Author Archives: ZerotoBillion

Imagine two scenarios: Nifty is up almost 5% in the preceding month and is holding up in green as you watch the screen. You’ve been wanting to buy XYZ for a while as it moved from 800 to 1200. Your friends have bought it and it’s the best thing in the world which can happen to your portfolio. You’re wondering, I’ll buy it when market cools down a bit, maybe around 1100.

Scene 2- Nifty has fallen 10% from its recent highs and there’s blood on the street. FII are selling and there’s fear about the latest news on China border. XYZ has nosedived to 1000 and is down 5% for the day. Your friend hasn’t returned your call and you’re panicking because it’s going down to 500 in a week( as per the experts on CNBC).

Scene 3- five years later. You’ve almost forgotten about the first two scenes and moved on in life, happily buying and selling random stocks. XYZ suddenly moves past 5000. You tell your friends, I almost bought it at 1200!.

This is almost true, if not exact for many of us. We’re always waiting to buy when price goes up, fearful when it goes down and freeze in moments of great joy or panic. Market timing and analysis paralysis are the worst drugs to sniff on.

First things first. I’ve been asked this question multiple times- do I book profit? Do I keep cash to buy at a good dip? Short answer to both of these questions are- No. I don’t know anything about booking profits nor do I can time the market in such a way that when I buy, it’s always bottom. I buy when I have cash, period. I’m always 100% invested.

Why do I behave in such a way? Well, one thing is very simple. You can’t time the market. When the price is right( read low), market will be in such a bad shape and the news will be bad and there will be so much blood on the street that you’ll panic and never put a penny in. ( Read March-April 2020). When the news is right( October 2021), prices will be almost unbelievable. You’ll not buy while waiting endlessly for that elusive dip. So in either case, you’ll not be able to buy much, if anything at all.

Two, corrections will come in a Bull Market. It’s as true as death. However, if you wait patiently for that 20% dip, are you sure that your stock will be available 20% down too? Let’s take today’s market. Nifty is down 8% from top, while metals like Tata Steel, NALCO are down almost 30%. Tata motors is down about 10-12% while BSE is up 30% in last week. So was Nifty at 18700 cheap or expensive to buy BSE? TaMo went up 3x in one year while Nifty is up just 30% or so. So is it a good time to buy or not?

I can’t deny that having cash during a bear market is the best thing in the world. You make the biggest money during such times. However, by the very nature of law, bear markets and bad days are less likely to persist than Bull Run and good days. You may make a killing during Covid crash but if you sell once that is over and keep cash in hand to buy during the next depression, you may wait forever for one. Buffett has over $140B in cash which he didn’t deploy last year thinking market was expensive even then. Even the greatest couldn’t time it, leave aside you and I.

Thus, if the idea is to buy minority stake in a good business and hold it for long term so as to reap optimal rewards,the best time to buy is Today. You can’t be penny wise and pound foolish and say- if I had bought Eicher shares instead of Bullet in 2009, I’d have been a millionaire. Well, maybe in 2030 someone will say, if only I had bought Tata Motors shares instead of buying Nexon, I’d have bought a Range Rover today. Who know!

How would it be to have a portfolio like Nick Sleep? The idea to shut your fund down and put all your money, a sizeable hundreds of millions of dollars into just three securities is crazy and scary at the same time. However, if you reverse engineer it and see how it happened, it is one hell of a journey.

So what will it be to hold just three stocks and live with the extreme results it might throw up? How is the process like to think this through? Let’s try and analyse.

If you base your decisions based on outcomes, you may forever be confused as to what led to what. If you think through with the right processes and outcome isn’t to your liking, this doesn’t mean that the decision was wrong. It just meant bad luck. Similarly, if the outcome is great based on pure luck, it doesn’t mean the decision was right.

Put simply- you have to wear seat belt while driving and not overspeed. You may meet with an accident if you were following traffic rules. Also, you may be overspeeding and still reach home safe. This also doesn’t mean you’ll never meet with an accident if you’re speeding away.

Similarly, you may do all your research and the stock is fundamentally sound, you enter at a great price and you think it’s the next multibagger. The company is doing well and everything is set. Howeve, the stock doesn’t move. Now does it mean you made the wrong decision? This happened with a lot of us with ITC/IOC or even NTPC.

Imagine it was March 2020. You had the money and the prices were depressed. Om what basis will you not buy ITC or IOC and buy let’s say Tata Elxi or Alkyl Amine? That the former didn’t move four times doesn’t mean you made a mistake in buying good businesses and if the latter turned out to be multibaggers also didn’t imply that you weren’t plain lucky.

Ofcourse you could say that you already wanted to buy Tata Elxi and it was zeroed in to be your top buy candidate and it so happened that you got a March 2020 price and made a killing. This is different from just chasing momentum, which most people do in life. You can’t say that until February 2020, metals were a lousy businesses but all of a sudden you realised that in the midst of a global pandemic, we’ll have a commodity upcycle which will propel Tata Steel and JSW and Hindalco to lifetime highs. Unless you already were ready to buy Tata Steel on the way down from 500 to 250, you couldn’t have played the upswing. And nobody but God could’ve predicted that Tata Steel would move 6x from 250 to 1500 in less than a year with decade high steel prices. It’s impossible to make such decisions.

Ofcourse, forget the experts who have to copy market moves and buy everything which goes up and try to justify it’s existence ij their portfolio on TV. I remember not one would recommend Tata Steel at 300 or TaMo at 80 while almost all predicting they’re going down further. Unless you were always looking to buy them based on your own study, you’ll keep buying and selling random stuff and that’s not makes money on longer term basis.

This is where research comes in. You’ve to keep reading about companies before buying and see if they fit in the criteria you’re looking for in a stock. As the price go your way, you should be willing to take an entry without making a prediction it to be a multi bagger on the go. I read a quote recently and it’s apt- Making money during bear markets and crashes is easy. You have to unlearn it as it doesn’t happen often. Unless you learn to keep expectations low and do the hard work, you don’t make money on a sustainable basis.

Having read an extra book, an extra annual report, following an industry closely trying to enter based on fundamental and not momentum in normal times help. And if and when the crash comes, you’ll make a forward looking decision which may not result in the best outcome but which is based on the right process and conviction. I mean if Dhoni had gotten out cheaply, and Yuvraj hit the winning six, would that mean it was a bad decision to promote himself?

Coming back to Nick Sleep’s portfolio. I can only imagine how much research he must have put in to buy just three stocks. It’s almost art like to not worry about anything else, Zen like behaviour to not sell even if it’s over 100x and hold and hold with all the intermediate corrections. This is worth a thousand years of investing lesson in one man! Google it, read it .

Today’s market fall was fantastic- Nifty and Sensex are down 8% from their highs, while most broader indices are in correction zone- down 10% or more. Well, instead of explaining why it happened, isn’t it most of you wanted it to happen!

There has been so much hullabaloo about markets making new highs everyday and why this is decoupled from reality and the valuations are too stretched that I believe there should be community gatherings to celebrate this fall. This, however is not the case. People who were clamoring for a dip to buy are now worried if the new South African variant is going to lead us to another bear market. My words for them- bullshit. Please ignore.

I’ve said this before and I’ll repeat it again- India is at the beginning of a multi year bul run and all maga runs are interrupted by brutal, sharp and sudden corrections and this my friend, is exactly one of them. I’d quote from Reminiscence of a Stock Operator when all that the old fellow said in similar times- “this is a Bull Market.” If you’re not looking to buy more or atleast hold on to your position, you’re going to regret it pretty badly.

Sensex may go down from 62k to 55k but it three five seven years from now, it’s more likely to be over 100000 than 40k, isn’t this the perfect buying opportunity? In markets, 99% of the time, optimists win. You do make occasional killings while shorting but none of us is Soros shorting the Pound or Burry shorting the CDS bubble.

Now I’ll come to what I think when my portfolio falls 5% in a day- nothing! I’m a firm believer in what I’ve said and most positions I own are company specific. Well BSE share price may fall 10% a day but do you think the company didn’t make any money while there was massive volume to short? Unless you’ve a clear vision of why you own what you own, you’ll get out at the bottom and regret as it rebounds ans enter at the top. Buy High, Sell Low that is!

I know some of you who are not making money in this market who’s portfolio is either break even or below cost and that’s a shame. If you’re losing money when everyone is double, you should close your trading account and just buy index funds and sit quietly. You’ll do much better.

Also, here’s a cue- Delhi recently had its annual pollution shutdown. So there are three possibilities from here. In ten years, pollution will only grow and most people will suffer miserably and develop life threatening diseases. Or, Delhi will be shut from Diwali to New Year completely to control pollution. Or, people will buy electric vehicles because it is non-polluting. If you’re of the opinion that third option is most likely, look around and see who’s smiling when there’s massive runway for growth for electric cars? Hello Tata!

I have written multiple blogs on my idea of investing and how this blog is basically a way to talk to myself and to let my friends know what’s on my mind. The more I’m learning, the more firm my belief has become is that investing is not about picking stocks, it’s about how you live.

I’m thankful to some people who’ve shown me the way as I struggle to make correct choices. Rakesh Jhunjhunwala is right there at the top. Mohnish Pabrai and through him, Guy Spier, Nick Sleep and ofcourse Charlie Munger have all contributed to a large extent what I think, live and breathe.

I was talking to my cousin who said why don’t I popularise my blog. That made me think for a blog and I said- if all these people begin to charge for what they’ve taught me and millions alike, I’ll be their slave for next few births. The idea of giving back without anything in return is my sole passion for writing this blog and is a small token of appreciation from the masters I’ve learnt everything from. The real greats give all the knowledge they’ve to all of us for free. This is the least I can do.

Another point is that I wish to remain an individual investor- not a fund manager, PMS manager, broker, or anything who takes fees or commission to pay his bills and live lavishly. This feeling strives from the fact that unless you’re on your own, you’re not really independent. For me, freedom to not do anything for anyone is the biggest achievement. Here’s a fantastic video link on this subject- https://youtu.be/7YXOeiysR50

If you’re interested in becoming a long term investor, the first and foremost requirement is to slow things down. Cut off the noise around stocks you own, market’s timing, corrections or upswings etc. You have to completely shut this down and out. A month ago, people wanted corrections to buy are now scared to even buy at 20% dip because market is heading down. Well, most people in this market are traders. They pretend to be investors but will only trade their way in and out. They all come and say, we’re here for the long term while in reality, all they want is a quick buck and action.

So stop wasting time with any of them. My thumb rule is, I don’t talk to anyone who proves to me once that he’s a trader. You can only push me away once. Beyond that, I’m happy never talking stocks. Second, build a vision for the stock you own. Unless you can have a vision of what the company is going to be three years from now, you’ll never know when to sell or average more. As far as market timing is concerned, it’ll never be a practised art. You can never buy at bottom and sell at top, unless you’re trading on inside information, which anyways is illegal.

Second, you’ve to work on yourself. You can’t feel the magic of compounding only in your portfolio while your body erodes and you stop thinking. I have a firm belief that compounding works because 11 years ago, I was a lean thin guy who began to lift weights. Today, I’m totally different from where I started. The progress over days is glacial, though it all adds up and transforms exponentially. You can’t be a naysayer and win in life. I’m a big fan of Chinese Bamboo tree story and truly practice it. 7 years ago, while preparing for civils, I read my first book. Today, I’m reading almost 45 a year and still feel hungry. Warren Buffett reads over 300 pages a day. It all bloody adds up.

Most importantly- Think Big! There is nothing bigger than a profound vision. Unless you visualise yourself independent, rich and fit, you’ll retire at 60 in obscurity.

So unless you’re one of those who’re trying to make your lives better, hustling everyday in one form or another, investing is not for you. No man who made it big didn’t not start. The biggest investment you can make is in yourself. Unless you do, you’ll only age and grow old.

This blog emanates from the most recent thing on my mind- Peter Thiel’s 2014 talk at Stanford titled Competition is for losers. I got introduced to him through Mohnish Pabrai when he mentioned how great companies behave when they’re monopolies. Here’s a link

Though the crux of the talk was that the monopolies hide their competitive edge so as to not invite extra supervision while mediocre companies try everything to pretend to be a monopoly. He explained using the analogy of a restaurant vis a vis let’s say a Google. Even though Google is a monopoly in every sense, it tries very hard to not be caught like one. This is a very interesting talk and I believe all of you should watch it.

The bigger moment for me was when Thiel described how he quit his law firm after getting through Stanford law school. This is like someone resigning from IAS after IIT-IIM education to start investing. Now what he described was that after getting into such high demand companies, you get in such a big rat race that all you want to fight for is another inch of position, power and promotion that you stop thinking at all. You stop having a vision for your life and then, get disillusioned all through your working life and retire a frustrated man.

Now I asked myself a question- what can one do in order to become a monopoly, or be someone without competition. This mean, what can one do so that in his business, there is no competition so that the only person who can defeat him is he himself. In this case, let’s say we take the biggest businesses of India.

Let’s ask ourselves- who can potentially defeat DMART? Or maybe an Asian paints. Well, hypothetically, another company with better margins and bigger pockets can take them down. However, let’s ask ourselves- who can defeat a Jhunjhunwala or Buffet? The answer is, only they can destroy what they’ve if hypothetically they lose everything on a bet gone wrong. Other than that, nobody! So this means, if someone is an individual investor, the only person who can defeat him is he himself.

I’m of the firm belief that this is the biggest strength of being an individual investor. You’re answerable to none, can invest and hold any stock you like for however long you like at a price you like. This means when Nick Sleep was asked to reduce his erstwhile fund’s exposure to Amazon down, he must have realised what we are talking- best to shut the fund and invest my own money in a way I wish. That’s exactly he did and in what magnificent way. Thanks to his large exposure to Amazon, he has practically outperformed everybody for the past 7 Years.

The road ahead for an individual investor starting out with small sums of money is arduous. You can’t take big bets, you’ve too little to make and too much to lose. However, compounding is one’s biggest friend. All of you must have watched Ramesh Damani’s famous 10l to 1000crore video. If one can be patient for the first five ten years and sit down with good stocks, the small capital can be a big one pretty soon.

Also, as you’re on your own, learning quickly what not to do is extremely important. You can’t trust these jokers on CNBC to tell you what to do as everyone who’s working for someone else is an employee. And an employee can never think big. So his only goal is to look smart in the short term to save his job- he’s in exactly the same rat race Thiel described. So get away with anyone who’s not independent. This may also mean you’re left with not many, if not none people in your life. Well, this is too small a price to pay for potential outsized gains.

Now when you’re alone trying to figure out what to do with a stock, you must independently calculate it’s worth. Nobody is going to do it for you. Also, you can’t think small. Thinking small is a sin in investing or in life. Unless you think way beyond your wildest imagination, none of it is ever going to be true. I find it funny when people want to be another Buffet but nobody wants to read 500 pages a day!

This blog is not about investing. This is about how to approach the whole idea of being an investor. It’s more to myself than to anyone else because on days like today, when you’re down 4%, you need to remain very sure of all the things which you’ve thought through before holding on to a stock. And as far as I’m concerned, this is another of bull market correction which are sharp, sudden and brutal. Thanks to Paytm, a lot of dirt in the IPO market will subside and some sanity will return.

So the D-Day is behind us. Biggest IPO in India got listed yesterday and what a debut! Down 27% on day 1 reminds me of another very infamous the then largest IPO in India’s capital market history- Reliance Power!

I was anyways not an investor in Paytm or any of these new pseudo-tech IPOs but yesterday’s interview of Vijay Shekhar Sharma on CNBC made me realise what money can do to someone’s mind. Until yesterday, I have thought of him as one of these founder promoters who are selling venture funded bubbles to another PE investors in the name of fintech revolution. However, yesterday I realised that the man is horribly arrogant and childish trying to be cool guy who got rich and can’t believe his luck. So I stopped using Paytm then and there

Let’s come back to what Paytm and his other App based fintechs are trying to do. They bring customer to make basic functions through their apps like money transfer, buy tickets, pay bills etc. Now you see all these things can be done through your YONO SBI or IMobile ICICI easily. Since most of the retail payments we use in India is done via UPI, which is developed by NPCI and is free to use, no customer will ever pay for it. So now these Paytm types go around town saying that they’re doing God’s work by financially including people who are now doing online payments. Well, in the past 7 years, over 40crore Jan dhan bank accounts have already been opened in India and thanks to Aadhar linkage, India’s level of financial inclusion is near universal. So these payment companies are only taking credit for what has been basically done by public sector banks because the fruit seller or gol gappe wala who’s now taking money through QR code on Paytm of PhonePe is able to do it because some public sector bank gave him a Jan Dhan account in the first place.

So now they’re saying, we’re not charging for payments( which they can’t legally charge) but for cross selling. We’re offering other products like insurance, mutual funds etc on our platform which the customer can buy for which we’ll get some commission. Well, isn’t it exactly what our banks do when we go for an FD, they sell you an insurance. The point is, everyone in financial services industry in India, your SBI, ICICI, ICICI Securities, BSE, NSE, realise that we’re an under penetrated market in terms of financialisation of savings. This means, people’s money is yet to be invested massively in financial products such as mutual funds, insurance, etc. The opportunity of this is huge and so everyone is banking on more Indians puting their money in stock markets inline their parents who bought gold or real estate. This is the absolute beginning of this whole premise.

Now, these Paytm types sell the story such as- India has 1.3billion people waiting to buy stocks or mutual fund, which they can through Paytm. Even if we capture 5% of this market, we’ll have 6.5crore Indians as customers. Even if each customer invest 100000rs a year, we’ll have 6.5 lakh crore AUM and if we can get .1% commission, we’ll make 650crores and then the number will keep growing and we’ll make billions and billions of dollars so that makes us a $100billion oppertunity. Well, great story, but too far fetched.

The reality is,most of banks are already doing this for decades. Most big brokers, including ISEC etc already earn a lot of their money by cross selling. So it’s not that it’s an innovation. So if Paytm is a fintech company, BSE is a daddy fintech as doesn’t matter where and what you buy, you’ll end up paying some part of it to BSE or NSE as the case may be. So this whole idea of only Paytm being a fintech and others as old lousy businesses is false. Also, if you begin to value ISEC which also is a huge distributor of mutual funds and loans etc, it should be valued not at 25000crore but 250000 crores as it has one thing Paytm will never have- real profits! Cash, hard cash. Paytm selling a 100rs thing for 90 and calling it revenue growth is a joke. This difference of Rs 10 is exactly what the investors paid for yesterday as India’s biggest IPO.

Worse than this cross selling types are the ones who will sell customer data to someone else and let they try and sell some loans to the customers. I know the only business model a lot of these startups is called- data monetisation. This basically means since they know what you’re buying or selling, they can sell their data to another Bank or someone who’s willing to buy it so that he can harass you with- you have a pre approved personal loan/credit card type calls.

Just a reminder- Reliance Power was issued at close to 450rs a share and post listing day, it never saw that price again and 14 years later, the company is officially bankrupt, promoter’s networth is zero and trades at close to 4rs a share. So much for India’s largest IPO!

Every Bull Market is known for its legendary IPOs. It was Ford in 1950s, Reliance in 1970s, TCS and Maruti in 2000s and I believe it has to be NSE for the current mega run we’re in. No I don’t agree that this run will be known for pseudo-tech IPOs like Zomato or PB or Nykaa or even Paytm. It is most likely to be known for NSE as after a long time, one real cash generating machine is at the block for it’s debut. I’ve mixed opinions on whether or not I’m willing to subscribe to it’s offer and when in doubt, write! So here’s my two cents on NSE IPO.

First things first. It’s a fantastic company with one of the best balance sheets and cash flows we have in India. It mints over 5500cr revenue with almost 40% net margins and has what is certainly an almost unbelievable competitive advantage. It rules the roost in equity cash and derivatives market and the second largest player is quite a mile behind. So 1-0 for NSE.

Second, let’s see what the IPO is about. It, according to market gossip, plans to list at about 2lakh crore valuations ( ~$26B ) which makes it one of the most valued stock exchanges in the world. I did a smll analysis comparing it to global peers and here is what I’ve found.

On the other hand, NSE has a revenue of almost $0.8B and net profit of ~0.4B. So at an asking market cap of $26B, it’s already the priciest of the lot. Our good old BSE is trading at ~$0.93B even at current price of 1560Rs. Now I’ll make some counter points to what I believe is the challenge and oppertunity of this issue.

The biggest stock exchanges of the world typically are valued at close to $80B with revenue between $3-9B and net profits between $1.5-3B. This for me is an upper ceiling of what NSE should be valued once Indian markets mature over the next 10-15 years as my thumb rule is that our financial markets are around 10-15 years if not more behind the US markets. So as they mature, with higher turnover and profits, NSE should make close to $5B revenue and $2.5B in order to be valued at around $75-100B and this I believe should take 10 years if not more.

Now my problem is that too much growth is being priced in to perfection at this price. For NSE to generate $5B in revenue, i.e. almost 6x revenue, even at 20-25% revenue growth rate, it will take atleast 8-10 years. So in that case, if everything turns out to be true, NSE will definitely be an unbelievable money machine and should see its market cap at close to where NYSE/CME are today. So this means if it lists at close to $26B, it should be 3x in 10 years in a most optimistic scenario.

However,What we experience in Indian economy is that there are hardly any companies above $2B revenue, which generate that kind of growth rate. So I believe I assume safely that NSE shares should be trading at over 12000rs in ten years(assuming IPO at 4000rs)

Now let’s do what Charlie Munger does best- invert. NSE is ten times BSE in revenue and 15-20x in profits( this being an unusual good year as NSE sold CAMS) And it trades at close to 30x it’s market cap. So going by the logic that BSE will also slowly grow it’s turnover and profits normally, if NSE does go to $75B market cap with $5B revenue, BSE would also be making close to $500m, and since costs catch up slower, net profits should be close to $200m. So even at current PE of ~38/40, BSE should be valued at around $8B. This means BSE should be trading at, voila, a share price of, you guess what- 13333Rs.

Yes, that’s right. If only nothing speical happens and BSE still remain a lousy exchange it is made out to be, it’s share price should be almost 9x from here in ten years, just to play catch up to NSE valuations and market sentiments.

I hope you know what I mean!

Here’s a list of money(net profits after tax) some of the stocks have made in the past 12 months( end of September quarter): DMART ~ 1400cr, IRCTC~ 425cr, Pidilite ~ 1025cr, Berger Paints ~725 cr, Page( end of June 2021) ~ 400cr, ISEC~ 1257cr.

Now let’s rank them by market cap. DMART is ~3l crore, IRCTC~65K cr, Pidilite ~1.2l cr, Berger ~75K cr, Page 45K crore while ISEC is right at the bottom with market cap of a lofty 25K crore.

With Net profit margins of 41%, operating margins of 61%, ROE of ~55%, can anyone of us argue that it’s not a decent business. Well it’s just not fancied yet.

This is one of the largest broking house, with full digital play on India’s rising financialisation valued at less than 20 times earnings when every loss making so called digital company is valued north of 50000crore atleast. I remember somebody valuing Nykaa saying it’s cheap if we look at 2041 earnings. I mean, seriously?

I would like to quote Sunil Singhania who recently said to a guy who asked him why didnt he own Asian Paints, Nestle, Kotak etc. He said- mere paas returns hain. I’d agree that some of these supremely valued companies are great businesses. However, if they’re bought at astronomical valuations, I’m not sure they’ll be multibagger in immediate future.

Secondly, valuations are slaves of earnings. My bet in ISEC is simple. Come 2030, it will be making 2-3 times profits from here if it doesn’t do anything fancy and avoid being stupid. If it can just maintain what it’s doing today, it’ll be making 5000cr profits in under 10 years from now. That’s good enough for it to go from 750 to 7500 in the same period, or even less.

Two companies making similar money, with comparable ROCE and similar growth runway should be valued similarly. So if DMART makes 1400 cr is valued at 3l crore, why should ISEC not be valued at 50K crore. Both are plays on a rising India, who’ll consume and invest more in the coming years. Though I’d argue ISEC is capital light and can scale much faster than any of the above-mentioned businesses.

Now come back to my favourite BSE. It’s a duopoly business with leading franchise in a lot of its offerings. I can’t think India’s second largest Stock exchange being valued for $750million when it’s peer NSE is quoting at close to $20Billion! If it was a loss making startup waiting to be listed, I’m sure all analysts would run over each other to justify why it shouldn’t be valued at $15B.

My take is- I’m too conservative to buy Policybazar, Paytm or Nykaa, leave alone Zomato. They’re all plays on a rising India, which I’m happy to bet through ISEC and BSE. It doesn’t matter what stocks you own, as long as what you own also go up respectably. I mean, I don’t have Kotak, HDFC Bank, Nestle, Page, Asian Paints, Zomato, Speciality chemicals, Pharma or IT for that matter. Not even Tata Elxi or IEX or IRCTC. So now you’d think I must have been crying over missing the bus. Well, to let you know, TaMo went up 8.5x from bottom, BSE up 5x. And you’d not evn hear these names.

Like I said, color of money is same. You’re not here to make money by buying what is being fancied, or socially approved. You can buy the most ridiculed and still end up rich. Market may value 1000cr profit differently, but if you make 5x, it’s indifferent to the stock which you own.

I have long been a believer that we’re in a multi year bull run in Indian stocks and what we’ve witnessed in the past 18 months is just the beginning and not the end of this mega run. I now argue that we’ve moved beyond the Skepticism phase and are entering the third stage of this Bull run when people are slowly waking up to the idea that this is for real. Why do I say so? It’s because it’s FOMO in parts of the market.

A while ago when the trend started to go up everyday in certain stocks such as IEX, IRCTC, Dixon, midcap tech etc, not many realised how strong the rally would be. IEX has all but tripled while IRCTC has just the other day hit market cap of 1l crore, which until a few weeks back even IOC couldn’t touch. People around me jumped from not Investing anything at all to suddenly going all in to IRCTC, some random organic stocks, Dixon and what not. More so, they’re selling other stocks and buying into the frenzy, fuelling it further up and away.

This is classic fear of missing out in the early bull run. The skeptics who didn’t invest at Nifty 10k or 12k or 15k or even 16k are now waking up that they have missed a phenomenal run and now hypothetically they’re poorer than they would have had they invested six months back. So, throwing caution to the wind, let’s make up for what we’ve missed out on. So instead of carefully building a portfolio and hold it for long, let’s invest into what’s going up the fastest. In that way, we’ll make up for the lost time quickly.

Hence you see retail tweeting the most of how they’re thankful to IRCTC for an early vacation, a dream car and how IEX and I’d cap tech or chemical stocks gave them multiple of lakhs as profits. I recently heard someone suggesting me a stock saying- buy this and I’ll be malamal soon!

Here’s my two cents to this mania- this is. Bull Market. The trash goes up the highest, fastest. So anyone who has sensibly built a blue chip portfolio will begin to underperform vis-a-vis the crap which goes up 5x in 5 months. This creates self doubt in the most sensible of investors who either finally throw in the towel and buy into the frenzy, only to feel great temporarily or suffer the ignominy of being less rich than the cocky trader who’s nuts. The FOMO occurs even to the most seasoned investors.

However, there’s some end to this at some point in time. Unitech went from 1800 to zero, DHFL from 700 to zero, Yes Bank from 400 to next to zero,. JET, Kingfisher, Suzlon, Rcom all went to zero. And mind you, some of them were even part of Nifty or even Sensex in some cases. This means, they were supposed to be the ultra blue chips in their heydays. Hence, it is extremely difficult to retain your sanity and stick with the portfolio which has all the good stocks but doesn’t do as well as the crap does.

This is, thus, the biggest threat in a rising market!

PS: Here’s what I feel of the two stocks I mentioned-

IEX has a great niche business and strong margins etc. However, the valuation is out of the roof. It’s trailing twelve year profit is 260cr, and today at 830, it’s market cap is close to 24k crore. ICICI securities has its recent quarterly profit of 351crores with 40% net margins and 65% ROE, a market cap of 25k crore. So if the color of money is same, either IEX should trade at 200 or ISEC should go up to 3000! And for the monopoly part, both BSE and MCX have approvals to start power trading and will eat into atleast some of the volumes it’s generating. However, I do feel all these exchange businesses are great and would like to buy if this becomes as unpopular as BSE was and still partly is!

As far as IRCTC is concerned, it’s the travel agent of a loss making entity, Indian Railways. And last I checked, travel agents do go bankrupt, even when they’re very, very large and famous. Eg, Thomas Cook in UK. And regarding growth, how many Indians do you know who could have gotten into a train but haven’t? I guess none. And with the advent of better cars and highways, people drive as much as they can and take a flight to fly long distance. And with a socialist railway ministry, railways is a declining business in India, with fares never going up. S far as monopoly is concerned, Coal India, IOC+HP+BPCL, HAL, and multiple other PSUs are monopolies. Just look at their charts. I’d not buy this even if it goes down 90%!

The last two weeks have been sensational to say the least. There were multiple days when the portfolio was up more than 3% in a day, which made up for almost 15% jump in two weeks. I wanted to shout out loud but restrained myself for a silent Yessss!

I must confess I’m a big, big believer in the RJ model of investing. A young man with nothing can come to the markets and make it big, very, very big on his own. The legend has done it and deserves all the respect we run over each other to shower on Buffett, Munger and Lynches of the world. He is and along with RK Damani, the real hero for millions like me.

So why did I mention RJ today. Well, I’ve a lot to thank him for. None too much than the multiple interviews he gave over these years, narrating his journey from 5000rs to $5B. One of which stand out for me. It was Madhu Dandvate budget, when his networth went 10x in a matter of days, ofcourse due to massive levered trades he set out on. This line has been engraved in my mind everysince the first time I heard it, sometime in 2019.

I used to live in Imphal then, living alone in a sleepy town with nothing much to do. So after I was done with work and working out, I devoted sufficient time reading investing books. Then I stumbled upon YouTube videos of many a legends, inter alia Peter Lynch, Seth Klarman, Howard Marks, Ramdeo Agarwal and ofcourse RJ. As I didn’t have much company, I used to play these videos in background and hit the bed. So they all basically talked me to sleep for almost an year.

Some, if not all of the words remained in my head subconsciously and when COVID crash happened, I realised I was prepared to take the plunge. Seth Klarman’s legendary line was my guiding force- ” we don’t think the world is ending, we couldn’t think how people could think that the world is ending, the world doesn’t end that easily.” This was Klarman narrating how he invested almost half a billion dollars every week for three months back in 2008 Lehman crash.

Similarly, when the bull market picked up, I was reminded of how Raj’s networth shot up multifold in less than a year, back in 1980s and also how he made the biggest killing of his life in 2002-07 bull market, by being fully invested in the dumps of the bear mania.

All of this has given me the vision that being a successful investor requires the vision to buy and patience to hold through thick and thin of a stock. TaMo has just conquered Mt. 500 after 4 years but it isn’t even the beginning of what it can be five years from now. Like I have recently wrote, how Nick Sleep has held Amazon all the way from $20s to $3600s, it’s not about how much you make when a stock goes up, it’s also about how much do you leave on the table after succumbing to the temptation of profit booking.

If a stock goes up 100x in 15 years, and you sell it even after first 5x, you’ve left 95% of the money on the table, after doing all the hard work and just by being less patient.

In an investing career spanning thirty years, if you can find ten 10baggers, ie ten stocks which you own which goes up 10x in price, you’d be very, very rich by the end of it. If you’re lucky, and even two of them turn out to be 100 baggers, you’re bound to be sipping champagne on a private yacht by the time you’re 50.

So hold on for the vision takes years, if not decades to unfold. You might be having a portfolio of 5lakhs today. But, if you stay put, it will be worth 5cr someday. Don’t hurry up to sell out. Give yourself a chance to be seriously rich. Markets will take care of everything else.