I keep writing these columns once in a while to emphasize that this is NOT a portfolio management column. This is a blog by a Mumbai centric Tam brahm heavily influenced by the Gujarati community in his investment orientation. What are my biases (you should know it, so that you know how much to discount what I say)
a. It should come as no surprise that I am biased towards equity.
b. A firm believer of Value Investing, I personally run a very aggressive portfolio – and it might shock or stun financial planning students to see such a huge equity bias in my portfolio.
c. I do not understand technicals and even though I know some of the top tech analysts, I have very rarely held positions based on the charts.
d. When one of my companies pays a dividend, I bank it – smirking at the Return on Cost of acquisition. This may actually cause YOU to miss opportunities. Having said this I have held positions in Bharti Airtel from Rs. 80 to Rs. 1200 – and I do think it was luck. I also sold Mahindra Holiday Resorts at about 540 – a share that I should not have bought at all based on my Value philosophy.
e. My portfolio is a long list – some held as a value investor, some as a speculator, some as a MNC buy back opportunity, some as …..so I do have contradictory styles in about 50% of my portfolio, but overall I am a value investor.
f. I do not agree with, and therefore do not read about why gold and real estate are growth asset classes. I still do hold real estate – as an investor, user as well as a lender.
g. I let my ego sometimes overpower my portfolio management skills.
h. I have been protected from complete disasters by my super able broker, and I am biased by his views.
i. I am biased by the brokerage house that puts a buy report. When I see a buy report I probe whether it is from a merchant banker, broker, management. Then I am skeptical about the industry too. So when I get a report, it means I have to do research. Research reports are useful ONLY for the numeric data.
j. I am convinced that talking to 3 people is better than 3 days of number crunching. I am biased to think that I can get to them in 3 calls each. Not a bad effort – reward ratio,
k. I hate selling well performing shares – even over long term (say 3 years) of underperformance. However ignoring the media and holding on to HUL and Colgate, PnG, Gillette, Oracle….
l. I will NEVER leverage – I belong to to the old school of thought….Investment means with my own money.
m. If I spent 1 hour on a discussing a research report with a kid who has made it, I spend 45 minutes on the people running the business, 10 minutes on the nos. and 5 minutes on the macros. Not sure if this is right, it has worked for me.
n. Out of the 50-60 fund managers I have seen, met, spoken to, there are 10 whom I respect. 4 are with the MF industry, 6 are on their own. So the odds of finding a good scheme is close to zero. After 10 years it will be ZERO for me, as these guys would have retired. I presume.
o. I hate admitting to the fact that I have made money by picking up undervalued shit. I also like picking up shares which have been over punished by the market because the management is of dubious quality, but it would always be a trading position.
p. a very very very strong believer of the market cap: free cash flow ratio. Completely kept out of Adag, and feel good.
q. Huge, huge, huge regional bias. For a long term buy the company HAS to be located in Mumbai, Chennai or Bengaluru. Will NOT pick up a company with HQ in Hyderabad. Huge exception being Coromandel Fertilizer which is technically controlled from Chennai, not Hyd. In case of MNCs do not care where the HO is, so ITC makes the cut.
r. I find changing myself difficult, but that is how i am…
s. I have a good clipping rate of outperformance of the sensex…the worry is I think I can repeat it……sheer arrogance perhaps.
I keep writing such stuff because in real life it is impossible to eliminate bias and vested interest. For example fund managers will keep telling you this is a good time to buy, BUT since they are paid on AUM basis, they will NEVER tell you when to sell.
A broker is interested in activity, YOU are interested in increasing networth.
A life insurance company is interested in selling ULIP, but you in Term plan.
UNDERSTAND BIAS. UNDERSTAND VESTED INTEREST. Utopian to think things will change. It cant.
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