Ramesh Damani is known for picking Infosys. But did you know about the story of this 40x stock?
In 1995-96, the Finance Minister announced a policy of disinvestment in Public Sector Enterprises. One of the companies was Computer Maintenance Corporation Limited (CMC). This company played a pivotal role in the computerization of Indian Railways and the BSE Online Trading Platform.
One fine day, Mr Damani read the annual report given to him by his friend. He was astounded and rubbed his head in disbelief to find out that CMC, which did such an important work at that time was entirely available for just ₹30 Cr Mcap. Given his tech background, he knew that if IBM were to handle the BSE online trading platform project, they would charge at least USD 150 million (approximately ₹486 Crore at the exchange rate of ₹32.4 per USD in 1995) and take four years to complete. In contrast, this Indian company was selling for a song.
The Allocation:
Buoyed by this insight, Damani was eager to invest in this company. Initially, he had planned to buy 10,000 – 20,000 shares, but his father told him to buy a big chunk if he truly believed in the undervalued potential of the company is undervalued and since the risk-reward is in his favour at ₹20 per share. His father told him, “When you have a great idea, you need to back up the truck and buy”. Great ideas are very rare and if you feel like you have one, you should buy a truckload.
Averaging Up:
When a stock moves up, a smart investor will keep adding at various points, while an average investor may not. It might be uncomfortable to average up but the market gives you money when you are uncomfortable.
The stock price went up from ₹20 to ₹800 in a little over a year. It was a fast 40-bagger for him and a big break in his life.
Mr. Damani got these two stocks, Infosys and CMC because of his technology background.
In 2001, CMC was sold by the Government of India to Tata Consultancy Services and its owner, the Tata Group.
See you next time.
Until then… Stay Prudent!
Also read:
Sir what should I buy for 40% return in a month?