About 30 stocks gave compounded return of up to 78% in 5 years
Although it is a far-fetched idea, but careful stock selection can help you achieve your goal.
D-Street is not very different from a cricket match and we say that because the ingredients are pretty much the same. You have to have patience, hard work, consistency as well as focus. Just like in a match, not all your batsmen will hit half-a-century or a century in your portfolio and neither will all your stocks outperform.
Well, as an equity investor we want all our stocks to perform consistently as Virat Kohli. Although it is a far-fetched idea but careful stock selection can help you achieve your goal.We looked at data of the companies in the S&P BSE 100 index and nearly 30 companies gave consistent CAGR return of over 20 percent in the last five years.
As many as 29 companies in the S&P BSE 100 index, including names like TVS Motor Company, Bajaj Finance, Bajaj Finserv, Britannia Industries, Eicher Motors, Aurobindo Pharma, Biocon, Ashok Leyland, Maruti Suzuki etc., among others have given consistent returns of up to 78 percent in the last five years.
Well, the compound annual growth rate is more of a representational figure and not a true return. It is the rate at which an investment would have grown if it had grown at a steady rate. It is a way to smooth out an investment’s returns for better understanding and comparison.
To calculate compound annual growth rate, divide the value of an investment at the end of the period in question by its value at the beginning of that period, raise the result to the power of one divided by the period length, and subtract one from the subsequent result, as explained by Investopedia.
One thing is certain that most of the stocks have been consistent performers have good corporate governance along with the management’s visions to maintain their leadership position.
So consistency of companies that had historically outperformed depends on the potential to grow their top line or bottom line in the coming years. An investor could gain by investing in mispriced stock in short to medium term but a substantial CAGR gain over the year is possible from investing in growth stocks.
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