Evolution & Musings of a reclusive investor

I have been actively participating in public stock markets for about 13 years and have been (mostly) passive member of this forum since it was founded. Several times I have picked up a pen to chronicle my investments and related learning journey to share with VP and learn in the process. However something or other made me pause, more on that later.

I hope in this thread I can share how I evolved as an investor, different phases of learning / thinking and reflections on them with the benefit of hindsight. In hope this starts a productive discussion which helps me improve as an investor and may be also useful for others on this forum.

Before I start, I want to express heartfelt gratitude and sincere thanks to @Donald , @ayushmit, @hitesh2710 and other folks who created and nurtured this platform which filled a much needed vacuum in India for like minded people.

As I look back, I see four distinct phases of my journey as an Investor so far.

  1. Novice - It’s Easy !
  2. Explore - I don’t know what works - Confused Investor
  3. Comfortable - I know what works for “me”
  4. Open - New dimensions of investing

Novice - It’s Easy !


I graduated in 2004 from one of the famous engineering colleges in India. I come from a family with a business background with many of my relatives invested in public stocks (in the hindsight mostly gambled on broker’s tips) and grew with that context around me. When I graduated, strong desire to be financially independent led my choices and after a lot of introspection I did what I found to be only two respectable, reasonable (and legal) ways to achieving financial independence:

A) Co-founded an internet startup

B) Invested in stock markets

(We did the startup for about 3 years before it was folded up, with many valuable lessons learnt on the way).

I distinctly remember the first stock I bought was Bajaj Auto in ~2006 (back then it was a single entity, all currently listed business came out of that). I had just started reading Warren Buffet letters and one of the things he talked about was buying high quality businesses during temporary problems. There were rumors of issues among the Bajaj brother to split the business and it seemed to fit the definition of great business. The stock had corrected due to these issues and I bought some. It went down another~20% after I bought. I was scared and sold the stock when it came close to my buying price. How I wish, I would have held that but learned a lesson ( about conviction) which I appreciated much later.

Those were the heady days of stocks hitting upper circuits for weeks on mere mention (or rumors) of new orders, announcement or just whispered tips. It was too tempting when people around you are doubling the money in months. With the little money I had saved so far (“little” was a blessing in disguise) I bought several of those names - KEI Industries, Gremach Infrastructure, Bartronics, Sanghvi Movers, Aegis Logistics, Hanung Toys etc. It was “exciting” to see your stocks to move so fast. But as those who have been around back then know, these stocks came back and close to zero even faster. I lost most of money as tuition fees to the markets but since I had small corpus, it was a “value education”.

What I read: Some Warren Buffet letters - leaving me feel confident about easy money making from stock markets. Business newspapers, Online equity forums looking for the stock which is about to start the upper circuits

Mistakes I made: Almost textbook style of losing money. Impatient. Confident. Looking for tips. Buying fancy stories without business analysis. Make short term stock price movement dictate my actions

I still had faith in equity but those two early years forced me to look for the right way to analyze companies and approach equity investing.

To be continued in next post …

Topics for future posts:

  • Rest of investment journey
  • Musings on Portfolio construction
  • Styles of investing: Momentum or Value or Growth or XYZ
  • More on current portfolio (I hold Biocon, Borosil Glass, Mahindra Logistics, Piramal Enterprises, Shemaroo Entertainment, Zee Learn, Couple of speculative/nano caps, US stocks, US Cash)

Confused - I don’t know what works


As the start up folded, I joined at the India office of a large internet company. After burning my hands over the last few years, I was more diligent about understanding how the markets work and stumbled upon some of the usual texts (by/about Benjamin Graham, Warren Buffet, Howard Marks etc). Among other learnings, “Margin of Safety” (What to buy) and “Mr Market”(When to buy) made immediate sense to me and seemed obviously the right way to buying stocks. From many of these writings, my takeaway of “Margin of Safety” was simplistic - Buy cheap stocks . Wherein the cheapness was measured by Price/Earning (P/E) and/or Price/Book (P/B) ratios. I was excited and fired up stocks screeners to buy cheap stocks. In the subsequent months, I experienced and learned about “value traps” and why strategy focused only to not lose money is not enough.

I made some money in such stocks but missed the big rally in some of the high quality names which had a huge bounce back during those years. I had now regular cash coming in to invest but overall portfolio size was still pretty small .

What I read: Peter Lynch, More books about warren buffet, Howard Marks, Ben Graham

Investments: SIPs in mutual funds; Stocks: Sangam India, JK Paper, M&M Finance, Piramal Enterprises, VST Tiller, Atul Limited, Aditya Birla Chemicals (most of them were below book or single digit PE)

Key Learning: Don’t overpay

Key Mistakes: Value traps, Didn’t value quality and growth


Comfortable - I know what works for “me”


This was also a time when I had the good fortune of meeting and becoming good friends with one of the big investors in India. I read more (Charlie Munge, Nassim Taleb, Phil Fisher, Templeton , … ), deliberated and expanded my definition of margin of safety. These deliberations influenced me to change my analysis to evaluate how a company will look like 5 years from now than just looking at current story/numbers. This led to the following:

  1. Expanded definition of margin of safety - MoS can come from many sources like growth, dividend yield, business quality, management, external events etc.

  2. Filtering out potential investments : It helped early filtering of large number of stocks to exclude businesses which were difficult to imagine how the future may look like. I am not looking for exact numbers for future, just that with how much “probability” “I” can imagine “different possible paths” it can take - Please note the three keywords in quotes. Business with UUU quality which are not priced in are OK for me.

Looking back this was the pivotal point of my investment journey.

I still cared about “margin of safety” but was open to buying expensive looking stocks If by my estimates (usually on price/cash-flows) they can be at a reasonable multiple in 1-2 years from now due to growth in earnings and those earnings will continue to grow. To be systematic about this, I started journaling about the stocks that I tracked and kept updating my expected price 1 and 2 years from now. This helped me buy and hold some stocks even if they looked expensive at present. I would also update my journal atleast once a quarter or at other important events (including large buy/sell decisions) for every stock that I had in the portfolio.

To avoid value traps, I decided not to buy businesses:

  1. With negative operating cash flows with no visibility of turnaround even if they are available at fraction of asset/book value.

  2. With negative/low expected topline growth.

At this stage I had a reasonably concentrated portfolio with Biocon, Piramal Enterprises, Amara Raja, Page Industries, Hawkins, Titan, Arshiya Limited***, Finance Basket**, Cyclical Basket**, Speculative Basket**.

** For some of these stocks where in I want to play the opportunity but did not want to take a concentrated bet, I bought 3-4 stocks I liked and treated them as representative of that sector.

*** An interesting story on how I avoided a near complete loss and learnings

I also spent a lot of time thinking about:

  1. Portfolio construction (Portfolio composition, how much to allocate single bet etc).
  2. How to avoid landmines in Indian stock markets.
  3. Relative Importance of Financial statements Cashflow, Balance Sheet vs P&L
  4. Checklists to evaluate new business
  5. Expanded definition of value
  6. Journaling on portfolio and other stocks
  7. How to identify signal vs noise. Often there are only a few things which are most important to evaluate a business for investing but identify those (or get distracted) in a sea of noise could be difficult
  8. How to buy growth without overpaying for it

This was the phase where in though I made my mistakes and kept learning new lessons, I found myself “comfortable” with “my kind of investing”. I realized what are my strengths (and weaknesses) as an individual and as an individual small investor. And I found that there are certain characteristics of stocks where I tend to like and make money. (This topic deserves its own post, but I very strongly feel that each investor should look within on what are their intrinsic preferences and identify what kinds of stocks/investing style aligns well to that.)

I was lucky to have a stable investment philosophy with strong cash flows from my job in a rising market.

I also moved to USA.

What I read: Phil Phisher, Seth Clarman, George Soros, Nassim Taleb, UUU, Charlie Munger, John Templeton, Robert Cialdini, Daniel Kahneman, Berkshire letters, Jesse Livermore, Malcom Gladwell, Pat Dorsey, Michael Mauboussin, Benoit Mandelbrot, Texts about importance of and analyzing Balance Sheet and Cash flow and many others

Investments: Biocon, Piramal Enterprises, Amara Raja, Page Industries, Hawkins, Titan, Arshiya Limited***, Finance Basket**, Cyclical Basket**, Speculative Basket**.

Key Learnings: Value of Quality & Growth, Edge of the small individual investor, Distance from market noise, Looking at what a business can be in 5 years from now.

Key Mistakes: Sold some winner early, Big mistakes of omissions

… to be continued


@photon Can you you please elaborate Expanded definition of Margin of Safety- How the MoS can come from growth, business quality, management and external events.

It is good read. Since you moved to USA, did you change your demats to NRI status. Do you have any strategy on buying stocks through NRE and NRO accounts? It seems there are some limitations in buying stocks through NRE demat. Did you face any such limitation?

Best Regards

Thanks Nityanand for your question. Please excuse my late response as I am in timezone ~13 hours behind India.

I look at the “Margin of Safety” as the basic principle of the downside protection of the investment/capital at current prices. In my experience I saw several companies seem to indicate base prices which can (sometimes justifiably) attributed to one of more such factors. Caveat here is that even with such expanded definition, stocks do get expensive/overvalued beyond what one may be willing to pay. Some examples of these factors from my own direct experience:

  1. Growth: As businesses which have high and predictable growth often trade at high multiples. For Page industries or HDFC bank, I used to look at earnings 12-18 months in advance (which were fairly stable in 2013-2017 period). I would look stock price multiples with the earnings growth which will come in the next 1 or 2 years (If earnings go higher by 50% in 2 years, multiples get halved). I viewed earning growth as compressing the spring of price , more the earnings growth - greater is the compression and there is only so much a spring can get compressed. And when the recoil happens the move is violent.

    Also looking at the price charts of the stock/industry over a long period gives some idea about how cheap they can get even during an unfavorable business cycle.
    ps: I sold both HDFC Bank and Page industries in 2017, when they looked expensive to me even when adjusting for growth in next 12-24 months.

  2. Dividend yield: Average dividend yields in Indian markets are usually <2%, they are rarely higher than nominal interest rate in the economy over extended periods for good/clean companies. In my experience there are times when some companies are available at very high dividend yields even when they are at the bottom of business cycles. If the yield goes higher than nominal interest rate, the price adjusts sooner than later (or does not go down much) if the market believes the yield to be predictable. If these companies are 1) Growing (not necessarily fast growing) 2) High operating cash flows (not necessarily profitable) 3) Capable Management with clean track record 4) Bottom of business cycles - In my experience they are a great way to make money with dividend yield providing downside protection, such opportunities are often more frequently present in cyclical stocks. In early 2014 I bough Apar Industries, Gateway Distriparks, Rane Madras and Rane Holding as my cyclical basket (referenced in the portfolio for that period) with above criteria with 5-10x returns. But it’s difficult to do large allocation to single bets as these may not be great businesses over the long term and one needs to be careful to time entry/exit.

  3. Business/Management Quality : Business with predictable metrics with high RoE, free cash flows rarely fall and if they do, recovery is usually quick. The downside protection comes from market participants perception of the value of such business and managements. For such companies I would look at the long term PE or P/OCF range and try to buy them if they come closer to the lower side of that range. I keep a watchlist of companies that would buy if they trade at such multiples. (Examples: Nestle, Pidilite etc)

  4. External events: In my experience often there could be potential unknowns which can provide the upside in the future and are not currently priced in by the stock markets. ( Nassim Taleb calls them free options Or Mohnish Pabrai calls “Heads I win, Tails I don’t lose”, also see UUU). There are some businesses which present such opportunities, one example from my portfolio:

    Biocon: Biocon was available at very reasonable multiples of their existing business during 2011-2014 with several of their biosimilar drugs approved and launched in India. Market only priced in the value from the current launches. But the fact that drugs had been used in India meant that the drugs actually worked. It was a matter of when US market will open for biosimilar drugs and not if these drug will work. (Give EU had welcomed biosimilars for last 10 years and the drugs pricing being the big election issues in US along with industry consolidation it was imminent in my opinion). Once the US market opened for business and people realized the same vial of drug makes order of magnitude more profit in US, Biocon’s stock took off (Also there was Syngene IPO which was not priced in). Even if these events didn’t exactly materialized, I would still make the money from existing business growth.

I think in Indian markets Intellectual Property is not valued properly and if there are companies with IP which can be monetized, such opportunities can be interesting. Other examples of external events are potential subsidiaries IPO or monetization.

Ideally I would want more than one factor from above to be present to buy a stock. But management track record and growth is almost a must to not get into a value trap.

Hope that makes sense and useful.


Thanks for the feedback.

I found it easier to open new accounts than conversion. I have NRO PINS account in which I moved my existing stock holdings from resident account and a NRE account through which I makes incremental investments. My accounts are in Kotak bank and the only limitation is that I have to call/email a dealer for placing my orders (No Online trades), which is fine with me. Is there some other issue you heard/faced ? Thanks

I had my account with ICICI. I can able to trade online like, how I was doing in resident account. There are some more issues like stock buying restrictions in NRE account. When we are investing through NRE, we are considered as foreign investors. Means in NRE, the investors are restricted with FII limit. This stock list is regularly updated in RBI website. Also IPOs can be bought only through Non PINS. Still I am exploring these things in NRI demat accounts. I am always getting something new.

Yes, NRI account does have the restrictions which you mentioned. I have kind of made my peace with them :slight_smile: