I invested in ITC in 2020.
My average purchase price was 187 INR.
At that point in time, ITC was a Meme stock. A lot of my friends asked why I invested in ITC when there are greater and more exciting high-growth opportunities in the market.
The popular consensus at that time was that ITC is a dead stock (not a dead company) and the only way the stock price would move was if it demerged all its entities.
While I do agree that ITC will never grow as fast as some other small-cap / mid-cap companies what attracted me were the probability of a risk-free 15 % CAGR return.
Here is what I thought at that time.
- At that time, ITC was being valued at 12-15 PE. ITC has historically grown earnings at 9-12 percent CAGR. HUL which had the same growth rate was being valued at 70 PE. It simply did not make sense.
ITC was highly undervalued here.
So over a 10-year period, all I wanted was this.
- ITC keeps growing earnings at 9 % PA
- Markets get rational and start valuing ITC at 25 PE.
- Keep Collecting Dividends every year. With Dividends growing at 9 % CAGR
That would make my investment 4x over a period of 10 years.
4x returns in 10 years with virtually Zero Risk of Capital Loss.