Peter Lynch boasts of one of the greatest investing track records of all time, while serving as the portfolio manager of Fidelity’s Magellan Fund from 1977 to 1990. When Lynch became Magellan’s manager in 1977, the fund had $20 million in assets. His strong track record drew investors at a rapid rate, and by 1983 the fund’s assets topped $1 billion. It went on to become the largest mutual fund in the U.S. with $13 billion in assets. No one else had managed such a big fund with so much success.

Over the 13 years of him at the job, the fund delivered an annualized return of 29%. Check out the performance of the fund if you had invested just $1 in the fund –

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In last 20 years, the BSE Sensex benchmark has delivered a whopping 910% returns, from 1997 to 2017(YTD), in other words, this gives a CAGR (Compounded Annual Growth Rate) of 10.75%. This rate of return has been the highest returns any emerging market has delivered in last 20 years.

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The market is at an all-time high.
“Does it make sense to invest now? Should I start booking profits now? There are few stocks which are still not at their peaks so should I buy them?”

These are the latest questions from Indian retail investors which are doing the rounds in the market currently with Sensex closing at 32,309 and Nifty at 10,014.

The common denominator of all these questions comes down to the valuations of the stocks. Our analysis shows that when investing for short to medium term, the valuations of the stocks do matter for e.g. investing at lower Price to Earnings ratio or Price to Book Value ratio.In simple words, we would like to say that investing in stocks for 6 to 12 months which are trading at cheaper valuations compared to its industry peers will yield better returns for you than investing in richly valued stocks.

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#1 Think like an owner

Stocks represent ownership stakes in businesses and are not just pieces of paper to enable trading. Think like a business owner. If stocks are ownership slices of a business, we should value stocks like we value businesses. A business is worth the value of all future earnings that it can generate.

An investor should think like a business owner, not a renter. Successful businessmen don’t get up in the morning and ask whether they should sell their business that day. If they own a pizza shop, they don’t think about whether what they really should own is a shoe store instead. They show patience and persistence and try to understand the market demand and the economic conditions so they can earn the greatest return for the longest period of time.

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We believe Dewan Housing Finance Ltd. (DHFL) is going to be the next Blue-chip company and a major wealth creating opportunity in the time to come. We had recommended DHFL to our Paid subscribers in February 2016 as a Long Term service stock pick and just look at the kind of returns the stock has generated for our subscribers.

200% RETURNS IN 14 MONTHS

WHY WE RECOMMENDED DHFL

1. The CAGR of its business has been 31% from last 5 years along with EPS growth of 20%.

2. Loan growth remained strong: DHFL reported a 19.7% yoy growth in AUM to Rs. 75,223 Crores. In absolute terms, the AUM grew by Rs. 3,211 Crores qoq. While sanctions remained moderate, up by only 10% yoy, disbursements growth accelerated to 32% compared to 26%. Continue Reading