Some time ago I came across an interview of an investor from Mumbai whose rise has been meteoric. I’m not certain if I’m allowed to mention details of the investor. Hence, let’s address the veteran investor as Mr.S.
His success story is inspiring but the obstacles he faced are moving. Despite those impediments he never gave up. He vanquished those roadblocks and emerged victorious. The success story is an outcome of a concoction of grit, determination, dedication, integrity. The interview was conducted by Mr. Puneet Khurana from Stoic Investing. I’ve made notes of the 120 minutes interview. If I err my apologies.
At the outset of the interview Mr. S declared that he didn’t complete his graduation course . He abandoned the Bachelor’s of Science course.
However, he had a keen interest in economics and statistics.
Iron and steel broking was his family business.
Post college he joined the family wholesale brokerage business.
His responsibility as a broker involved visiting the train yard and selecting defective steel units, pieces that could fetch a decent amount in the market and acting as a liaison between the buyer and the seller.
However, the yard was later shifted to a location far away from his home.
The increased distance prevented him from visiting the yard and selecting good quality steel samples.
Per him success in the brokerage business is dependent on honesty, integrity.
Ever since he left college he had developed an affinity for equity Investing.
He was an avid reader. He would collect new issue forms. New issue forms are today called Red Herring Prospectuses. He would preserve all the forms.
It was difficult for him to manage his passion for equity and the iron and steel brokerage business simultaneously.
It dawned on him that there wasn’t enough money to be made in the metal brokerage business. It helped him earn enough money to survive. But, not enough to thrive.
It was either equity or metal broking. Finally, he took the difficult decision of moving to equity full time. He was enamoured by the tremendous growth stories of ACC, HUL, etc.
This happened more than 3 decades back.
The Struggle in Equity Markets:
The veteran investor, today, has no qualms in accepting how difficult the first 20 years in equity were for him.
His decision to switch to investing full time was looked down open. The stock market was considered a speculators’ den. Disparaging remarks were often passed for the market.
But, Mr. S didn’t give up. He firmly believed that the market is always right.
His dream, his mission in life was to find multi baggers. Per him, stocks that are in the limelight, that are well discovered can seldom become megabaggers.
He is a staunch believer in the contribution of luck to a person’s success.
Between 30 years ago and today, his wealth has multiplied manifold. His quality of work has remained the same. But, what changed was his luck.
In the expert investor’s opinion, there are various factors that determine a person’s success. The important one being luck, good fortune.
But, most importantly, ALWAYS TRY HARD. ALWAYS GIVE IT YOUR BEST. YOU NEVER KNOW WHEN FATE FAVOURS US.
Finally, fate smiled at him in the early 2000s. Not because of the dotcom boom.
But, before I get to the life defining success he achieved I’d like to share the difficulties he faced on the path to victory.
His 10 year old son wanted a bicycle. On enquiry it emerged that the cycle costed Rs. 1600.
It may seem like a small amount today but in those days he didn’t possess it.
He resolved he would gift his son a cycle. Expenses on all non essentials were reduced and finally, after 18 months of toil, enough money had been saved to acquire a bicycle.
Survival was a struggle. In the meanwhile he worked at the garment business of an acquaintance. The job didn’t pay much but it was warranted to supplement earnings.
Finally, after a year, he left the job because the equity bug wouldn’t leave him.
Despite the laborious life he never abandoned his desire to learn, to acquire knowledge. He had been a big collector of annual reports. He wanted to buy financial magazines. But, they were expensive. Hence, he would work hard to secure a magazine that was reasonably priced. He believed that newspapers and magazines are the cheapest yet the most reliable sources of information.
One day, almost 2 decades ago, he was reading a financial magazine. He was impressed by the organised retailing industry.
Captivated by the retailing sector, in 2000, he invested in shares of Pantaloons for Rs 12 apiece. The major competitor in organised retail was Shopper’s Stop. Shopper’s Stop was attracting millions in PE money.
Hence, he theorised that Pantaloons would succeed as retailing would migrate from the unorganised to the organised sector.
After repeated attempts he was able to get a meeting with Mr. Kishor Biyani whose vision was organised retail in India.
I must reiterate that Mr. S still hadn’t achieved extraordinary success. But, he was trying.
Pantaloons’ first store was at Crossroad 1.
One day, Mr S convinced his wife to visit a Pantaloons store to experience modern retail.
His wife, however, wasn’t willing to visit the store since they didn’t possess the wherewithal to shop at such stores. They had just enough money to commute via public transport to and from the store. However, he convinced her to visit the store and just have a look at the new face of Indian retail. He was trying the Peter Lynch investing philosophy.
His wife was mighty impressed by the extensive range of clothes, outfits offered. Also, the experience of shopping in an air conditioned enclosure was remarkable. He was convinced this form of retail would do well. It was only a question of when.
His patience paid off. From his investment in the year 2000 for Rs 12, the stock appreciated to Rs. 2500 in 3-4 years. A return of almost 20000% in 4 years. Truly incredible.
His next investment was in a company called SSI.
He invested a significant portion of his portfolio in SSI.
He still wasn’t financially secure. But, was patient, calm.
He had decent unrealised gains.
But, past success in investing emboldened him to try his hand at trading.
His gains in SSI were eroded by trading in a now famous fertiliser company.
He sold his entire holdings in SSI at X and the stock appreciated to 35X.
He was subsidising his loss of speculation by booking his profits in tech companies. Not a very good strategy, in hindsight.
And, he continued to speculate because there was a desperation to make big money. He still hadn’t made big money and he was exhausting his savings for day to day expenses.
In this tumultuous period he never gave up learning. He worshipped newspapers and annual reports.
In 2000, when everyone was focused on IT stocks he focused his concentration on a stock called Elecon Engineering. His investment was based on the capex cycle over the next few years. But, since hardly anyone was paying attention to stocks other than IT he got a wonderful entry price of Rs 27. Along with Elecon he invested in Dynamatic Technologies at Rs. 27. He was able to detect the trend before anyone else.
When market trend aligns with our strategy massive wealth is created.
And, he attributes it to luck if such a favourable alignment occurs.
He was way ahead of the trend. His patience was tested. But, fruits of patience were sweet.
In 4-5 years he sold his holding in Elecon at Rs.4000.
One master tip- He never looks at his cost of acquisition. It leads to anchoring to the cost price. He looks at the current price and assesses the situation. If investment thesis is valid he holds. Else exits the stock.
He chose to be a contrarian and invested in leaders in the struggling sector. When the sectoral outlook improved gains were massive.
Criteria for investment :
1)Which are the emerging sectors?
2)Which sector can have positive trend in the market?
3)Most important is the price of entry and patience.
4)Good entry price gives margin of safety.
5)Look at shareholding pattern.
6)If mutual funds, FIIs have holdings,the stock is dissected enough, it is unlikely to be a megabagger.
7)Never place target on selling price.
8)Always set review prices.
9)If review target is achieved, review stock fundamentals. If thesis is still valid hold. Else, sell.
8)Annual Report is the Holy book.
9)All persons have strengths and weaknesses.
10)Find your strengths and focus on it. Refine it.
11)Always be a student. Keep learning. The day you stop learning the downfall commences.
12)Knowledge is supreme.
13)More than what to do, what not to do is more important.
14)Be an eternal optimist.
15)Don’t give up. Have faith.
16)Finally, stay invested in equities and trust the growth story of India.
And, the investor finally did make it big.
He did very well for himself and achieved his dream of being an extraordinary success by starting from scratch.
It’s a true success story. The aforementioned investor, now in his late 50s, may not garner media attention. But, it’s a story that’s inspiring, motivating and reassuring that every person possesses the ability to succeed.
If I’ve erred in any part my genuine apologies.