12 December 2012

Multibagger of Long Term Investing

Wouldn’t you be shocked if we told you that someone has turned Rs 10,000 into Rs 3,69,00,00,000 (Rs 369 Crores) in 32 years?. And that too by doing nothing in stock markets!! We bet you would be... :)


Your next question would definitely be – Who has done it?

Our answer is that we don’t know. But we are pretty sure that promoters of company would be one of them. They would have held shares for 32 years and made a killing. By the way, turning Rs 10K to Rs 369 Cr is same as growing your money 49% year on year for 32 consecutive years. Even great Warren Buffett managed a ‘paltry’ 25%...  So even if we told you earlier that you cannot become Warren Buffett, here we have data, which suggests that you actually can!!

(In comparison, banks pay 8% per year on deposits)

So now you’ll ask – How has it been done?

Before we answer this question, we would caution you that data given below has been collected from various sources and may or may not be correct. So, take it with a pinch of salt.

The company is WIPRO. Suppose you invested Rs 10,000 in its shares in 1980. You would have got 100 shares @ Rs 100 each. Now shares of Wipro have gone through multiple splits & bonuses. So we adjust them as and when splits & bonuses happened.

1980 – Bought 100 shares @ Rs 100

1981 – 1:1 Bonus = 200 shares

1985 – 1:1 Bonus = 400 shares

1986 - Stock Split to Rs.10 face value = 4000 shares

1987 - 1:1 Bonus = 8000 shares

1989 - 1:1 Bonus = 16,000 shares

1992 – 1:1 Bonus = 32,000 shares

1995 – 1:1 Bonus = 64,000 shares

1997 – 2:1 Bonus = 1,92,000 shares

1999 - Stock Split to Rs. 2 face value =9,60,000 shares

2004 – 2:1 Bonus =28,80,000 shares

2005 - 1:1 Bonus =57,60,000 shares

2010 – 3:2 Bonus =96,00,000 shares

Value of one Wipro share is around Rs.385.

So as of today, your investment of Rs 10k is worth a staggering Rs.369 crores!!

And we are not finished yet. If you know about benefits of dividends, you would realize that Wipro has been a regular dividend payer. Last year it paid Rs 6 per share as dividend.  So you would have earned  Rs.5,76,00,000 (Rs 5.76 Crores) last year alone as dividend income. Just imagine how much you could have made from dividends alone in last 32 years. :-)

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8 comments:

  1. Moral Of Story : Power Of Compounding & Long Time Investment....

    ReplyDelete
  2. @jigishashah:disqus

    Absolutely. And this is just one of the many examples. :)

    ReplyDelete
  3. not very sure about the authenticity of the data :-(
    are you sure you guys got the bonuses & splits correct?

    ReplyDelete
  4. @5cfd5f1b61231e38adb2a93a1f0de777:disqus

    As per available information, we think we got it right :-)

    ReplyDelete
  5. Which is a Next WIPRO.

    ReplyDelete
  6. @9b9217db15161ea2c9f681b99874abab:disqus

    We don't know. :-(

    ReplyDelete
  7. Just look at 1997, a 2:1 means "for every 2 shares held, 1 will be given as bonus". How come 64000 shares became 1,92,000 shares??

    ReplyDelete
  8. Mansoor

    A 2:1 bonus issue means that you get two additional shares -
    free of cost - for the one share you hold in the company. For example, If you
    hold 100 shares of a company and a 2:1 bonus offer is declared, you get 200
    shares free. That means your total holding of shares in that company will now
    be 300 instead of 100.

    ReplyDelete

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