{"id":994,"date":"2025-03-24T15:57:37","date_gmt":"2025-03-24T15:57:37","guid":{"rendered":"https:\/\/sharpely.in\/blogs\/investing-like-rakesh-jhunjhunwala-a-stock-screen-based-on-his-philosophy\/"},"modified":"2026-06-03T15:48:13","modified_gmt":"2026-06-03T15:48:13","slug":"investing-like-rakesh-jhunjhunwala-stock-screen-based-his-philosophy","status":"publish","type":"post","link":"https:\/\/sharpely.in\/blogs\/investing-like-rakesh-jhunjhunwala-stock-screen-based-his-philosophy\/","title":{"rendered":"Investing Like Rakesh Jhunjhunwala: A Stock Screen Based on His Philosophy"},"content":{"rendered":"

Rakesh Jhunjhunwala, often called the “Big Bull” of the Indian stock market, was known for his ability to identify multi-bagger stocks early and hold onto them for long-term wealth creation. His investment approach blended deep conviction, strong fundamentals, and an understanding of business cycles. While his method was primarily qualitative, we can try to convert his philosophy into quantifiable screening rules to build a stock screen inspired by his strategy.<\/span><\/p>\n

In this blog, we\u2019ll break down his key investment principles, define a set of screening rules based on his approach, and test the screen using backtesting on <\/span>sharpely<\/strong>.<\/span><\/p>\n

Rakesh Jhunjhunwala\u2019s Investment Philosophy<\/strong><\/h2>\n

Jhunjhunwala\u2019s investment philosophy revolved around a few core principles:<\/span><\/p>\n

    \n
  1. Strong Business Fundamentals<\/strong> \u2013 He preferred companies with robust financials, strong balance sheets, and sustainable business models.<\/span><\/li>\n
  2. Scalability and Growth<\/strong> \u2013 He looked for businesses with the potential to grow revenues and profits significantly over time.<\/span><\/li>\n
  3. High Return on Capital Employed (ROCE) and Return on Equity (ROE)<\/strong> \u2013 He focused on companies that effectively reinvest their profits and generate high returns.<\/span><\/li>\n
  4. Management Quality and Moat<\/strong> \u2013 He valued competent leadership and companies with competitive advantages.<\/span><\/li>\n
  5. Reasonable Valuation<\/strong> \u2013 He believed in buying quality companies at a fair price rather than chasing low-value stocks.<\/span><\/li>\n
  6. Long-Term Holding<\/strong> \u2013 He had a high conviction in his stocks and often held them for years, allowing compounding to work in his favour.<\/span><\/li>\n<\/ol>\n

    Based on these principles, we designed a <\/span>quantitative stock screen<\/strong> that aligns with Jhunjhunwala\u2019s investment strategy.<\/span><\/p>\n

    Quantifiable Screening Rules<\/strong><\/h2>\n

    Using these principles, we have identified seven screening rules:<\/span><\/p>\n

      \n
    1. Market Cap > \u20b95,000 Cr<\/strong> \u2013 Focus on mid and large-cap companies with established business models.<\/span><\/li>\n
    2. Revenue Growth > 10% (5-Year CAGR)<\/strong> \u2013 Ensures the company is expanding at a healthy rate.<\/span><\/li>\n
    3. ROCE > 15% and ROE > 15%<\/strong> \u2013 Companies generating high returns on capital deployed.<\/span><\/li>\n
    4. Debt-to-Equity Ratio < 0.5<\/strong> \u2013 Prefer companies with lower leverage to reduce financial risk.<\/span><\/li>\n
    5. Operating Profit Margin > 15%<\/strong> \u2013 Indicates strong pricing power and profitability.<\/span><\/li>\n
    6. Promoter Holding > 50%<\/strong> \u2013 Shows management\u2019s strong confidence in the company\u2019s future.<\/span><\/li>\n
    7. P\/E < Industry Average<\/strong> \u2013 Ensures the stock is not overly expensive relative to its peers.<\/span><\/li>\n<\/ol>\n

      Backtesting the Stock Screen on sharpely<\/strong><\/h2>\n

      To assess the performance of this stock screen, we conducted a backtest using <\/span>sharpely\u2019s backtesting tool<\/strong>. The test was run over the past <\/span>3 years<\/strong>, rebalancing every <\/span>quarter<\/strong> to ensure the screen remains updated with changing market conditions.<\/span><\/p>\n

      <\/p>\n

      <\/h4>\n

      Backtest Results<\/strong><\/h3>\n