Link to twitter thread [contains images as well]: link
Had an opportunity to attend 6th Value Investing Pioneers Summit by CFA Society India on 19th November 2022.
Further, I had great privilege to meet and talk to Prof. Sanjay Bakshi, Rajeshekar Iyer, Ashwini Damani, Saurabh Basrar, and Jitendra Chawala.
There were a total of four speakers but the most I enjoyed was Rajeshekar Iyer’s talk on “The Art of Investing”.
The event started by opening comments of Jitendra Chawala sir and he shared a beautiful quote which I have written down: “Knowledge is like a sphere, the greater its volume, the larger its contact with the unknown” - Blaise Pascal.
Speaker 1: Roshi Jain, Senior Fund Manager, HDFC Mutual Fund.
Talk: “In Pursuit of Alpha”
- Think why does one need a framework? Brings discipline and consistency, leading to better results.
- Finding your own comfort zone is key.
- Components of growth:
- Structural: Large TAM + Low Penetration and Company specific
- Cyclical: Economic Cycle and Industry Cycle.
- Avoid: Cyclical weakness for structural weakness and cyclical strength for structural strength.
- Rupee today > Rupee tomorrow.
- Determining intrinsic value: Stocks cheap on P/E or P/B multiples are generally cheap for a reason. Hence, such an indicator alone should not be our criteria for valuation.
Speaker 2: Sandeep Kothari
Talk: “Deep Simplicity”
- Talks about scalability:
- In IT sectors people who have scaled big giants are now moving towards smaller companies and re-doing the same journey again.
- Real Estate is a sector very difficult to scale and has seen only one pan India player (DLF). One can make money in such sectors but have to time the cycle.
- Consumer durables & Building material: Easier to scale than the primary driver of demand i.e. real estate sector.
- Focus on:
- Building an investment framework
- Think long term
- Minimize mistakes
- Compounding needs time and not great returns.
- Make long term thinking hard wired.
- Generally, profits grow into the market cap but the problem comes when market cap grows too fast and profit fails to catch up.
- Data points on penetration level in India should not be given too much importance as 40% of the population don’t have purchasing power. (11 cities contributes maximum to the GDP)
Speaker 3: Rajeshekar Iyer
Talk: “The Art of Investing”
- There are multiple approaches in the stock market.
- One has to learn risk management and keep moving upwards in the equity learning curve.
- There are two types of outperformance: Stock selection and cash calls.
- Stock market is only for people with inclination and time to invest, because Index level performance can be achieved with little effort but for 2-3% outperformance significant efforts needs to be put in.
- The Intelligent Investor is one of his favourite books and he believes that it answers all the questions about the stock market. Only thing missing is Benjamin Graham did not focus on quality.
- Taking cash calls are very important: He took good cash calls in 1992, 2008, and 2017.
- Don’t hesitate in selling at 85 when it falls from 100 because you never know it might go to 50.
- Advice to young investors: Make an investment journal and write down all your bets - Why you bought and why you sold.
- Loss of capital > Loss of opportunity
- What you think is a loss of opportunity might not turn out to be one.
- Opportunities will keep coming and one can make up for it.
- What has to decide on the following things:
- Maximum loss potential on one trade
- Maximum % of book profits given back
- Maximum portfolio drawdown acceptable
- He looks for good quality at bargain prices.
- My question to him: “Most of the time bargains are cheap for a reason. So how does one find good quality at bargains and avoid value traps?”
- Answer - Quality can be found at bargain level in three instances: Bear Market, Temporary difficulty in the business, Something has changed but the market is not sure as the price is not reflecting.
- He has never used DCF in his life.
- On multiples: If he finds that multiples after 2-3 years will be at reasonable levels he takes a position.
- Divides cash flows of a business in three components:
- What is already there (current cash flows)
- Growth of cash flow (future cash flow)
- New segments (new avenues for cash flow generation)
- As you keep going down this list the level of certainty reduces.
- Depending on which category of cash flows you value/prioritize one knows where to look for.
- Follows William O’Neil for: Stock screening and Relative Strength.
- Starts with screening and weeding out the bad and then look for bargains.
- One has to remember the market is probabilistic and losing money is not a problem. Finding your comfort zone is important. If you fear losing even Re.1 money then the market is not for you.
- Participation in bubble is fine but one has to run as soon as trouble arrives.
- Look for new leaders in the new bull market.
- Uses technicals as well in his style as prices indicate some information.
- Setup: waits and enter after breakouts
- One has to complete their research and then wait for a breakout.
- How does a bull market end:
- Expensive Valuation: As per his experience, this category occurs the most.
- Growth stalls
- Liquidity goes away
- Number of stock in portfolio: overall around 12-14 stocks
- 6-8 stocks contribute 70%
- 5-6 stocks contribute 20-25%
- Few stocks contribute 5%
- Books recommendation:
- The Intelligent Investor
- Common stocks and uncommon profits
- How to make money in stocks (William O’Neil)
- How I Made $2,000,000 in the Stock Market
- Most Important Thing by Howard Marks
- The Battle for Investment Survival by Gerald M. Loeb
Final talk was by Vallabh Bhansali, founder of ENAM Group. The talk was about how India has changed and the achievements the country has achieved. I do not have notes for that but I would recommend reading Morgan Stanley’s report “Why This Is India’s Decade” or watch this interview.
Overall, the event was a great opportunity for networking and getting decades of insight by listening to experts of the industry. Looking forward to more such events!