Gift Shares - Our Contribution in your Wealth Creation Journey
- Gift Shares
This can come as a surprise to you that after all why are we gifting shares along with our annual, 2-year and 5-year subscription plans?
Wouldn’t it have been easier if we had just offered some direct discounts on the subscription prices? Or maybe we would have offered some physical gifts along with the subscription?
As a believer of wealth creation via long term investments into equity markets, we did not like both the ideas as the direct discount will save you some money now and that’s about it and a physical gift can be cherished for sometime but will be forgotten after that. In both the cases, the monetary value of such kind of gifts tends to depreciate over time.
So our thought is –
“Why not gift you something that will have more than just the emotional value; whose monetary value will also appreciate with time”?
And for us, there is no better example of such an ‘appreciating’ gift other than shares. Our experience and historic data shows that shares of fundamentally strong companies, which have been chosen after thorough research, have a higher probability to appreciate in value in the medium to long term.
Generally, it’s very easy to read and discuss about wealth creation but in reality, it requires a lot of practice and patience. It is common observation that as your investment grows with time, you tend to get tempted to sell those investments for small profits even if the fundamentals of the company or the underlying business remains the same. We believe that since the Gift Shares are not ‘purchased’ by you directly & they are of relatively a small amount, you are more likely to let them grow in front of your eyes, year after year, and that too at a low risk. We will, based on our thorough research, advise the company for you to invest & send you the shares as a gift.
This way you can also learn the art of wealth creation and your trust and belief in long term equity investments will increase over a period of time.
Most of us tend to think that only the legendary investors like Warren Buffet and Rakesh Jhunjhunwala can create wealth via Equity investments and it might require a lot of money to invest for wealth creation. You couldn’t be more wrong!!
LET’S SEE HOW A SMALL INVESTOR’S INVESTMENT of INR 10, 000 TURNED INTO A FORTUNE OF MORE THAN INR 500 CRORES
The benefits of Gift Shares are fairly simple & straight forward –
- Your Gift Shares have the potential to appreciate over time , making you learn the art of wealth creation and increase your belief in long term equity investments.
- The appreciation in the Gift Shares can potentially return back a large part of the subscription fee paid to R&R over a period of 5 years or more. Let us see how:
Mr. X takes yearly subscription of R&R. He gets gift shares worth Rs 5000 at the time of initial subscription.
Let us see how much will be the approximate value of these Gift Shares–
Potential Value Appreciation of “Gift Shares”
|Annual subscription fees (INR)||20,000|
|Gift shares (INR)||5,000|
|Value of Gift shares 5yrs hence at –|
|Scenario – I (25% CaGR)||15,259|
|Scenario – II (30% CaGR)||18,565|
|Scenario – III (35% CaGR)||22,420|
|Scenario – IV (As per our 5 in 5 Strategy – 38% CaGR)||25,025|
Note – The numbers given here are for illustration purposes only and should not be taken as any promise or guarantee.
As you can see, the value of the Gift Shares, based on the aforementioned assumptions, can cover up a substantial part of your annual subscription cost if we consider the first scenario of 25% CaGR over the next 5 years. But what, if the value of these Gift Shares grows as per our expectations (5x in 5 years – 38% per annum)? The final value of Gift Shares will be even higher. You can understand by now the benefits & vision of our gesture called as Gift Shares.
At Research and Ranking we believe in taking the first step. The idea of “Gift Shares” is the first step from us towards your Wealth Building Journey immediately after you become part of Research and Ranking family.
And, we are not just stopping there, you will avail the benefit of “Gift Shares” at a very special discount that we are offering on our 5 in 5 subscription service.
There is yet another reason for us to do this.
We are celebrating our 7th anniversary this year. Yes, our Group will be 7 years young on Nov 20, ‘16 and we want to invite everyone to be part of our Wealth Creation Journey.
Our universe of “ GIFT SHARES ” comprises of “ Wealth Creator ” businesses, which is in sync with our 5×5 strategy of Wealth Creation. “Wealth Creator” businesses are companies that have the potential of delivering share price CaGR of at least 25% and more over the next 5 years. Our checklist for identifying these businesses is as follows –
1. Industry Attractiveness
|1.1 What is the overall size of the industry and growth rate potential?||We focus on industries that are expected to grow at least 1.5xs real GDP growth rate with increasing bias.|
|1.2 Is the business heavily regulatory driven?||We tend to avoid heavily regulated industries as business becomes heavily dependent on the policies and their outcomes.|
|1.3 Is the industry consolidated or fragmented; hence the pricing power?||Industries that are less fragmented and hence more consolidated implying greater pricing power are preferred.|
|1.4 What is the size of unorganized segmenta nd potential of it to lose business to the organized players?||Declining proportion of unorganized which means more scope for organized players to grow is preferred.|
|1.5 Is the industry into commoditized products or the industry is witnessing premiumisation trends in demand?||Premiumisation or value addition trend indicates greater demand stickiness and better pricing power; hence preferred over industries which cater to commodity products.|
|1.6 What is the level of capital intensity and capital efficiency of the industry?||We prefer industries with low working capital and CAPEX intensity with at least 15% average return on capital deployed (RoCE).|
|1.7 Is the industry cyclical &/or heavily dependent on macro-economic cycles?||We avoid large ownership of cyclical stocks as also stocks that are heavily correlated to the overall macro economy as they tend to fuel volatility in returns which goes against the premise of wealth creation.|
2. Sustainable Competitive Moat
|2.1 What is the company’s brand equity and reputation of products and its services?||We prefer companies who have carved a niche brand positioning and have stayed ahead of the times through continuous investments behind the brands leading to demand stickiness and hence better pricing power and low volatility in revenue growth.|
|2.2 What is the company’s track record on innovation?||We prefer companies that have been innovators which could be of both products as well as new category creators, as against those that mostly have a reactive strategy and typically duplicate a successful strategy.|
|2.3 Does the company have unique relationships within the firm and outside – with its dealers, distributors, financiers and suppliers?||In our opinion, the relationships that the company builds with all stakeholders are a true reflection of its culture and something which cannot be replicated by another company. It helps build perhaps the strongest of all competitive moats.|
|2.4 Does the company own any strategic assets or Intellectual Property Rights (IPRs)?||Either of the two will imply a strong competitive advantage for the business which ensures a strong lead time advantage for any peer to catch up with.|
3. Management Quality
|3.1 Does the management have a track record of good governance and clean accounting?||We prefer management who focus on profitable growth along with healthy free cash generation. We also value simplicity and conservatism in balance sheet management.|
|3.2 Does the business have a track record of disciplined and efficient capital allocation?||We prefer companies with low and or declining debt to equity including working capital debt. We are very cautious on cap-structure metrics and how business has funded its growth.|
|3.3 What has been the promoters track record on acquisitions wrt acquisition price, funding, integration and turnaround?||The objective here is to understand management’s approach and success with utilizing capital for acquisitions which could be either related or unrelated and overall whether it has aided in improving the business’s growth prospects.|
|3.4 Do the promoters have a track record of staying focused on their core operations?||We’d prefer companies which stay focused and continuously build upon their core competencies rather than frittering away precious capital for unwarranted diversification.|
|3.5 How has the management rewarded shareholders?||We prefer companies that time to time reward shareholders by means of regular dividend and bonus issuances.|
Finally, through the checklist above we screen from over 5000 listed Indian companies and identify businesses that have the potential to deliver at least 25% Profit after Tax (PAT) CaGR over the next 5yrs, with healthy free cash flow generation, low and or declining gearing levels and working capital intensity and strong return metrics as measured by RoCE of over 15% with increasing bias. The list is further narrowed down by super imposing the valuation and upside potential over different scenario analysis and risk sensitivities.
After your successful subscription to our Half yearly/Annual service, we will send you an email on your registered id, as per our records, seeking important details needed for transferring the “Gift Shares” to your Demat account. We will initiate the process of transferring the shares via Off-market transfer, once we get the required details from you.
Mr.Mohammed Anwar Ahmed had invested in 100 shares of Wipro at face value of Rs.100 in 1980
Let’s see his wealth creation journey of 500 crores.
He had invested in 100 shares at face value of Rs.100 in 1980. The initial investment was Rs.10, 000.
- In 1981, the company declared a 1:1 bonus. He now had 200 shares.
- In 1985, the company declared 1:1 bonus. He therefore had 400 shares.
- In 1986, the company split the share to Rs.10. He thus had 4000 shares.
- In 1987, the company declared 1:1 bonus. He hence had 8000 shares.
- In 1989, the company announced a 1:1 bonus. Now he had 16,000 shares.
- In 1992, the company declared a 1:1 bonus. By now he had 32,000 shares.
- In 1995, the company declared a 1:1 bonus. He then had 64,000 shares.
- In 1997, the company declared 2:1 bonus. He now held 1, 92,000 shares.
- In 1999, the company split the share to Rs.2. He now had 9, 60,000 shares.
- In 2004, the company declared 2:1 bonus. He thus had 28, 80,000 shares.
- In 2005, the company declared 1:1 bonus. He came to have 57, 60,000 shares.
- In 2010, the company declared 2:3 bonus. He now had 96, 00,000 shares.
The current market price is approximately Rs.500 per share. The shares are valued at Rs.480 crores.
Over the past 33 years, the company regularly paid out dividends and increased them almost every year. Cumulatively he received Rs.118 crores as dividends over the past 33 years. Thus by investing Rs.10, 000, Mohammed gained Rs.598 crores.
He is now retired and donates freely to charity from the dividends he receives. His foreign educated children often advice him to sell the shares but he has kept his vow of not selling a single share till Mr. Azim Premji is the working Chairman.
This is a lesson – both in patience and starting early.
Celebrating 7 Years of Success* and
Introducing Gift Shares
Inculcating the Habit of Long Term Investment in YouClaim your Gift Shares worth INR 5,000 Now!
*Refers to our Group company, Equentis Capital Pvt. Ltd.
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