Big Boys Of The Indian Stock Market – Part 2
Apr 27, 2017 | 18:37 PM IST
Apr 27, 2017 | 18:37 PM IST
In our pursuit of finding value investors other than Rakesh Jhunjhunwala, in the previous chapter, we met Porinju Veliyath, Chandrakant Sampat, Raamdeo Agrawal and Ashish Dhawan. But the community of value investors has more names to offer. In this chapter, we will meet four new investors who, through their investment acumen, have redefined the art of wealth creation.
It's important to understand the philosophy of every value investors as every investment philosophy differs from other. Of course, there is a standard research technique but every investor brings his own style and personality traits to his/her plan. For example, Buffett used to specifically investment more in food and beverages while categorically avoiding IT. Similarly, the market veteran Chandrakant Sampat would only investment FMCG. What made them take those calls?
Every investment philosophy gives you a peep into the investor's mind.
Parikh, like all his fellow investors, is a firm believer in the value investing ideology, however, he perceives it a little differently. His idea of investment revolves around buying businesses which he understands. He further adds that along with long-term investment perspective, it is important to buy stocks cheap. He believes, buying good stocks cheap gives you more room to exploit the full potential of the stock. He says, "If you invest in good businesses then even if the market is going through a turbulent phase, you can rest assured that your investment, sooner or later, will come through with flying colours."
In 1983, Parag Parikh set up Parag Parikh Financial Advisory Services (PPFAS). Working on the strict value investment code, on several occasions he faced the flak of his investors as he refused to budge from his principles. For long he resisted the charm of the enticing "dot com" companies which had mushroomed in the early 90s. However, he had the last laugh as the "dot come" bubble busted in the latter years. Discipline and control over your emotions are the keys to success, he maintains.
Sanjay Bakshi came across a phenomenon called Warren Buffett when he was studying at London School of Economics. He became an admirer of the investment wizard after reading Buffett's letter to investors, which he says was a life changing experience. Needless to say, Bakshi believes in value investing. His investment mantra is to identify quality businesses which are run by the best management team. After all, it's the management which determines the fate of the business. He also stresses on finding businesses which have minimum debt.
One of the examples of his astute judgement is - Relexo Footwears. He saw a great potential in the business of this company and invested in it in 2011 at an average price of Rs 100. Within 3 years the stock reached Rs 400, giving Bakshi a multibagger growth. Bakshi's one line advice to investors is - invest in good businesses and don't trust your brokers and don't look for free stock market tips.
Ramesh Damani's success story is the exact opposite of any value investor. Damani wanted a career as a stock broker. To follow his calling this California State University's master's degree holder became a member of Bombay Stock Exchange (BSE). However, soon after starting off as a broker he realised that identifying and anticipating a growth of a business is what really excites him. Naturally, he started to invest in such companies.
One of the highlights of his career came in 1993 when Infosys came out with its IPO. He saw the potential in the company and invested Rs 10 lakh in Infosys and CMC. Within 6 years his investment paid off as his capital saw hundred times growth. However, he didn't sell off the stocks despite it growing manifolds. On his decisions of holding the stock, he says that just because the stock has doubled its value it doesn't mean we should sell it. Sticking with good businesses on a long-term basis is what matters the most. That's the secret of wealth creation, he says.
Samir Arora cut his teeth as an investor at the time when India was standing at an existential crossroad. The time was the early 90s and India was getting ready to embrace liberalisation. Arora, working at that time as a fund manager with Alliance Capital, saw a great opportunity in this changing time. Soon he set up India Liberalization Fund which was primarily focused on buying public sector companies' stocks which were up for privatisation.
In the same line, he focused on PSUs like banking and insurance sector which were first in the line to taste the waters of privatisation. His strategy paid off as he got handsome returns in HDFC and other banking stocks. Arora believes in taking a diverse approach which distinctly reflects in his stock selection. He has managed to stay ahead of the league by spotting the gems in their formative stages. Over the years, he has invested in sectors like media, retail, multiplex chains, liquor, etc.
He believes that there are no short-cuts in identifying the growth potential of the companies. Only low P/E is not an indicator of good stock. All the fundamentals and the balance sheets have to be closely scrutinised before you enter the stock.
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