chapters, he explains how he bought Hanes after his wife would not stop talking about Leggings.
The story is that there were queues and women were so fond of Leggings at that time including his wife. On observing this, Peter Lynch analyzed who manufactured Leggings. When he learnt the manufacturer’s stock price was at reasonable price compared to potential he bought the stock.
Well, I’m not Peter Lynch. But the example in the book was somewhat close to my heart. It was a very simple idea of how merely by observing the behavior of people , you can identify great stocks.
Due to recent memory after reading that book and my experience soon after that I somehow decided to explore the manufacturer of Jockey.
I researched and found the stock was trading at close to 23 times PE. It was reasonable.
I knew or felt Jockey had great potential. After all, I have lived in Chennai and Bangalore for many years and din’t explore Jockey or its value.
Think about my cousins, friends and crores of Indian population who might like the product the same way me or my wife did.
So I was sure if quality is maintained and price is reasonable Indians will buy Jockey ( I here refer to the clothes not the stock ).
The stock was around Rs 325. I made a buy order next day for Rs 9000. Following was the rationale:
- I hadn’t done much of ROE, ROCE analysis at that time(rather say I did not know how to do them that time effectively). I knew that market was potentially huge.
- The stock was not overpriced (less than 25 PE) as profit was growing above 30% every year
- The company didn’t have much debt (Another important parameter explained in the book by Peter Lynch).
This is how I was bought Page Industries. In hindsight I can say it was 20 multibagger but when I bought I dint know that.
All I knew was that I was buying a good stock with good business potential. It was only later I realized it was a great stock with possibly all great financial aspects/standards, quality aspects, management strength etc.,You can read more on these here.
Multibagger Page Industries and why I sold it
I had accumulated few more quantity of Page Industries at regular intervals for next 6 months. After that the value was getting realized and there was no Margin Of Safety (atleast that is what I thought). My last purchase around Rs. 740. The average purchase was around Rs. 435 something.
The scrip went on going up and there was news that top market gurus bought the stock. There was no turning back after that.
The valuations were getting higher and higher but the company closed the gap with their growth every quarter/year.
If you see graph above, there was no period of dramatic fall in Page Industries stock price anywhere from 2009. Very few business/stocks have such a great chart of no significant falls. One such example is HDFC Bank.
Around 2014 October, the stock was trading at 45 PE. But the growth had started slowing down to around 30% because Jockey became a well known brand with branches everywhere.
Jockey products were available in any decent mall and in outlets. I started to feel the growth will slow down to 20-25% in future.
In stock markets, price always follows earnings. I started wondering if I should hold a stock at 44 PE when growth is only 25-30%.
The PE was too high in my opinion and either of two things can happen
- Either there will be significant price correction around 30-50% to bring valuations to justifiable levels.
- The stock will get into a long time correction as 2-3 years growth was already in stock price.
I expected the former would happen and the stock will correct/fall. One fine morning, I decided to sell the stock as it was around 30% of my portfolio now and buy back after some correction. I ended up selling all Page Industries stock at Rs 8850.
I was happy with a sigh of relief. I just made a big multibagger and thought I can buy the same quantity after prices correct. To my dismay the price never fell.
Page Industries went on to make new highs everyday and you cannot imagine my frustration. Below is the chart after selling.
As you see, the stock went to above 70 PE. It hit high of Rs 16,879 once. Close to double my selling price in less than one year.
There was no turning back and I’m still waiting for reasonable entry point to buy the stock. Currently it is around 64PE.
If I had held on to the stock. The price almost doubled from where I sold and it has potential to more than double even from here in next 7-10 years if no major change in fundamentals. That will make it a 100+ bagger from my initial purchase price in less than 12 years.
Related: 10 tips to investment success
Disclosure: I’m not SEBI registered analyst. I do not own Page Industries anymore. No buy/sell trades in last 30 days. Do your own analysis.
What can you learn from my mistake
Page Industries taught me a very important lesson. A lesson as important as stock market crash in 2008 taught me.
Never sell your winners for realizing temporary gains as long as fundamentals remain same. In other words, ride your winners to full potential.
While I knew Jockey still had more towns to cover and saturate, I made the mistake of selling out. It is a common phenomenon in stock market to under-price and over-price valuations in near term. Don’t just sell because it looks overvalued in near term.
One should not be swayed away by these price fluctuations. Let there be temporary price corrections. Once can never accurately predict them. As said by Peter Lynch in One Up On Wall Street – “While it is important to realize profits, one must also stay with ups and downs of your stock which you still believe in”.
I hope you’ll keep this in mind when you sell a high quality moat stock. If you liked my experience of How I missed 100x multibagger in Page Industries – share it with your friends so they can learn from my mistake. Have you had a similar experience where you sold a stock and it kept going higher. We’d love to hear them or what you think about my above experience in comments section.