My Pursuit of an Unusual Multi-bagger Stock (Kellton Tech)

If you are like me, an Indian growing up in a middle class family, it’s very likely you avoid stock markets and think of them as casinos.

Throughout my life, I had the same notions. I even had several people telling me horrible stories about their experiences with stock market. Though I believed in the stories, I always wondered how do people like Warren Buffet and Rakesh Jhunjhunwala keep on getting rich year after year from the same stock markets.

So, one day I decided to explore more about it online and found interesting stuff about value investing. The approach sounded very simple. Buy shares of good businesses who are selling cheaper than their actual worth.

I really liked the approach and decided to give it a try. I went online looking for a stock that met this criteria. That’s when I found Kellton Tech (September 2019). Let’s understand what happened next.

COVID-19 struck and stock markets hit rock bottom. In April 2020, Kellton Tech was trading at Rs 7. I had purchased this stock at Rs 14 and was in a panic.

I had 2 choices:

1. Sell at Rs 7, hence avoiding further losses.
2. Trust my research work and hold it or buy even more.

Before I tell you which choice I made, let us see how the underlying business looked at that moment:

Yearly Sales: Rs 771 Crores

Yearly Net Profit: Rs 71 Crores

Net Profit per share: Rs 7.36

Now, this sounded to me as crazy. How is it possible that a company that makes Rs 7.36 profit per share every year is selling it for Rs 7. It’s like I take a Fixed Deposit of Rs 7, and I get Rs 7.36 interest every year on it.

I know what you are going to say, “The company is probably a scam and I am just going crazy”. Except it isn’t a scam. The company is around 20 years old. I have been researching on this company for a while. Further, company is working for really notable clients like:

1. Food Corporation of India
2. IBM
3. Indigo
4. Flipkart
5. Walmart
6. Coca-Cola

The list goes on to include several another big international brands. Management checks out okay, clients are happy, employees are happy. Yes, there were few warning flags but in no way that could explain the huge mispricing in the stock.

Hence, it was a no brainer for me to double down my investments. Fast forward to today, I am sitting on a 10x multi-bagger stock which grew from Rs 7 to Rs 75.

What is even interesting is that it was not a one-time opportunity. So many such opportunities exist in the stock market and the only thing you need is a small effort to find such opportunities and a weekend to do research on them :)

(Disclosure — I am currently invested in the stock. The above article in no way should be considered as a stock recommendation)