Warren Buffet on his Birthday Interview
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Mr Ramesh Damani interviewâŚWorth your time
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Michael Mauboussin talks about common mistakes. All are so relatable.
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âSharp Stock Crashes Are Not the End of the Worldâ
The recent market correction is only a short-term pain for genuine longterm investors, asserts Porinju Veliyath, founder, Equity Intelligence India. In an interview to ETNow, he said that the last 2-3 years have spoilt investors because returns have been extraordinary.
Edited excerpts:
How are you approaching this market because all kinds of parallels are being drawn between
September 2008 and September 2018. The news flow may not be that bad, but for mid- and smallcap
investors, the pain has been excruciating. So, how are you dealing with this fall?
As an investor, I have nothing to do at this point of time. Investors have to only wait and watch. This is a
typical market panic and we have gone through such many corrections and cycles and every cycle, every
correction is unique in this market. That is what I believe.
People try to compare it with 2008 or 2000 IT bubble or 1992, but these things do not matter and every
cycle is a learning point. When the markets are bullish and things are going well, especially in the five
years of bull market, especially for small and midcaps, everybody gets carried away, even I also got
carried away.
One thing investors should not forget is such kind of scary fearful situations, sharp corrections and crashes
have happened many times in the past and every time, markets have bounced back. So, it is not the end of
the world. As many people may be thinking at this point of time, this is not something happening for the
first time.
But there are some certain aspects of this fall. This crash is the first time in the sense our Nifty, for
example, is still at near the peak. We had gone to something like price earnings multiples of 28-29 for the
Nifty. It is still around 26 or may be 25. It is still expensive and at that same time 90% of the stocks, listed
companies even investment worthy companies, they have gone 30%, 40%, 50% and some of them 60%
and 70%.
So, this is very unique and it is very painful for investors in any case. Especially in the short term, maybe
1-2% of people survive and some of them might have even made money. But investors at large are in pain.
One has to admit that. But I believe this is a short-term pain for genuine long-term investors.
How should one really minimise the losses, do maximum capital protection? Last 2-3 years have
spoilt us because returns have been extraordinary and this mean reversion is coming at a painful
cost. But when you suddenly see portfolios which are down 15-20-25%, what should one do?
Equity investors have lost money. Now the only thing what they can do is lose more money by selling it
today. So right stock again is not an easy thing. If you remember, I was talking about an improvement in
the corporate governance and some of the âchorâ companies with very good business model could be
multibaggers when corporate governance improved.
10/3/2018 âSharp Stock Crashes Are Not the End of the Worldâ - The Economic Times - Mumbai, 10/3/2018
https://epaper.timesgroup.com/Olive/ODN/TheEconomicTimes/PrintArticle.aspx?doc=ETM%2F2018%2F10%2F03&entity=ar01205&ts=20181003001⌠2/3
I have gone very wrong in timing that because I was very optimistic with the structural changes happening
in the economy where the black money has been discouraged. Many of the smaller companies, family
owned and traditionally managed companies will have encouragement to go more professional about it and
take care of the minority shareholders. So that expectation has been belied. So, I am paying a price for that
at this point of time.
But I have not lost all the hope on that. I still believe there is improvement in the corporate governance
happening or it will definitely happen, the way things are moving in this country and we are now in fact
going through the pain of that reforms, going through the pain of that cleaning up happening in this
country. So I still definitely appreciate the recent reforms by the government to clean up the system.
All systems have been corrupt and the criminals and the bad guys have been making all the wealth so that
system has to change politically. Bureaucracy and the complete social sector has to be cleaned up. That
cleaning up is happening and I in fact underestimated the short-term pain of that reform. So many
companies are paying a big price for that. There can be even permanent loss of capital in some of the listed
companies.
You rightly said it is really the fear psychosis which seems to be gripping the market right now and
investors at large. So tell us what is your strategy right now in your PMS, are you buying this
decline into individual stocks or are you in pure capital protection mode right now?
I am in total inaction at this point of time, to make it very frank. I do not have money to invest. Of course
some fresh money is coming in. They have been adding funds, additional capital and many new investors
are also opening accounts.
So, we have been fully invested otherwise. With this new money coming in, I am very confident, I am very
happily buying stocks. Even today, we have clients and we will be buying mostly today itself and maybe
little money kept for some of the stocks where we expect it to go down further and this market is too
dynamic.
Now, it is very easy to say people are using today the word âcapital protectionâ, I think it is a wrong time to
use that word. If somebody had that vision eight months ago or one year ago, all this sophisticated jargon
would have been more relevant.
But again nobody is that smart in this market. Market makes everybody look fools at some point of time.
A few of the people who have been talking about capital protection and the price earning multiple were
bearish in the market 3-4 years ago and they have missed out on the rally.
But those people are really doing well today. Their conservatism, their capital protection kind of style
everything is working in the last eight months. So that is why I am telling everything, every strategy has a
time and market has the cycles and even individual companies are going through cycles.
NO NEED TO PANIC
This is a typical market panic and we have gone through such many corrections and cycles and every cycle,
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Great talk by Mohnish Pabrai - The Ten Commandments of Investment Management.
Following are the Ten Commandments he explained.
- Thou shall not skim off the top.
- Thou shall not have an investment team.
- Thou shall accept that thou shall be wrong at leat 1/3 of the time.
- Thou shall look for hidden P/E of 1 stocks.
- Thou shall never use excel.
- Thou shall always have a rope to climb out of the deepest well.
- Thou shall be singularly focused like Arjuna.
- Thou shall never short.
- Thou shall not be leveraged. Neither a lender nor a borrower be.
- Thou shall be a shameless cloner.
Regards
Harshit
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This is not a video by an investor, but it was just too good. So pardon me, I have to share this.
The future is uncertain. But you can damn well try to estimate it.
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Always a pleasure to listen to Howard Marks.
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23rd Wealth Creation Study - By Mr. Raamdeo Agrawal
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Samit Vartak on Bloomberg Quint.
Key notes
- Investors are having a psychological bias towards avoiding a further 10-15% fall which isnât much compared to quantum of gains possible in next 3-5 years
- High quality midcaps which can grow earnings at 20-25% in next 3-4 years look interesting from
valuation. Many of these are trading at PE lower that expected growth rate - On high quality consumer large caps : Valuations will sustain till growth is there. If growth stops there can be sharp correction e.g. Maruti - 30% correction
Lots of learning from a 30 mins conversation
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Good interview with Guy Spier and Mohnish Pabrai on ET Now
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The famous interview:
The Kiril Sokoloff Interviews: Stanley F. Druckenmiller
Full Video: 1:24:38
Berkshire AGM from 1994 videos
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PPFAS unit holderâs Meet a must watch for individual investors to learn thought process valuations models etc
Topic covered
1.Focus on valuation(discount to intrinsic),management quality etc stock selection filters , where he emphasise difference between discount stocks vs cigar butts
2.Teck stocks like FB
3.Pharma sector
4.Brief idea about Cable manufacturers,Insurance, diagnosis space
5. Why they are not holding High allocation to FMCG stocks whereas in past these sector was their favourite and caution is required in consumption space. Referenced this article https://www.thehindubusinessline.com/opinion/columns/aarati-krishnan/are-consumption-stocks-invincible/article25625089.ece
6.Focus on positive surprise while holding companies
7.Overall market valuations like NIFTY PE(as per NSE standalone) vs BSE(Consolidated)
8.Speciality chem vs commodity chem
9.Competitive intensity in industries like Airline/Telecom/Road construction
10. What to look out for while investing in gov owned companies
11.Importance of Capital preservation vs growth
{e.g.: It is better to have low expectations and then beat them rather than assume high returns and find that our savings are not sufficiently large enough to meet our financial goals.
Is the fastest mode of transport to your destination always the best? In our view not necessarily. Say, you are flying from Chennai to Delhi. On the normal path there is some weather turbulence and your pilot decides to take a detour on account of safety and comfort considerations. Due to this, you reach your destination 30 minutes later than the scheduled time. Some other pilot of another airline decides not to take a detour and reaches safely and on time but with a lot of scary moments for the passengers. Is the second pilot better? }
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