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Anuj, this started, there are three of us who write this study, I mean, I sit in my office, Dhruv Mehta, and Shrinath, who is my agent assistant. Okay, so Shrinath, this time we were asked what should we study, so two or three, one was to sell the market at a new high, so that was one topic, second was the turnaround, sir, sir, we have not done on turnaround, let's start, so we ran the first time, it was a very tough subject, turnaround is a very tough subject, then we found a book and in that book he talked about how to make money, this is the fundamentals of making money only by turnaround stocks in the US, and he's written a 30-page book on how to make money out of turnaround stocks, I said we got a framework, and now let's work on this, okay, so there he talks about when any stock falls by more than 50 percent from their recent highs, all-time highs, and Recent High Last Five Year High in India Five year high is the all time high always so generally so when it falls more than 50 per so then you have to find see there could be hundreds of stocks like that but within them you have to find bruise blue chips and busted growth stocks when you find these you have to category stocks then you go about completing the process of buying but then we said this let's pick up the bruise blue chip part I mean after doing everything so we said turn around our bruise blue chips is the only segment we will do it next time if time permits we will do the busted growth stocks so this time we picked up bruise blue chip okay now then the first problem was what is the blue chip what is the blue chip I was going to come to that how do we define blue chip is it only decided by market cap whether blue It is a blue chip and because it is hard to tell what was or was not a blue chip, blue chip has to be defined and I think we can have different definitions but for the study I said with my experience and I said any company will have earned more than 20 percent for the last 10 years, okay and of size both, so that company will term it as blue chip because you have earned 20 percent in 10 years, which means you have some standing in the market and you are of the size, so we said we look at only the top 250 companies, so that gives a sense of size and 10 percent to 20 percent, so that gives about 80-90 companies, then the guy said there are a lot of large companies, very large companies, like a part of the rest of the 200 and more than 20 percent for the next 10 years, so we got 1007 companies and Thatchi pass now what is the bru blue chip is the company in the last five years what ever high is it in now after the five years complete it is fallen by more than 50% ok till 50 it is correction ok but below 50 it is bruise bruise now it is seriously bruise because some thought on in a market it is somewhere 1000 bucks some big thought the value of the company is 000 now it has fallen to 500 and below it means that the company is thoroughly bruise and there must be some reason behind that ok is earnings misallocation and misallocation and competition and something must be there so then we will talk about analyzing the sources of trouble and what could be the remedy for that ok you buy them ok in this report we will discuss the names of many stocks That is purely as an example, it should not be considered as a recommendation in any way.
Let me give this disclaimer first, Ramdev Sir, there is just one thing in this, now I am just giving some examples like there was S Bank or there was India Bulls Housing or at one time there was Jet Airways, at one time there was Suzlon, all of these, although Suzlon may have made a comeback, all of them at one time, but they were not blue chips, they were not blue chips, blue chips were first Nifty stocks, but if they were Nifty stocks, then yes, at that point of time clearly if they had fallen from there, that and see, it is completely not infallible, but they have to be blue chip, did Bank Nifty make it to the N1, yes Bank Nifty or so definitely it would qualify as a blue chip and yes I mean it did recover, so my question is where do we decide that it is a bruise and where do we decide that it is not, otherwise the story is over.
Look at this here, ultimately investing is not only a situation you have to take, you have to at the time see if something is bad and hurt buy 50 60 percent it means it makes interesting second it is a blue chip or in fact I would rather prefer more than the size I would go buy 20 percent right okay that is my preferred mode so that makes me very comfortable because sub earn 20 for last 10 percent it can be X of Nifty also that can be X of Nifty also any stock actually as a framework that makes me very comfortable so that stock yes why it has fallen I mean what has happened is it internal to the company and is it external to the company you know so you have to figure out that and then finally take a judgment whether this company is going to survive in given situation is it It is going to survive and more important is it is going to prosper, so generally the companies which are blue chips have a very strong tendency to come back, okay you know because it is like Rishabh Pant getting hurt, yes now he means he had an accident, he was out for two-three years, but when he came, he hit and became a complete captain, so for example, let's say Virat Kohli or any Sachin Tendulkar, he scored zero in two-four innings, it means Sachin dozen becomes useless and Virat dozen becomes useless, when ever he comes back, he will hit a century again because he knows the game, he knows batting, yes and he can bat in toughest of the situations, so all these 20 RE blue chips have that core capability, yes you know, so when they come back, not only they come back to retrieve their last position, then they go for the kill, yes, so what I am Betting on is the first and I mean your question is correct watch one to live which is broken there is a difference between bruise and broken yes between bruise and broken yes Ramdev sir because you have already talked about it but maybe he lagged behind a bit but here also there is a little come back you also Ro Mot has given us more a positive that brother there is a change of management from 2400 stocks to 5000 so double in last there is a massive come back on the change of the management and he has his own strategy so in such companies i.e.
where you have created so much wealth there has been such a good dividend yield everything has been there in it then for how long do you have any belief that this is a bruise and it will come back like Ro Mot for example I am saying you had confidence that it will come back that there was no doubt there was no doubt like like Indian Hotel at 70 bucks I had no doubt deal 70 bucks I have no doubt but I did I did not have a framework.
I went to Delhi and gave a speech somewhere, where I said, "Brother, you should sell your real estate portfolio," but that was just a one-off discussion. I now have a framework. This study is more about the framework than examples of how to think about a blue chip in trouble. So, in this, you have discussed two or three things in Y-Bruce.
One is internal factors, one is stock related, one is company related, that once many, the stock itself falls. That is a different factor. Some are company related, so what is the difference in this? Basically, yes, in the stock which is stock related, it could be due to Covid, if the market itself fell by 50%, then the stock itself will fall by 50%, right?
From high, everything means nothing is lost at that time, right? Yes, except for two or four consumer stocks in India, the rest of the stocks get beaten, so at that time the state fell by 50%, right? So, it has become a blue chip, right? And its remedy is only one: let the market come down. And when the market comes back, like it happened in the Global Financial Crisis, in GFC, this is how the banks became one book below book, like I think ADFC has also fallen big time at the same time, there is only one remedy for it that the market must come back and the market does come back, I mean if you see every time the market falls in this manner, there is a lot of recovery in the next 12 months, in Covid we saw all time high in February, all time low in March and back in June-July, so during that period you get an opportunity to buy Lako and Indian Hotels and Mahindra, all sorts of things you get to throw away on sale, the whole lot happens, so that is market related but that is not the main thing, the main thing is company related, company related has also got two types of problems, one internal to the company and external to the company, how did competition come, you are earning good money peacefully, running a shop and then you come to know that Bhaiya, this new guy comes and says no, I will become number one, Mukesh bhai says that I want to become number one, so bhai, the whole mess was done, so it was given for free, you mean for one year, like for 10 years, that is, for five to six years, the whole market was destroyed, yes, so 12 players were reduced to three, three players remained, and what is there in that too, then I want % market share number one, so you made it from zero to number one, so what happened in that, the profitability of the entire industry was finished, so like the Indian stocks, they meant the price went up to 250, that means absolutely, from there the price went up to 1500, yes, but you should have that understanding, bhaiya, this is the problem, right now I made maximum money in Bharti, you know in 2003, you had taken a lower price than the IPO, so that one was known, that was an opportunity, so so that is external to the company, the company, yes, what is the other thing, companies also make mistakes, like companies like mis The biggest problem with the company is that successful companies misallocate capital like CG Power, yes CG Power, I would say mismanagement, but take Mahindra, you bought S, you bought Tata Steel, Corus, Corus, so all this is your ambition, some banker comes and explains that you will get money at 3, you will earn money and people go away, I mean, we can do it here, so we can do it there, but some how dozens of people work, then it creates problem, then getting out is a big problem and it spares the energy of the company, but then it still remains a blue chip like number one in tractors, absolutely that was the cash, then the focus also decreases from SV, so then they sold off Sangam, so that is completely internal to my mind, so there are problems, well there can be all three types of problems in one company, only they could be internal problems, there could be external Problem and they could be market rid problem so what happens is finally one the problems come together and along with that the market also sinks due to some reason 20 then you get shares at a huge price but now how will that happen, how will it play out, how will you get the opportunity, that is the point of time but you have a framework as to in what ways the shares of the company fall and of course
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