I have been reading the Berkshire Hathaway Annual Letters recently and cannot recommend the same to you enough. Anyone who wishes to take investing seriously, even casually on his own must put in some time to read what the maestro has to say. They are easily available in pdf online or in a book which is my preferred medium. Also, before you jump on to the letters themselves, I’d recommend you to first watch a few Youtube videos featuring Buffett and Munger so that you are familiar with their style. Then, you can read a fantastic book titled Buffett and Munger Unscripted which will help you understand why these two gentlemen were the true epitome of investing and life genius.
Why am I sharing books at the beginning of my blog? This is because of the lessons I wish to revisit and share with all of you which I have learnt from the books I mentioned. First and foremost, investing is about buying minority stakes in living businesses and is more than the stock prices which quotes everyday. Most of, myself including, get a lot happy when the prices move up and are traumatized when there is a sustained bout of selling in our chosen names. The biggest advantage of having an active stock market is its biggest drawback- you are yelled the price of your holdings non-stop for 6 hours 15 minutes, 240 days a year! And youre bound to get nervous when things aren’t what you thought to be.
Here, if you think of yourself as a minority owner in the business, your philosophy changes. You realize that businesses and their stock prices may not be the same thing. A company can easily go along on its own and keep doing what it does even though the markets sell its shares down mercilessly. If you’re the owner of that company, you don’t really sell just because the price went down.
Let’s take the example of Exchange Business. Before we begin, let me give the standard disclaimer- me or my company may have interest in what stocks we discuss here but have no intention to solicit or to give any buy or sell advice from or to any of you. We do not provide any investment advice and have no such registration. So, whatever I write here is purely from the perspective of knowledge sharing.
There is a huge buzz regarding weekly F&O expiry and what SEBI will do with them and so on and so forth. The listed player gets a beating whenever any news gets reported from Sources just like today. People are claiming on social media that it might fall 20-30 or even 80% in worse case scenarios. On the other hand, if you purely look at its business, it has gained market share from its bigger unlisted rival and has also managed to do more business on notional turnover basis on their respective expiry days after the weekly expiries were exchanged beginning the first of this month. It, thus, has been able to achieve more than any of us or even the management envisaged a year or two ago.
Now lets also read through the tea leaves. The unlisted player had 100% of the market share two years ago and commanded huge premium in gray market. There are large well known investors who have invested in the stock and is currently a huge hit with those dealing in unlisted markets. Since the listed stock exchange introduced its derivatives product, the bigger guy has lost almost 25% of the market share and thus, isn’t growing at the breakneck speed it used to grow especially post-Covid. Also, the regulator is yet to give it the go-ahead for a listing. Thus, there appears to me a panic in large investors/operators who are stuck with the unlisted stock because none of them caught the rally which made the listed exchange a 80-90 bagger from Covid lows.
So there is a swarm of brokers who are enticing public to take unlisted stock shares in small lots as a sure-shot ticket to heaven. On the other hand, there is a concerted effort to get retail sell their existing stock holdings by planting news from this or that source. This has been going on since at least March 2025 when it went down 40% in three weeks! Similarly, whenever there is a small rally in the stock, there is a source based news which is followed by a large bout of selling in the stock which goes down 5-10% in a day or two. This, to my mind, is a classic operator play. The large sharks want to corner the retail into selling their holdings somehow while also unloading their unlisted stock simultaneously.
Lets also analyse a few news items on this topic. There is a large private equity and related consortium which wants to invest thousands of crores of rupees to start equity derivatives trading on two other exchnages- the Metropolitan Stock Exchange and the NCDEX. These two exchanges have already/ undergoing large fund raising exercise and are expected to commence operations by later next year. If the regulator is really going to do away with all the F&O expiries and Indian exchnages will lose all their businesses, why do you think these private equity guys putting in thousands of crores to gain 1-2% of the Indian market that too through currently moribund exchanges?
Either these guys are dumb or they are thinking like business owners. I would like to believe even though at times PE guys do act dumb but this time they are sensing the future. The Indian capital markets are at the point of take-off as our economy gets to $4 trillion. Over the next one-two decades, our markets will go from $5 Trillion market cap to well over $25Trillion market cap and where will all this money be raised and put to work at? The Exchanges, of course. So if you think that the exchanges are going out of businesses because CNBC reported that through unverified sources, you may not be thinking through it.
I was recently talking to a few colleagues who wanted to start a mutual fund distribution business because the commissions are huge. All the major houses- Reliance through Jio, every PMS owner wants to get into the mutual fund business where unless you are in the top league, you don’t really make meaningful amount of profits. Amidst all this, you are being told that the listed players which are already managing $100 Billion plus of AUM with 55-60% PAT margins will go out of business and you sell your shares because one random analyst on TV told you so?
Always remember something. There are a lot of people in the markets who by the very nature of their job have a vested interest in trying to make you an active player. The news channels want TRP so they tell you so much news that you are overburdened by it. The CNBC guys aren’t investors, they are news sellers. They themselves aren’t in the market investing for 20-25 years but just covering the news on a daily basis. Similarly for all the analysts etc. Please understand if any of these people really invested their money for the past 10-15-20 years, will they still be doing a job for a living? No! anyone who has been invested is already a multi-millionaire owner of these people. So the next time someone advises you, please ask yourself whether the person is already a multi-millionaire or is working a job and want you to trade actively in order to make commissions.
Being a long-term investor requires a lot of patience and counter-intuitive inactivity. Its hard looking at your portfolio down 2-3-4% a day and decide to not do anything. Its harder to stay invested when the news channels are selling down your holding predicting the doomsday scenario. Its very easy to sell when it goes down and buy when its going up because you are with the crowd. And anyone telling you that investing is not a full time job because there is a lot of free time available doesn’t really knows what he is talking about.
I will end the piece with my favorite line from the recluse Invstor- Seth Klarman when he was mentioning the 2008 Lehman crisis and why he invested when there was blood on the street- “ We did not think the world was ending, We did not see how people think that the world was ending, the world doesn’t end this easily.”
Disclaimer- The views expressed are entirely mine and am not a registered Investment Advisor. I or my company do not provide any buy/sell advisory and have no vested interest in writing this blog except knowledge sharing!
Life is all about Compounding! 