🐂 is back!

In my previous post, I had mentioned that the day the Indian government announced its Windfall tax, our equities had possibly made its bottom. This has now proved to be prescient as we are up over 10% from that day and Nifty has rallied from around 15600 to over 17100 in just about a month. From its peak, Nifty is now down less than 10% and thus has come off a correction territory. Globally, S&P 500 is now not in a bear market while the NASDAQ is up almost 15% from its lows of around 10500. The global markets are now brimming with some sort of optimism that at least and at last, the worst is behind us.

The FIIs which were relentless in their selling since October 2021 are now showing an early sign of a reversal in sentiment. They’re buying on and off in minor quantities and thus, markets are also going up, albeit on low volumes. This is a classic case of the beginning of a new run. People were so pessimistic in June that every 2% rally was sold into and new bottoms were made. Some stocks were sold so out of shape that many of them almost touched their Covid lows- HDFC AMC traded below it’s Covid lows and also for a day traded below it’s listing day low!

I’m of the opinion that this was a long due time correction in a structural multi year Bull run India is in. COVID-19 was a sharp price correction but the markets bounced off so quickly that people forgot that in a week in March 2020, most global markets used to open circuits down on multiple days.

The recent ten percent rally in my mind mirrors that of the April2020-June 2020 one where markets recovered from around 8000 Nifty to over 10000 Nifty without anyone believing in it. People kept predicting impending doomsday in the next month and the following month and the markets never traded below 10k after that. In early June 2022, you had a swath of experts predicting a 12000 Nifty by August and lo and behold, we’re above 17K.

One good thing about this correction ( we didn’t technically hit a bear market in India as on the Index level, the fall was less than 20%) was that it taught people the difference between a good share and junk. The high flyers of the post Covid run-up are now languishing in the dust, mostly down 50-60-70% from their last year’s highs. And this my friend is the opportunity before us!

Personally, I hold ten stocks and of which 5 stocks are around 80% of my portfolio in value terms. I am not in the race to best the markets but learning to hold shares of companies whose businesses I believe that I understand and hope will survive the test of time and are on the right side of Indian growth story. So what does my day in the trading hours look like- well, I use moneycontrol app to track my holdings and some stocks which are on my wishlist but other than that, I hardly follow the broader market. I completely missed the China+1 story and avoided chemical stocks, didn’t own any of the midcap IT ones or had any high flying Sugar companies.

I find it hard to understand that the experts who come on CNBC and sing praises about great businesses and long term views they take and then talk about sectors and stocks which are likely to do well over the next one to three years! To my mind, these are just glorified punters who will buy anything which is going up and justify their buying in terms of a narrative they believe that they can sell to quench their client’s intellectual thirst and move on to buy luxury villas with fat commissions. This is not how I believe one gets wealthy in this market.

I’m hardly 5 years old in this market. I may be completely wrong but I truly believe in the idea of owning shares over long periods of time and in the idea that one stock can change your life. I buy two kinds of stuff- one is what Nick Sleep has proved to us and what Chris Myers so eloquently showed us in his eponymous book- 100 Baggers. This is exactly what Munger has advocated about buying great businesses and what Jhunjhunwala has done in the case of Titan and Lupin and Radhakishan Damani has done with Dmart. You buy stocks in businesses which you believe can do well over long periods of time and which eventually will go up in terms of the original stock investing idea- share prices go up for companies which do well in their business!

Every true refined investor which I have gravitated towards has his own version of the above idea. Buy great companies, sir down on them for years, pay a low enough price and do nothing. Out of this flow my next kind of companies – the Colgates and Unilevers of the world. The ones which are truly great businesses and I know for sure that they’ll be around for the next hundred years and will likely do well just a tad better than the markets and because India is still a huge growth market, even these companies from here can go up 10-20 times in a similar timeframe in years. Colgate is hardly a $5B market cap company in India and can easily be trading at ten times that price in next ten-15 years simply because the runway even in the case of toothpaste selling is so huge in India.

I’m not playing the game of beating the market. I luckily have moved past that. I also am not looking to find the hottest sector for the next year or two. Why don’t I do that? The reason is a bit subtle- I’m not looking to manage someone else’s money by proving to him that I’m the smartest money manager in town and the only way I can prove it is if I can identify stocks and sectors which will do well and avoid the ones which don’t and can sell roughly at the top and predict the overall direction of the market and so on. This is the world of professional money managers who swear by the idea of portfolio diversification, sector weightage and NAV and alpha generation. Think Samir Arora and Saurabh Mukherjee. Unless they can come up with the great stocks to own over the next few months and years, they can’t ask you to hand your money over to them to manage for a fee.

What I’m trying to do is to become an Individual Investor who simply became wealthy for his sheer optimism about the India growth story. One doesn’t make a Billion by managing someone else’s money unless you’re Larry Fink! ( Google this name!)

So my idea of buying stocks is to own small stakes which get bigger as the company gets bigger and better over the next three-five-seven years. BSE basically was flat for me between 2018-2021 June and from then it went up five times in six months. This has happened to multiple investors in stocks which changed their lives and I am most likely going to experience something similar.

Find your Cera ceramics, find your Blue Dart, find your Titan. All these stocks have changed the lives of the investors who bet early and bet big on them. The only challenge is that you must stop playing the game professional money managers are playing. Don’t aim to beat the market. Don’t aim to time the markets. Don’t aim to fool yourself. Bet on one idea, maybe five but bet big on them.