Masterclass with super investors, Mittal and Basrar, 2019 - The book covers the investing styles, philosophy and historic investments/trades of some prominent names in the Indian investing landscape. This book has made a good name for itself since there are only a handful of books that cover what works or doesn’t in India and since most of our literature is from the West. It is organized into chapters that cover each of those investors so is very readable. What I also liked is that it covers investors with very a diverse range of styles.
Ramesh Damani
• The stock market is about looking ahead and not looking behind
• Earliest multibaggers are Infosys and CMC (40x in a year). He thinks its due to his circle of competence in tech. Infosys was a small bet that went up 500x,
• Great ideas are very rare (So back up the truck or average up)
• The market gives you money when you are uncomfortable
• A bull market leader is a bull market favorite and market doesn’t care if its 80 P/E or 100 P/E (and when it falls, it doesn’t care if its 20 P/E)
• You want to buy in a bear market and be patient and ride the bull market
• Get out of self-limiting mindset saying ‘I only buy technology stocks’ or ‘I only do real-estate’
• The next Xerox is Xerox (Has been applied to HDFC Bank here)
• A great company doesn’t happen overnight. It happens once every 2-3 years or at the end of every bear market (Maybe he means a great investment?)
• Lost money in MTNL in the middle of the telecom boom - equates it to being given a franchise with a multiplex, popcorn and coke stand and you still end up losing money
• If everyone disparages it, you probably have a good investment idea - there has to be skepticism in what you are buying.
• Worries only about the quarterly earnings of 5 companies which are large positions in his portfolio
• Vinod Sethi reads 3 annual reports a day everyday in his life (considers him the gold standard)
• Managements can run any dog and pony show - if we can’t judge them, we aren’t for for the markets
• Infosys was 90% of his portfolio once - he kept riding the winner
• If you double your money every 3 years and do it 10 times, you will be rich beyond your wildest dreams
• Before a bull market tops out, you fall in love with your stocks as the more you sell them, the more it appears to keep going up (Chandrakant Sampat). But it is necessary to do it disciplined, like 11am every wednesday
• Most of the time timing the market can be a futile exercise but at the extremes, it can be very profitable exercise (News flow and sentiment is a good indicator of tops and bottoms).
• Finding the top can be easier than finding the bottom since bottoms can drag for long
• When there is selling despite good news, smart money might be anticipating bad times
• Recommends thebrowser.com and longform.org and 'The spirit of st. louis by Lindberg)
Raamdeo Agrawal
• Delegates fearlessly. To build big things, one must delegate. Building trust is key
• Sometimes just by sitting, one makes money by luck
• CESC investment - fall in interest rates brought interest down from 400 Cr to 200 Cr which made PAT go up 30x. Depressed markets give such opportunities
• Good businesses have high return on tangible assets of company. Great businesses are able to deploy at higher rates of return. 90% of businesses are gruesome, about 10% are good and less than 1% great
• 25% CAGR = 10x in 10 years
• Div Yield / Div Payout ratio = P/E. When payout ratio doubles, P/E may double over time
• Books - Value Migration, Competitive Strategy, Expectations Investing, Measuring the Moat, Adaptive Investing, 100-to-1
Rajashekar Iyer
• When interest rate rises and economic growth stalls, smaller companies are the ones that are impacted most (was stuck in a lot of midcaps in 1995)
• Selling too early ('88-'91 - did well) and holding too long ('94-'95 - did poorly) will both be suboptimal. Sat out '96-'98 due to limited capital, made a killing in 2000
• Trailing stop at 20% of top to protect profits
• 2000-2003 wasn’t a bull market, so stayed 70% cash and traded with 25-30% of capital only with short horizon
• Books - Market Wizards, Trader Vic, Winning of Wall St., Trading in the Zone, Darvas book, Dow theory, Battle for investment survival, psycho-cybernetics, will o’ neal’s book,
• So long as you know how much you can lose, you can buy anything that you find attractive (No one says it like this)
• Pyramids to build positions (but only in rare high conviction stocks), held a 25% CAGR PAT grower for 10 yrs with 25% allocation.
• Reduces allocation when earnings doesn’t grow and then tracks and reallocates when it does
• Has hard stop at 1% of capital for any position. So if a position may decline 50%, he won’t allocate more than 2% of capital. For him to allocate 15% of capital, he will put a S/L at 6% drawdown
• Not comfortable with 30-35% drawdowns at portfolio levels so takes aggressive cash calls when anticipating a bear market
• Finds good companies by aggressively rejecting bad ones (by elimination). Good 10 year growth without equity dilution or debt are preferred
• Likes businesses that made 30% RoE in the past which is now down to 15% but earnings are recovering
• Sometimes you get too impulsive when you have too much cash (so true!)
• Switches overvalued stocks to other good ideas if he has any, else stays put
• When companies cross the Rs100 Cr barrier for first time, their growth opportunities expand and with it, the multiple (probably as funds get interested?)
• 5-6 stocks make up 2/3rds of the portfolio and another 5 make up 15% and rest are being liquidated or built
• In a cyclical business, ability to manage downturns is an indicator of management quality
• His big winners had deep undervaluation, immediate trigger to buy and big long-term position
• Doesn’t mind benefitting from excesses of the market but doesn’t position himself for the same
• Not investing in anything when there is nothing to do is good capital allocation
• Power, cement, steel - goes by discount to replacement cost. Especially with large debt so the equity multiple is easily 4x on re-rating
• Smaller capital, one must be willing to churn, identify and trade breakouts and not wait 6 months for stock to move and focus on risk management
• Survival is key to long-term success.
• As portfolio size increases, say from 50 lakhs to 5 Cr, one must get used to investing larger positions - say from 5 lakhs to 50 lakhs
Anil Goel - No notes
Govind Parekh
• Look for businesses that are first ones in the industry to do innovative things (eg of Rajapalayam mills bringing in Combidan mill)
• Sundaram Finance raised money through FDs and people needed contacts to invest in them (talks highly)
• Equity-to-turnover ratio - New plant would increase turnover and if margins go up, then profits shoot up on an increased turnover base and on a low equity base (MRF had a 2 Cr PAT on a 3.8 Cr Equity base
• Bought Bajaj Finance at Rs 17.50 (adj) and sold around 300-600. Regrets it though returns are phenomenal.
• Doubles money every 2 years and 4-5x in 5 years. Buys small positions to get foot-in-the-door - calls it platform ticket to board the running train later
• Best in capital allocation - Sundaram Fasteners, Carborundum Universal, Coromandel Fert, HDFC Bank, 3M India, Bosch, SKF, Rajapalayam mills
Bharat Jayantilal Patel
• Has a broking business and also invests but never both at the same time - says clients influence investing decisions and so he can’t be balanced
• Anything above 85% utilization will give pricing power to cement industry (65% in the south, due to price “understanding”)
• Bull or bear trends hit stock market first and then the real-estate market with a gap of 1.5-2 years
Hiren Ved
• Our market is very illiquid by global standards, so FII capital will keep pumping the few with disproportionately high valuation
• Individual investor not answerable to anybody can follow any investing philosophy they want (funds cant)
• Bajaj Finance would do internal evaluation against other NBFCs on 6 parameters and see how they stand against others regularly (unheard of in the industry before)
• P/E re-rating and de-rating is more sensitive to RoE than to growth
• Most extraordinary companies have surprised every analyst in the early phases of their growth
• Every time the system corrects for marcro issues, the corporate sector pays in terms of profitability on an “aggregate” basis
• We think companies always know their worth but they always have their blind spot (on buying stake from promoters)
• You cannot scale up complexity but simplicity can be scaled
• You cannot always be the creator of original ideas and must be willing to adapt to others’ ideas
• One must strike a balance between being independent and being egoistic
• In manufacturing any company that does RoE of 25% is respectable
• Special situations - you don’t have to play an event. You can play it “seen” instead of “blind” - invest post event rather than before (buy from people playing the event)
• When market is elevated, people start looking at value plays but deep value never work out (I disagree)
• Earnings have no meaning in bottom and top of cycle - only in the middle when trend is established
• Getting risk:reward right is more important than having patience and conviction
Kenneth Andrade
• Its nice to find an industry where everybody is making losses, since mostly its a matter of time before they bounce back
• If you buy something you dont understand, you don’t know when to sell it and will get stuck
Vijay Kedia
• Used to put all money made in earlier trade into subsequent trades and lost it faster than it was made
• Worked supplying materials while trading in early days to support himself with daily expenses
• People carrying or reading annual reports were considered educated (in the kolkata ring)
• When you have nothing, your intuition helps
• Markets reward you as per your perception
• When you reach a certain level and basic expenses are taken care of, you can fly
• Once a management thinks they have made lots of money, their hunger goes away
• We do everything twice - once in our mind and once in reality (wow)
• Has been able to catch big winners in every bull market - typically small caps move after the large caps do, so there is ample time
• Stock market is a game of the mind. If you think short-term your behavior will be different from if you think long-term
• If the management does not become billionaire, you cannot become millionaire (find managements with intent)
• If you see a 70 yr old company still at small size, then his exp. is only 5 years - the last 5
• Best time to sell is when the management changes focus
• Will sell all the stocks without question of price if there’s a bear market coming
• Common threads in successful stocks - unknown/unpopular company, capable management, good business, and illiquid stock. There’s no belief, then there is and stock moves and same people invest, followed by FII and MFs
• Started in market '78-'80. Took 20 years to reach net worth of 5 lakhs. Big money was made in last 15 years
Shyam Sekhar - No notes
Chaitanya Dailmia - No notes
I liked some sections a lot more than the others, some I found outright boring perhaps due to my biases to certain styles more than the others, or to certain individuals more than the others. It is perhaps my misgivings and faults, than to the book or the investor. 8/10