Secrets to Finding Multi-Bagger Stocks & Avoiding Pitfalls with Shankar Sharma

In this Face2Face video, Shankar Sharma discusses his investment philosophy, shaped by experience and the lessons learned from past failures, particularly during the tech boom and bust. He emphasizes the importance of data analysis over narrative-driven investment approaches, advocating for a pragmatic and flexible strategy in selecting stocks. Notably, Sharma shares his views on the merging role of technology in the economy, including the rise of AI and its potential impacts on job markets, especially in India.

He highlights the promising opportunities within small-cap stocks and SMEs while also recognizing the inherent risks involved. Additionally, Sharma stresses the need for balanced regulation in the SME segment to foster growth and diversity in investment, while cautioning against speculative trading practices in futures and options. Ultimately, his insights encourage investors to engage deeply with data, experiment wisely with their investments, and maintain a growth-oriented mindset that embraces both successes and failures.

Shankar Sharma discusses his investment strategy, emphasizing the importance of conducting small experiments rather than committing fully to any single position. He manages a diverse portfolio of around 130 stocks, with a focus on around 20 to 25 significant ones, highlighting the concept of "return decay," where exceptionally high returns over a few years often lead to lower returns in the subsequent years. Sharma advises taking some profits off the table but recommends maintaining a portion of successful investments rather than liquidating entirely. He uses the analogy of a "joint family" to describe a diversified portfolio, suggesting that investing involves appreciating a variety of 'characters' or stocks, while also suggesting that data points like P multiples and PEG ratios should inform investment decisions.

Shankar Sharma also discusses his evolving perspective on stock valuations, revealing a less rigid approach to investing. After a challenging experience in 1997 with Infosys, he's moved away from solely relying on price-to-earnings (P/E) multiples, recognizing the dynamic nature of market narratives that can justify various valuations. He emphasizes that multi-bagger investments are often identified in hindsight rather than with foresight and shares his past successes with notable companies like HDFC Bank, Amazon, and Apple, driven by a combination of insider knowledge and market insight. Ultimately, he advocates for a flexible mindset in investing, akin to an all-rounder in cricket, suggesting that adaptability is essential for success in the unpredictable markets.