The Myth of the 'Good Stock'
Unpopular opinion and maybe I sound a little mad, but hear me out: a “good stock” doesn’t really exist, at least not in the way most people think.
If you regularly analyse stocks, you’ve probably heard of bluechip stocks. When I started in 2020, the advice was simple: invest in companies with a massive market size, strong profitability, and a long track record — Reliance, Infosys, Tata Consultancy Services, Wipro, Marico, ITC, and Hindustan Unilever. You know, the usual suspects.
But with time and experience, I realised that wasn’t enough — not if I wanted to beat the market or earn exceptional returns. Think about it: if picking a great stock was as simple as reading an income statement, everyone would already be rich, right?
So what actually matters then? I’ll get to it, but let me be clear first: reading a company’s financials is absolutely necessary, it’s a must. My point is it shouldn’t be the only reason you invest.
The Most Important Thing? Valuation.
Or more precisely — investing at the right price and the right time.
“The world’s best company bought at the wrong price can lose you money. An average stock bought at the right time can create wealth.”
Indian retail investors often carry a mindset I’d call dangerously oversimplified: “Buy a good company, hold for 10 years, get rich.” What people don’t realise is how rare it is for a company to grow continuously for a straight decade. It’s not impossible, but it’s far rarer than most people think.
My approach now is to find a company that can grow for 2 to 3 years, because from experience, growth tends to fade after that. The stock then enters a stagnation phase where you’re just paying the opportunity cost of holding it.
Sector Rotation is Real — Learn to Spot It
It’s very rare for all sectors to be in a bull run simultaneously. There’s almost always one sector beating the market at any given time. You just need to identify it.
When I entered the market, the Chemical Sector was on fire. Companies like Deepak Nitrite, Fineotex Chemical, and Rashtriya Chemicals performed exceptionally well for about 1–1.5 years. Then the sector got hit hard by raw material price swings, international competition, and most critically, China aggressively dumping cheap chemicals into India — something that has since been officially recognised as one of the most significant and persistent headwinds for the entire Indian chemical sector. The sector is still recovering.
Next came the Pharma bull run. Marksans Pharma (a personal favourite), Aurobindo Pharma, and several small-cap pharma plays ran well. The run was already fading before the US tariff announcements came in, but those acted as the final catalyst that accelerated the correction.
Most recently, Auto Ancillaries (companies supplying OEMs to auto manufacturers) had their moment — Gabriel India, Lumax Technologies, Belrise Industries, and many others.
Why No Stock is Truly “Good” or “Bad”
Let me give you a real example.
Take IDEAFORGE (Ideaforge Technology). A loss-making company, stock falling since its IPO, heavily held by institutions with little retail participation. By every traditional checklist, this is a stock you’d avoid.
But if you actually studied the business, you’d see:
- One of the very few companies in India manufacturing drones indigenously.
- Strong R&D spending.
- A solid product portfolio across defence and agriculture.
- 25 patents globally.
The losses weren’t from a broken business model; they came from being a capital-intensive company still in its heavy growth phase.
Because of the “loss-making” tag, the stock kept falling and eventually became very cheap. Then, their order book swelled to ₹440 crore, and they posted a profit of ₹60 crore in Q4 FY26 against a loss of ₹26 crore the previous year. The stock nearly doubled from its 52-week low in a matter of weeks!
(And yes, I was invested in it with a small amount. Just so you know I’m not saying this in hindsight! 😄)
How Do You Find These Opportunities?
It’s simpler than it sounds:
- Visit the company’s website and genuinely try to understand what they do.
- If you believe in the growth story, add it to your watchlist.
- Read the concall transcripts regularly — that’s where the real insights are.
Similar stories worth studying include Gabriel India, Marksans Pharma, and Honasa Consumer Ltd. (Mama Earth) — the latter is still playing out, so it’s too early to call.
Which sector do you think is next in line for a bull run? Drop it in the comments, I would love to hear your thoughts.
Pankaj, signing off. See you next time!