Many people want to be an investor. Forget being a “good” investor or a “bad” investor. You would be shocked to know how little they want to read, or how much they want to work. Many of them would walk up to me and say “tell me how to buy a share and hold it on for 40 years like you did”. Well, I got lucky I tell them. Of course they are skeptical. However many of them think that if they just got my portfolio they would just go and duplicate it – and it would look the same in 2059. Well, seriously, I can’t help it. I bought and sold CARE about 30 times in 2019. Amazing trading opportunity in a company in which I will never invest. Does not cut the investing edge, but is a good trade.
So if you must be a good investor, you start by reading a lot. Reading about types of investing – Momentum, Growth, Value, Deep Value, Cryptocurrency, regular currency, commodities, Foreign country investing, Art, Activist investing (it is still in its infancy in India), Venture cap/ Angel investing, close ended funding, special situations….you should have a decent working knowledge of all this. In India one of the most lucrative places to invest for the short run is the construction business, and the film business. You can’t be a complete investor without knowing how all this works. You need not do it, but you should know how the whole thing works.
You should read about good businessmen and bad businessmen. I had the privilege of meeting / exchanging cards and speaking with all of India’s scamsters. No, not kidding it was important to know that some of them were the sharpest brains. It was just luck that kept me away from them – from a business point of view. Similarly it is important to read about the best businessmen and business families in the world. My view on the Murugappa group, M&M, Tata, Birla, etc. has come out on my blog from time to time – honestly there should be no holy cows. They have to make money for you. Tata Steel, Ta Mo, Hindalco, Mahindra Holiday Resorts – have all been poor investment choices at least in the past decade. However, all of them gave us enough trading opportunities. A little while ago I completely exited Tata Steel to be fully into JSW. It is not easy – remember we had shares of Tata Steel signed by Jamshetji Tata – before it went into demat mode. However, sentiment has to be conquered.
Read about Accounting shenanigans – go and read my blog on the best books to read – and you will find a few books there. One of the best things to read is about 100 annual reports a year. I have now slowed down on AR reading – the kids who do it are there on my speed dial!! Hey, but that is YOUR starting point. Go there. Do not try to come to the Marathon in the 30th km. That is not the starting point.
Look hard – are people changing? are the youngsters getting smarter? are they renting or owning? do they like to “own” cars or use cars? In US Marijuana is big business, do you think it will happen in India? IVF, beauty parlors are mushrooming all over the country – did you notice that? Keep looking hard? those are the megatrends. There is a new generation which compares ONLY the second ac costs to the air fare. My train ticket (2nd ac, tatkal) cost me Rs. 1800, my TruJet air ticket cost me Rs. 1650. How do people react to such data? Remember every restaurant – be it selling chai for Rs. 10 or Rs. 1350 are crowded. Keep looking hard.
News is too biased – and unless you know who is promoting what, it is difficult to make sense. Look at the media bashing that Putin, Trump and Modi have got! Remember the press is owned by people who do not want change. So what to read, what to believe, …is something to learn. However, the happiest investors that I know do not read the newspapers nor do they watch News on TV.
Meeting the management of a company is not as useful as you think. Many of them are good communicators and can enthrall you. Some are dirty. Some are filthy. Some are excellent. However the impact that they have on you could create a bias. If you do the management of a company, take a weeks break before you start looking at their numbers. I met one company which wanted to raise money. Their balance sheet looked like they could be lending! You can see a fudge when you see one no? By the way the best Fudge is available in Lonavala. I do not want to see it in the accounts.
Technical analysis is not very useful – however I know many people who swear by it. I can only say that I do not use it much, except to see the momentum in indices or in some share which I have decided to buy or sell.
With time I realize that I have no “edge” while investing. For me insurance, cash flow, and patience are the edges. I can sit on my equity portfolio now for the rest of my life. Even when I sell, it is just a switch – immediate or in a matter of time. So there is hardly any “sell” that I have done. Of course if i see shit in my portfolio — Shaan interwell, Indiana Dairy, GMR Infra, Crest animation, Jain irrigation, Suzlon, Nagarjuna group, …..the list is long, I do have to sell immaterial of whether I need the money.
Small caps are attractively priced – however in companies with say Rs. 500 crores market capitalization manipulation by promoter is likely. Be careful.
Want to still invest directly?
You must be young and brave!
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