Glorified Inactivity!

It’s been a while that I’ve posted something. One, I’ve been inactive and two, I enjoyed it. Inactivity is generally associated with laziness but it isn’t necessarily so. In investing, as in life, inactivity can be productive.

Charlie Munger said that the biggest money is not in identifying the best stock or timing the market, it is in waiting. You can buy what is right but unless you sit your ass down, you miss out on outsized gains. This is personified best by RJ’s two decade holding in Titan. The legend literally died with his conviction intact. Another famous example is that of Nick Sleep and his holding of Amazon since 2004.

So as far as my portfolio is concerned, I’m drilling inactivity in myself. I’ve hardly sold anything this year and intend to hold on to whatever I’ve for at least the next three years. Portfolio moves up and down and this time it’s underperforming the market, not massively but still a bit. It, however, is par for the course. The gains in equities are concentrated in bouts of massive moves, which, however are beyond anybody’s comprehension. The best performing stock of one season or year can be a dog for the next five.

Just look at SBI, NTPC and meme’s favourite – ITC. All of them are coming out of decade long wilderness and are ruling the roost. They didn’t go anywhere in 2012-2022 and have suddenly become everyone’s favorites. One more stock which I believe is due for a sustained upswing is Hero Moto, a dog for the past 8 years. Its absolute return since June 2014 is Zero. However, its peers, especially TVS have gone up 20-30x in the past 15 odd years.

It can be nobody’s case that a TVS will outperform Hero or Bajaj will not do anything but Eicher will or an ICICI will move up while Axis doesn’t. These are great stocks and will all go up in the long run, some will certainly outperform the peer group for some duration and others will play catch up. As long as the sector itself is not facing extinction or regulatory concerns, a lot of good companies go up with time, some doing good on Mondays while the others catch up on Thursday.

These are, however, discovered stocks. You, me and everyone on the street know enough about them, in equal measures. Thus, the only play in these stocks is to identify the ones trading significantly cheap to the peer group and hold. The easiest hack is to buy the one with the highest dividend yield vis a vis its peers. Like ITC was trading at 6% yield last year while HUL is at 1.5% and Tata Consumer trades currently at less than 1%. The rebalancing has happened in ITC while for Colgate and some other MNC stocks, it is due in my opinion.

The game, however, is not in buying a Bajaj v/s a Hero or Nestle v/s HUL. The big money in buying into stories for the future, the one with significant growth years ahead and are mispriced by the market for one or the other reason. The typical dollar bill trading for less than 50 cents, in Graham’s terms. The juice however is if the bill itself grows into a $10 or $20 bill, which you are buying currently for less than 50 cents. That’s a home run I’m aiming for.

Such stories, simply because they are untested and unknown go through long periods of do nothing, go nowhere. The trading volumes are low, institutional ownership is rare and the media ignores everything about it. If you can hold through this part, you’re bound to be rewarded beyond belief. The news may be terrible but if the business fundamentals are intact, inactivity is glorious!

We all know the India story, the financialisation of savings themes, the long runway ahead etc. What we don’t know is how long it will take to play itself out. No multibagger happens in a year, no great stock moves up on all days nor does it always outperform. It will have more bad days than good but in the end, the lesser number of good days will be worth the weight in pure gold.

All one should do is to do nothing. Play Ludo, take a walk, workout and relax. Don’t even bother looking at the market and if you do, restrict yourself from selling even one share.

So what keeps me occupied while I’m doing nothing–> long walks, books and Gym. And my newest obsession of playing Ludo at any given instance. Markets are quite like a game of Ludo. You can have a fantastic streak of 6s and 5s and can run ahead in no time, only to find someone patiently sending you back home with a 1!

Here’s my book recommendations for the week- I finished two biographies recently and one almost a biography and all the three turned out to be fantastic reads. The first one is on the life of John D Rockfeller, titled Titan which is a massive 700 page tome and took me over two years of effort to finish, but it is quite detailed and broadens ones horizons of the life, business and markets in the 19th and early 20th century America.

The other one is called Blood and Oil, a biography of Mohammad Bin Salman,the crown prince of Saudi Arabia and a most recommended book from my side. PS- I’ve a positive opinion of MBS and was silently rooting for him through the pages.

And lastly, a biography of Bill Gross, and in essence of the firm he founded PIMCO. He is a legendary bond trader, euphemistically termed the Bond King.

So, I hope you can find your own version of a fulfilling and engrossing bout of inactivity!