Up to 15x return! Meet this Gurgaon-based investor who is making big money in the stock market

Gurgaon-based investor Siddharth Oberoi (47), who has been investing in the stock market for the past 27 years, has spotted many multibaggers during his journey in the equity market to date. The Founder and CIO of Prudent Equity has participated in several bull and bear cycles. In an interaction with Business Today, the market watcher said that his investment thesis revolves around identifying growth levers in the company that are structural in nature. The strategy is totally bottom-up. Once he understands the economics of the business, he looks at other factors in the company such as management actions, and the company’s capital allocation policies among others. Edited excerpts:

Business Today: Can you throw some light on your journey as a stock market investor?

Siddharth Oberoi: I started investing in IPOs in 1994 when I was in college. In 1996, I went full-time into equities. Initially, I tried many strategies but they didn’t click. Since 1997, I started to read books on Warren Buffett and other investors. The concept of finding the intrinsic value of a company and buying with a margin of safety stuck with me. Slowly, my returns started to dramatically improve. Over the course of the next few years, I read about a hundred investment books.

I have seen the IPO mania of the mid-1990s, the bear market of 1996 and the Asian economic crises to the internet boom of 1998-2000. The biggest money-making opportunity came between 2003 and 2007. The period saw hundreds of stocks delivering multibagger gains. I witnessed first-hand the stock meltdown of the 2008 crisis.

Later in 2012, I started Prudent Equity, a stock advisory website. The service is spread by word of mouth. Between 2012 and 2016, the recommendations delivered CAGR returns of 52 per cent. Thereafter, another section for Ultra Micro Caps was started. Over the last 11 years, more than 8,000 clients have been serviced in several sections. From 2017 onwards, we started getting offers from family offices for stock research and advice. The total assets under advisory peaked at Rs 1,200 crore. In December 2022, Prudent Equity launched its Category III long-only AIF.

Over the last three decades, I haven’t changed my core principles since they were formed in the initial years. I observed that whenever I have deviated from my rules, I have suffered a loss or missed substantial profits. The discipline to stick with one’s investment principles and not deviate from them is of paramount importance.

Business Today: Which stocks have delivered you multibagger returns over the years? 

Siddharth Oberoi: There were several. However, multibagger returns without a meaningful allocation have little value. Some of the companies which delivered substantial returns to me include Ashiana Housing and Revathi Equipment. Shares of Ashiana Housing delivered 6x return. My allocation in the stock was 40 per cent of the portfolio at one point in time. The company was executing a large township near Gurgaon. On the other hand, Revathi Equipment also gave a return of 11 times. The allocation was over 60 per cent in the stock. Alkyl Amines (5x), Kesar Terminals (6x), Hinduja Global Solutions (5x) and Waaree Renewables (15x) were among other major stocks that delivered multibagger returns during the journey.

Business Today: What is your investment strategy?

Siddharth Oberoi: As investors, we are in the business of identifying mispriced bets. With that concept, I try to take out the intrinsic value of the company. The concept of buying lower than its worth or in other words, ensuring a large margin of safety in the purchase price is embedded in my DNA. I ensure that stocks are bought only when they are trading at a substantial discount to my estimated intrinsic value of the company. This ensures that capital is protected to a large extent.

As a rational investor, one needs to have the temperament and patience to sit on cash when an opportunity is not available. That’s exactly what I have been practising over the last 27 years. I wait for a good opportunity and do not shy away from investing substantially whenever such an opportunity presents itself.

Business Today: How did you manage to tide over the volatility in the equity market last year?

Siddharth Oberoi: Last year had been pretty good. It was a total bottom-up market where select contrarian bets in banking, agrochemicals and special situations paid off.

Business Today: How do you decide whether to hold or sell the stock despite a multibagger return?

Siddharth Oberoi: The decision to sell or hold while sitting on a high return is not easy. One needs to formulate one’s criteria for this which ensures that the investor does not let confusion engulf him. My criteria for this are –

a. Has the stock breached the intrinsic value significantly?

b. Can the intrinsic value grow high enough in the foreseeable future to justify the elevated price?

If the answers to the above are yes and no, respectively, then it calls for a sell. An alternate reason would be to have identified another stock that has the potential to deliver outsized gains, assuming no spare cash to invest in that new opportunity.

Business Today: What are the things you focus on before investing?

Siddharth Oberoi: I look for mispriced bets where the perception is different from reality.  I like managements that have steered the company successfully in various business cycles. Special emphasis is given to the company’s capital allocation record and corporate governance.

Business Today: What investing lesson would you like to share with new investors?

Siddharth Oberoi: Make reading a habit. Whether it is related to books on investing or successful investors, articles or any material which ensures you understand the various aspects of the business world. Each investor is different. You need to understand yourself and your investing style. Formulate your own investment principles and adhere to them.

Business Today: What is your advice to retail investors who have lost their money in the last one year?

Siddharth Oberoi: A fall could very well be the stepping stone to success. Learn from your mistakes. Questions to ponder are - What could you have done differently, what worked in the last year, can such opportunities be identified and how. Improve your skills as an investor to ensure better results.

Business Today: What should be the right investing strategy amid the present market conditions?

Siddharth Oberoi: A stock selective approach wherein one focuses on a company’s merit rather than sectoral play may work in the present market conditions.

Business Today: The RBI decided to keep pause on a rate hike in April. Where do you see the market going ahead from here?

Siddharth Oberoi: RBI has clearly signalled a pause in a rate hike. Bond yields have reacted positively. Stability in interest rates would help in decision-making at a corporate level. I believe the markets are headed higher, both due to reasonable stock prices and growth in corporate earnings.

Business Today: Which kind of stocks and sectors are looking good from an investment perspective? Why?

Siddharth Oberoi: I am very positive on the infrastructure and banking space. On a daily basis, we are witnessing scores of infrastructure companies bagging orders. Order books of infra companies are at the decadal high. This is very positive for the next 2-3 years for the sector as a whole. That being said, we have learned from past cycles that only a few players emerge victorious from such developments and hence, one has to be very careful while picking stocks.

The banking sector too provides immense growth going forward. Most banks are witnessing 15-20 per cent loan growth. With NPAs under control and reversal of excess provisioning during covid times, we expect the banking sector to perform well.  

Business Today: Do you follow any other investors and which books do you like to read?

Siddharth Oberoi: I follow Warren Buffett very closely. In fact, I have been following and reading extensively on him for the last three decades. In investing, most knowledge on investing is already out there. Some of the books I liked are –

a. The Warren Buffett way by Robert Hagstrom

b. John Neff on Investing by John Neff

c. Wall Street on Sale by Timothy P Vick

d. The Investor’s Anthology by Charles D Ellis

 

Business Today: What works as a stress buster for you?

Siddharth Oberoi: Investing and all its aspects itself are stress-busters for me. I am an avid reader. Other than that, I like to watch movies, mostly English.  

Business Today: How a day of a money manager look like?

Siddharth Oberoi: I start the day with a catch-up of what transpired at the global level. Thereafter, during day time it is mostly reading about various industries and news events, analysing companies and day-to-day operations, watching the markets and placing orders if any. Post market hours, it is mostly studying companies. I work late till night. My typical working day is about 14-15 hours. I mostly work on Saturdays as well.

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