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20 Years of Finding Multibaggers in 60 Minutes | JSW, IHCL & TCP | Contra Investing | Parag Thakkar — Transcript

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0:00When Mr. Rakesh bought Titan,
0:01everyone knows the well-known story that Mr. Rakesh created a very good wealth in Titan.
0:06If you see that journey, in the beginning, it was in a very throw-away valuation,
0:09that's why he bought it.
0:10Then he understood that the company Tanishq has a jewellery store.
0:14The unorganised to organised market will shift to jewellery, so this much money can be made.
0:18And he kept on investing even at a higher level.
0:21One thing is 100% in investing.
0:23Good news and good price will never come together.
0:25So when the price will come good, when the price will be attractive,
0:28then the news will be bad.
0:30Like many times it has happened with me that I tell everyone that I can't leave this thing at this price.
0:34Because the quality of this thing is so good, its track record is so good,
0:37its cash flow generation is so good, its ROCE is so good.
0:40That I will not be able to leave this thing at this price.
0:43Even if the whole world is in front of me.
0:45I want to catch a falling knife on my chest.
0:47So in that limited money, if you have taken 100 rupees in something, which was 40 rupees.
0:53So if that 100 is slightly corrected to 60, then your 40% capital will break.
0:57And a lot of these products are also leveraged.
0:59Actually that is a mistake which I regret for my lifetime.
1:03That I bought such good stocks at such a good price.
1:06But if I had kept it till now, then I think the return would have been different.
1:51Hello sir!
1:52Hello!
1:52Welcome to Money Talks.
1:54Your market experience and your contrarian bets are truly inspiring, and I think our audience will be really excited.
2:01You’ll definitely share a lot of things many case studies and stories so that
2:06they can understand how you think and how you’ve made some big decisions over the years.
2:13So, you built the ICICI Prudential Contra Fund from scratch,
2:18and even today a lot of people are quite confused about contrarian investing, what it actually is.
2:25So, briefly, if you could explain to us what it is.
2:29Thanks a lot for inviting me.
2:30So this is actually my favorite topic, by the way.
2:34So thanks for starting with my favorite topic.
2:37Basically, when we started the contra fund, or when I first stepped into the investing world,
2:42I’ve always believed one thing and I learned it the hard way,
2:47you should never compromise on the quality of management,
2:51and you should never compromise on the quality of the balance sheet.
2:55If the management is good, meaning they’ve done good work in the past and executed well.
3:00If the balance sheet has low debt,
3:01it can be a bit complex for investors.
3:05But then one metric I focus on a lot is net debt to EBITDA.
3:09If that number is above three and a half, let me explain it in simple terms.
3:13If any of your viewers runs a business, right.
3:17If you’re earning ₹100 and your debt is more than ₹350, then I don’t invest in that company.
3:24And this one metric has saved me from a lot of mistakes in the past.
3:29I made a mistake too, I learned from it, then I applied this, and I managed to avoid many such mistakes.
3:35So this is a very important metric.
3:38I look for a clean balance sheet and a company that generates operating cash flow that is not less.
3:44These days everyone looks at screener, screener AI so anyone can check
3:48whether the company is generating cash flow from operating activities or not.
3:51So these three-four metrics, ROCE should average around 15% over the last 10 years.
3:56When a company like that falls for some temporary reason.
4:01Temporary reason might be that the overall market fell because something happened globally,
4:05interest rates went up in the US, or there was a war.
4:08One is the market falling, another is a sector falling, like today we’re seeing the IT sector has corrected quite a bit.
4:16We’ll discuss later whether there’s a contra opportunity there or not.
4:20But there is IT sector.
4:21But in the past too, many sectors have seen such falls, very big falls.
4:28And the third is a company-specific fall.
4:30Something is wrong at the company, right.
4:33And a good company comes to a very good price, like what happened with Sun Pharma.
4:37One example is that in ICICI Pru, in contra or across different ICICI Pru funds,
4:43we took a fairly large position along with Naren sir.
4:47The corporate governance issue in Sun Pharma was quite old, while the company itself was very strong.
4:53it was the largest pharma company domestically, and it was moving into specialty pharma in the US.
4:59So the stock price of such a company suddenly fell by more than half because of that governance issue.
5:06So there are three different buckets like this.
5:08But I want to wrap up this point here.
5:12The confusion people have about contra, people think contra means buying cheap.
5:18Like, “I’m buying at 5 PE, 6 PE,” or “I’m paying one-time price-to-book, or even below that.”
5:25In my view, that is not contra investing.
5:28My definition of contra is this.
5:30Today, if there’s a good company,
5:34that has no structural issue going forward,
5:37but it’s down only because oil has gone up so Pidilite is down, or Asian Paints is down.
5:43Or it’s down only because aluminum prices have fallen, so Hindalco is down.
5:46In such cases, you take a long-term view that this isn’t a big problem for the company; it will overcome it.
5:53The company is excellent, and this is just a difficult situation in the short term.
5:59That’s where I look for contra.
6:02It’s not necessary that I buy a stock just because it’s cheap.
6:06In one of my contra..
6:07In fact, when we started the contra fund, my mentor and guru, because of whom I’m here, by God’s grace,
6:15Naren sir.
6:17When he looked at the portfolio, he said we should call this “quality contra.”
6:21“Contra” isn’t quite the right name—this is quality contra, because the entire portfolio was filled with quality stocks
6:27that were bought at a time when crude oil was rising, and everyone felt crude would keep rising,
6:33margins would shrink, earnings would fall, and so these stocks had been beaten down.
6:38So that’s how..
6:39We started this fund in September ’19.
6:42If you look at the first six months’ performance, there was a very big alpha,
6:46because we got all these quality companies at cheap valuations.
6:49People were scared that crude oil going up would hurt these companies,
6:53so short-term investors and traders dumped those stocks and we bought them.
7:01And one more thing I want to tell you and your viewers: if the management is good, they overcome everything.
7:09Look at history JSW Steel, I’ll speak in today’s terms,
7:17suppose today it’s a ₹1 share; back then it was ₹10, so I’ll adjust the numbers accordingly.
7:22A stock that was effectively around ₹90 fell to ₹48 because of the iron ore mining ban in Karnataka.
7:28Is this about 21 years ago sir?
7:29This was in 2011–12,
7:33when the iron ore mining was banned.
7:36Mr. Jairam Ramesh, for environmental reasons, got mining shut down,
7:44so they had to buy all their iron ore from outside, and the stock got cut in half.
7:48The adjusted price as of today is ₹48.
7:52That company didn’t shut its plant even for a single day.
7:55They arranged iron ore from somewhere and carried out production and kept sending the shipments, on and on.
8:01And today, that stock is roughly 25 times higher than that level.
8:06So in 13 years it delivered a 25x return.
8:09Even today, that company is the lowest-cost converter of steel,
8:16and now it’s moving into value-added products as well and doing backward integration too.
8:20I can give you many such examples, but the point is,
8:23if the management is good, they come out of tough situations—just like in life, good people find a way out and overcome bad phases.
8:33Companies are the same.
8:36If you’re betting on the right management, they’ll overcome all problems and make you a lot of money.
8:42Now the question is, how do you identify that the management is good? How do you get that confidence?
8:47That’s basically why, in a lot of my NDTV Profit interviews too, I say that I believe in investing in tried-and-tested management.
8:58And yes, sometimes this approach can go wrong. By “go wrong” I mean, you can end up missing certain opportunities.
9:04For example, if it’s the Tatas, or the JSW Group, or the Kumar Mangalam Birla Group, Sunil Mittal, Reliance, Adani.
9:17If there are well-known business groups, well-known multinational companies.
9:21Right?
9:23Like Hindustan Unilever—everyone knows their corporate governance is among the best.
9:26Right?
9:28So when you get an opportunity in such companies, when they’re going through a bad phase,
9:32Take ITC as an example today, the ITC stock has fallen sharply, from around 420 to about 280 right now.
9:39If you buy that share today, you’re getting roughly a 5% dividend.
9:42Meaning the company paid about 14 rupees as dividend last year.
9:45The price is around 280,
9:47everyone knows this quarter is going to be very bad because the tax has suddenly gone up.
9:52They won’t be able to take prices up all at once, so they’re increasing prices in a staggered way.
9:57So volumes will also fall, because they had to take such a sudden price hike.
10:03For now, as I said, the company will take corrective actions gradually.
10:07Gradually, in a staggered way, prices will be increased.
10:10Gradually, they’ll tweak the cigarette sizes,
10:13and after understanding the whole market, they’ll protect and build their market share
10:18and then volumes will slowly start coming back over time.
10:21For that, you need patience.
10:22I’m not saying you’ll buy today and make a great profit in three months.
10:26You’ll have to hold it for one and a half to two years, but till then you’ll keep getting dividends,
10:31and your value appreciation will start from the point when growth begins again.
10:35You should also know this is a market cap of about 3.5 lakh crores, and 20–25% of the market cap is now starting to come from FMCG.
10:43The FMCG business is doing very well.
10:45This is doing revenues of 24,000 crores.
10:48It’s growing by leaps and bounds, and their focus is the same. They want to reduce dependence on the cigarette business.
10:53So basically, opportunities like this, like the kind of opportunity you see in IT today.
10:58Similarly, I had very strongly recommended TCS just recently.
11:02In between, a similar opportunity came in Bajaj Auto.
11:04In Bajaj Auto, people thought the domestic scooter market, where Bajaj used to be a big thing right.
11:11They’ve exited that market.
11:13So they’re losing market share there, and their domestic market share has come down a lot.
11:19So, this is from about a week or ten days ago.
11:21I had just taken that contra call that their exports are doing very well, and for me, it’s about profits, right?
11:28The company is earning.
11:29And that company earns, keeps 15,000 crores of cash on the side,
11:33and whatever profit it makes, it gives back to you, the shareholder, through dividends or buybacks.
11:37So a company that earns and gives me all that money,
11:41and still continues to grow because its export markets like Colombia, Mexico, Nigeria are all growing very well
11:49and on the other side, they’re investing big in electric vehicles. Their electric three-wheeler is doing very well.
11:54So now at a PE of 20–21...
11:57So that’s why I’m saying, known names,
12:00like Bajaj Finance, you know it iscompounding.
12:03Every year it’s compounding at 22–25% anyway.
12:08There isn’t such a problem right now.
12:09But I’m speaking hypothetically, if a two-quarter problem came,
12:13say asset quality was weak for a quarter or two, and because of that the stock fell 20%.
12:19I think that can be a very compelling opportunity.
12:22Right?
12:23So, like when something came up around the Murugappa Group in between,
12:27a very good stock like Chola Mandalam fell quite a bit.
12:31That was a good opportunity.
12:33What happens is,
12:34it gives you a chance to enter a good company at the right price point,
12:40and from there your compounding can even be 20–25%,
12:44because normally it compounds at around 15%.
12:46But because that correction happened, your entry point became attractive,
12:49so then your compounding becomes 20–25%.
12:52So every two-and-a-half to three, years, your money can double.
12:56And sir, you mentioned Chola Mandalam. At that time, what exactly happened?
13:00And when everyone was against it and you still showed confidence.
13:05How are you able to do that? That’s what I want to understand.
13:07It’s actually simple.
13:11I believe some things come with experience.
13:15By God’s grace, of course, God has to be kind to you for that opportunity to even strike you.
13:24But the most important thing is,
13:26if you understand the management’s DNA, that this management won’t do the wrong thing.
13:31Something can go wrong with them. Things can go wrong with anyone, with any company, with any business.
13:38But whatever has gone wrong here, they will take corrective steps, and they will come out stronger.
13:43Let me give you an example of really big wealth creation.
13:46For instance, every company that has created massive wealth has gone through a real trial by fire.
13:52Take Bharti Airtel if you remember, from 2016 to 2019 Reliance made voice calls free.
13:59Because of that, so many telecom companies shut down.
14:02Names we used to hear, like Uninor, Videocon, I’m just taking names, right, all those companies were shutdown.
14:10Vodafone Idea also went into a serious struggle.
14:13But Sunil Mittal ran Bharti Airtel in such a way, he cut costs, became cost-competitive.
14:19They had their Africa business, cash flows were coming in from there.
14:22Somehow, they survived and they thrived.
14:25So today its market cap has reached eleven lakh crore.
14:28Today it is the second-largest market-cap company in India.
14:31Reliance is around seventeen lakh fifty thousand crore.
14:33Bharti Airtel is eleven lakh crore, and ICICI Bank is now at ten lakh crore, HDFC Bank...
14:38So what I’m saying is, there are certain things that are structurally..
14:42For example, take ICICI Bank.
14:44There were quite a few controversies around ICICI Bank as we all know, right?
14:50But when Bakshi ji came in,
14:52and the first one or two times he addressed investors,
14:56you got this feeling that this man is going to do something really good.
15:03And I would say, ever since Bakshi ji came, their first quarter result came out.
15:07Everyone knows, atleast I think so..
15:09People even tell me, “Don’t talk about ICICI Bank right now,” because I talk so much about ICICI Bank and about Bakshi ji.
15:15I understood it that this guy, this person, will take the company to the next orbit.
15:22And ICICI Bank already had the basic infrastructure, branches were there,
15:27they were also a very technologically savvy bank.
15:31So I backed it at that time the price was ₹300.
15:34Today it’s ₹1400.
15:36From then till now, in almost every portfolio I’ve managed, my number one holding has mostly been ICICI Bank.
15:44Because I trust that person, and I trust that he will not do a bad landing.
15:49The deposit franchise is quite strong.
15:51They’ll keep expenses under control.
15:52And profits, like they say,
15:55profit before tax excluding treasury items.
15:58They’ll keep growing that at around 15–20%, so that kind of return will keep getting generated.
16:01If you buy it at the right price, pick it up during a big market correction, your return can be even higher.
16:07Sir, and your current firm, Fort Capital, has a stated philosophy.
16:12Buy good companies during bad times.
16:15Buy good companies using a quality filter, and buy them in bad times using a timing filter.
16:20Between these two, what do you find more difficult?
16:25No, in my view the hardest part is this.
16:29If a company or a sector is going through a bad phase, you can’t really judge how long that phase will last.
16:38For example, if I say today that TCS is a good stock, or Tech Mahindra is a good stock, or Mphasis is a good stock.
16:45Right now they’re facing headwinds.
16:49Today, because of AI, your billable hours,
16:53since fewer people are needed. Your billable hours are coming down, so it’s a deflationary environment.
16:59So in a situation like this, when you decide to buy, the question is, why am I buying TCS?
17:03TCS has a six percent dividend yield and about a seven-and-a-half percent free cash flow yield.
17:07It’s a Tata company, it makes fifty thousand crore in profit.
17:11If I’m buying it, then right now I’m basically shooting in the dark.
17:16I don’t have certainty about when growth will come back, when good growth will return.
17:23So it tests your patience.
17:26That’s why when you take such a position, especially on the technology side, where disruption can happen.
17:33It’s not necessary that your call will be right.
17:35Of course, if you speak to TCS, if you speak to Nandan Nilekani, they’ll explain that this is a temporary phase.
17:43Ultimately, system integrators will be required.
17:46But when the market will accept that, you don’t know.
17:50So what should you do in such situations?
17:54You should control your weights.
17:56No matter how bullish you are,
17:58don’t keep it more than 10 to 12 percent of your portfolio,
18:02so that you don’t get extra stress and your investors don’t end up with lower returns.
18:06Because if this pain lasts long, it can become a problem for your performance.
18:12So when you’re managing public money, you have to be very careful when you take such contra bets.
18:16And then, as your confidence increases,
18:19TCS had a buyback at 4,200 and today it’s at 2,200.
18:24So as confidence builds, you can increase your bet size.
18:29But it’s important to take an entry at least once, so that you track everything in that sector.
18:35Track every statement, every company’s earnings calls..
18:39This is our job, this is our passion, this is what we do.
18:43Retail investors who don’t have time, who have their own business, their own jobs.
18:47They’ll have to leave such things to professionals.
18:52And anyway, in the last interview I saw of yours, you said he is investing in large caps via SIP in the Nifty.
19:00That is one good way for retail investors to invest.
19:04If Nifty’s earnings growth is twelve percent,
19:06you’ll get twelve percent compounding over a longer period of time.
19:11But I have one addition to that when there’s a very big correction in the market,
19:17if you invest then, if you put in more money as a lump sum then you will definitely get a good return.
19:23Compounding can be above twelve percent too, fifteen, eighteen percent is also possible.
19:27See, one thing in investing is hundred percent true.
19:30Good news and a good price never come together.
19:34When the price is good, when the price is attractive, the news will be bad.
19:39That much risk you have to take in equity investing.
19:42Otherwise, just do averaging, keep doing SIP, ultimately you’ll reach your aim.
19:49But if you invest on your own,
19:51then definitely this is the brutalness of the market.
19:57Whenever you get an attractive price, along with it you’ll get negative news.
20:04And at that time you have to have the courage to buy.
20:08Like it has happened with me many times.
20:11I tell everyone, at this price I cannot let this go,
20:15because the quality is so good, the track record is so good, the cash flow generation is so good, the ROC is so good,
20:21that at this price I just can’t leave it, even if the whole world is against me.
20:27That’s why sometimes, in the flow, I say, you know, I want to catch a falling knife on my chest.
20:36So this is like..
20:39Look, in the near term I’ve been wrong in IT as well.
20:43But I’d say it’s sometimes success, sometimes failure.
20:46Like Bajaj Auto, by God’s grace, in the very short term, before I expected it to move, it moved.
20:52In some cases it takes time, but that’s how it is.
20:56Okay sir.
20:57And you mentioned that you look at companies
21:01whose 10-year average ROCE is above 15%, and that they should have a moat through technology or brand.
21:09Can you share some examples or a case study of how these filters work?
21:16So these are my mathematical filters.
21:19For example, Bajaj Auto fits, everything I’ve written in my investment philosophy fits Bajaj Auto.
21:27And when I was running my contra fund, at that time I invested in TVS Motors at ₹500.
21:37Because when I met the management, I got the vibe that this company is doing such good work.
21:42Launching great products, entering every segment, going into exports, getting into three-wheelers,
21:47and in scooters, domestically, Jupiter was doing really well.
21:51So even though it was a bit expensive, I bought it.
21:55Which actually wasn’t my style but I felt the company was doing something outstanding.
21:59You can’t let a company like this go.
22:00And the management was absolutely clean, transparent, with no corporate governance issues.
22:05So Bajaj Auto, TVS, Mahindra & Mahindra are examples like that.
22:10And sometimes what happens is, you get a big opportunity because of a change in management.
22:17Like I said about ICICI Bank, what happened after Mr. Bakshi came in.
22:20if you look up my contra fund, my top holding right at the start was Tata Consumer.
22:25Tata Consumer at that time was a stock people were tired of.
22:29For five, six years the stock hadn’t moved.
22:31The price was ₹200 and the market cap was ₹16,000 crore.
22:35Chandra became the chairman of Tata Sons at that time, Mr. Chandra, whom I respect a lot.
22:42Since then it clicked for me that this is the FMCG sector, where cash-flow generation can be very strong,
22:47and Mr. Chandra has now taken over, so it really came onto my radar.
22:49Then what he said was, I want to make Tata Consumer the Tata Group’s flagship FMCG company.
22:57Right?
22:57And then he said, the salt business that sits in Tata Chemicals, I’ll move that into Tata Consumer,
23:03so that Tata Consumer becomes a focused Tata Group FMCG company.
23:07That move excited me so much that the same day I bought 3.8 million shares at ₹200 in the fund, in the contra fund.
23:16Today that share price is ₹1100.
23:18So the point is, though we’ll come to this later, this is actually my biggest mistake, which I’ll talk about later.
23:25I sell too early.
23:28So I identify very quickly, and I also end up selling very quickly,
23:32because I feel, “Okay, that’s enough, now let’s go find something else.”
23:36That’s not right in my view, but I end up doing it. It’s a personal trait.
23:43So basically, in Tata Consumer, then a second time a similar trent happened.
23:48At around ₹1200, when it felt like Zudio was already doing very well, and Westside was doing well,
23:57Star Bazaar was just starting to pick up, and the management was from the Tata Group.
24:00Again, there was no issue with governance and all that, so I felt there could be very good growth here.
24:05Again, I sold early near the top the stock went up to 7000
24:08but the point is, everywhere, what I want to stress is the quality of management,
24:15their execution, their execution track record, low debt on the balance sheet, good return ratios, and strong cash-flow generation,
24:23these are the main factors.
24:25Then what happens is that from time to time,
24:27even these companies see big corrections due to one reason or another,
24:32and I feel that’s a God’s gift to investors.
24:36You should grab that gift with both hands, and if it comes at the right time,
24:42then you shouldn’t sell it, which I also have to learn.
24:45So, for example, if demonetisation happens.
24:48During demonetisation everyone felt that all cash transactions had stopped.
24:53At that time Maruti’s stock had fallen a lot.
24:56Even though Maruti is something most people buy by taking a bank loan and paying by cheque anyway.
24:59Still, Maruti’s stock fell then.
25:02If you had bought Maruti at that time, there was really no need to sell it, which I also have to learn.
25:08I did buy it, but I sold it.
25:12So in times like demonetisation, look for the areas that are getting hit the most,
25:16and then find which efficient company there you can buy, one with a superb track record.
25:23For example, today something that just came to my mind is,
25:28God forbid, if the monsoon goes a bit off track, tractor sales could face some issues, so Mahindra & Mahindra could correct.
25:36Right now, Mahindra & Mahindra, we know has excellent execution, a superb CEO, Mr. Anish Shah is fantastic.
25:42If the stock falls because of that, you have to determine at what price you should buy it.
25:51But you must keep this in mind,
25:54wherever there’s a problem, the market’s short-term traders and hedge funds will dump it,
26:00no matter how good or gold-rated the company is.
26:03Because in the stock market, 90% of people play for the short term,
26:07and short-term players will see that profits may fall next quarter, so they’ll sell it.
26:12And that creates a very good opportunity for a long-term investor to buy it gradually, in a staggered way.
26:19Next year the monsoon turns out good,
26:20hold it for a year to a year and a half, and you could make 30–35% in Mahindra & Mahindra.
26:24I’m just giving an example because the monsoon is relevant right now.
26:27So when there’s a problem in a sector,
26:31buy the best company there with the strongest balance sheet and the highest-quality management.
26:36That’s my core mantra behind whatever alpha, by God’s grace, I’ve been able to generate in my life.
26:43And sir, what was the first stock that made you believe that the contra strategy actually works?
26:50Tata Consumer, because in the contra fund, the very first stock I bought was Tata Consumer.
26:55And that too, I put about 8–9% of my fund into Tata Consumer,
27:00at a time when a lot of, I would say, good people were completely against buying that stock.
27:07Because, for the last 5–6 years..
27:09Actually human memory is such that we all get this recency impact.
27:13Like, even today it’s a big topic, right, that there are so many blue chips that haven’t performed.
27:21HDFC Bank hasn’t performed, Kotak Bank hasn’t performed, TCS hasn’t performed, Infosys hasn’t performed.
27:27For many stocks, five or six years of returns have become zero.
27:31So when people say this, I’ll definitely accept it,
27:35if I don’t own it and I haven’t endured that five-year pain, then I’m a happy person.
27:40I should evaluate that today, because it’s not like there was profit growth over five years.
27:44It’s not that profit didn’t grow. Profits did grow.
27:47It’s just that five years ago their valuation had already gone up a lot.
27:53There was no problem in the company.
27:55Back then the valuation had become so high, it got so expensive that smart investors sold it at that time.
28:02Then came five years of pain, and the company kept growing, but the pain still continued.
28:07So what I’m trying to say is, what was the recency impact in Tata Consumer?
28:11For six years, the stock wasn’t making money.
28:13So people had basically given up hope.
28:15But the change that was happening.
28:18Mr. Chandra took it as, you know, a company he wanted to turn into the flagship FMCG company of the Tata Group.
28:25that change needed to be identified.
28:28Let me give you another example.
28:30When we were starting to come out of Covid a bit and the news came that Pfizer’s first vaccine had been invented,
28:38The very first stock I went and bought, only in the Contra Fund was Indian Hotels.
28:43Back then Indian Hotels was ₹75, today it’s ₹720.
28:46Right?
28:47So Tata Group company, again, has the best management, and the Taj Group has such a strong brand.
28:52Right?
28:53I said, they’ll survive anyway.
28:55And I’m buying it at a time when a hope has emerged that,
28:59look, a vaccine is going to come, so people will step out again.
29:03Even I hadn’t imagined they’d go out this much
29:07that room rates would rise so sharply and that there simply wouldn’t be any rooms available.
29:10Marriages, conferences, all of that was going to restart in hotels, and
29:15consumption would trend toward premiumization, and people would travel a lot.
29:21But what happened first was revenge consumption, right?
29:24During COVID people were stuck inside their homes for two years.
29:27When they finally stepped out, they felt, why wait for tomorrow, spend today.
29:34That revenge consumption benefited Indian Hotels a lot.
29:38So again and again, why I keep referring to Tata Group companies, or Mahindra Group companies, and Bajaj Group companies is
29:44that is the most important thing,
29:46within that group, that company, like during COVID, the most affected sectors were hotels
29:55and theatres and those kinds of out-of-home entertainment and out-of-home leisure things.
30:02So what was the most affected? That was it.
30:03And it had been beaten down the most.
30:06And after Pfizer’s vaccine came out, I felt that
30:08human beings, mankind, wouldn’t just keep sitting at home forever; something would happen.
30:12Right?
30:12So to play that hope, I bought Indian Hotels.
30:15Did you buy any other stocks around that time as well?
30:20Tata Motors—at that time it was around ₹45.
30:23Motherson Sumi was in the ₹45 to ₹65 range.
30:26All those stocks.
30:28But that’s the thing, my mistake is that
30:31the moment I make 20, 30, 40 percent in those stocks, which happens very quickly in situations like this.
30:37Because when you buy a blue-chip company’s stock at what I’d call a throwaway price,
30:43someone out there is smarter than you.
30:45They’re watching too, they’re buying too, and because of that you get returns very quickly.
30:50Then we feel, “I made 30 percent in three months, sell it.”
30:53And that is actually my mistake, I’ll regret for my whole life that I bought such great stocks at such prices.
31:02But if I had held them till now… I mean, the portfolios I built at different times,
31:06I think the returns would look completely different from what they look like today.
31:10My God, these are good—but they would have been stupendous.
31:14You can’t even compare:
31:16if you bought Indian Hotels at 75 and held it till 720,
31:19if you bought Tata Consumer at 200 and held it till 1100—returns would have been amazing.
31:23So, out of all the investments you’ve made, sir,
31:25is there one stock where you can say, “I wish I had waited a bit more patiently”?
31:30There are so many.
31:31If you ask for just one—the biggest one—there are a lot.
31:36I mean, if you ask my colleagues, my friends, my team
31:38people who know me—they’ll give you at least a thousand stocks.
31:42Basically, because I’m a very early seller.
31:46When the price goes up, then I feel
31:51I’ll give you a good example—like when Mr. Rakesh bought Titan.
31:56Everyone knows that well-known story, that Mr. Rakesh created a lot of wealth in Titan.
32:02And if you look at that journey, in the beginning it was at such a throwaway valuation, that’s why he bought it.
32:08Then he understood the company—Tanishq was opening jewellery stores,
32:12the jewellery market would shift from unorganized to organized, and that could create such massive wealth.
32:16And he kept investing even at higher levels.
32:21Right.
32:21Mr. Nimish, who is a very well-known investor—I’ve seen his journey in Grasim, UltraTech, JSW Steel, Hindalco
32:28you can name it: metals and cement, and auto and auto components like Bosch, MRF.
32:33MRF, if I’m not wrong—I’ll have to check—but in ’98 or ’99, Annam had bought MRF at around ₹400 or ₹500.
32:45Just imagine: a ₹400–₹500 stock is around one and a half lakh rupees today.
32:49And that too, it’s a tyre-making company, right?
32:52This is about 1998–99.
32:55So yes, a tyre company—but the main point is their conviction:
33:02“My ₹500 stock is now at a price of ₹25,000, and I still like it,”
33:08because at that time, based on MRF’s positioning, branding, and cash flows,
33:13even at ₹25,000 they felt the valuation was still cheap.
33:17People like me—investors—what mistake do we make?
33:22Say we bought it at ₹500, but then once we get the profit we think is enough, we book it.
33:29In the stock market, if you’ve bought a good company in a bad time—buying a good company during bad times
33:35and then the time starts turning in its favor, the biggest learning, in my view, is: take the full ride.
33:43Like Mr. Rakesh ji did in Titan, like Mr. Nimish did in MRF—take the full ride.
33:48Don’t sell halfway thinking, “Okay, my return is made.”
33:53Otherwise, just do FD investing, because there you’ll make whatever money you’re supposed to make without any fluctuations.
34:01So this is the learning I wanted to share.
34:05But yes, one thing is: don’t sell quickly if you’ve bought a good company at the right time.
34:15And second: the main thing is, how do you find a good company in the first place, right?
34:19That’s why you need professional investors.
34:21But I’d like to say what I mentioned earlier:
34:25if, to begin with, the quality of the management is good, and you’re getting the stock at a low P/E—or
34:30whatever valuation metrics you look at—after it has fallen a lot, for example;
34:34or when the news flow is extremely negative in the market about that sector or that stock;
34:42or for instance, even for India itself, we’re in a phase right now where everyone is talking about Korea, Taiwan
34:47wherever you go, overseas investing has become a new trend,
34:51everyone wants to go there because that’s where the chipmakers are, where earnings growth is very high.
34:57So right now India is an ignored market.
34:58In my view, if oil comes down,
35:02then India can become a very attractive investment destination even for foreign investors over the next two to three years.
35:09Has there ever been a case where the crowd’s read on risk turned out to be right, and you went the opposite way?
35:17Basically, in IT I’ve had that feeling quite a few times—this time as well, very recently.
35:25Like, we hear a lot of people—Sameer Arora from Helios,
35:29for instance—he’s kept a zero percent weight
35:33on one of my fellow colleagues, Mr. Anish—who’s now the CIO at DSP
35:38has had a very clear view for the last three-four years that one shouldn’t buy IT.
35:43Right.
35:44My problem is that when a very good company
35:48one generating very high cash flows, with very strong return ratios
35:53gets beaten down a lot, its multiple becomes very cheap and
35:57the dividend yield becomes very attractive, I just can’t stop myself.
36:02I end up buying it.
36:03Right.
36:04So it’s happened to me once or twice that after buying IT stocks
36:13though I bought them after they had already fallen quite a bit
36:15still, the rebound didn’t come as quickly as I wanted.
36:20So this is a very recent example where it feels like, am I wrong somewhere?
36:27But time will tell, I think.
36:30I’ve worked with Narendra sir.
36:33I’ve seen that when he was bullish on some stocks like NTPC, Power Grid and all
36:37and I liked both those stocks too—we had to wait two to three years for our call to play out.
36:44The stocks were cheap, cash-flow generation was very strong, and it was annuity-like cash flow.
36:49Meaning, it wasn’t even cyclical.
36:51But the market took so long to latch on to that theme that it tested our patience—very badly, I would say.
36:59Because we had NTPC at 8–9% of the portfolio, and the stock just wouldn’t even move from 120 to 140.
37:06So during that time our patience was really tested.
37:09And I’d say one reason for that was that ESG investing became a trend at that time
37:16wherever there were environmental issues, FIIs were selling those stocks
37:21so NTPC wasn’t moving, because ultimately it uses coal.
37:25Conventional NTPC—the one that’s trading around 350 now—back then it was facing that ESG overhang.
37:35That’s why the stock wasn’t moving.
37:37But ultimately, after the Russia–Ukraine war, ESG became less relevant.
37:42Every investor accepted that, look, coal will be needed.
37:45And since then it got re-rated, and the stock has gone up almost three times.
37:50So sometimes it really tests your patience.
37:52Even Bharti Airtel tested patience like anything
37:55because on one side you were doing 25–30 thousand crore of capex every year,
38:00and on the other side such massive competition came in that voice became free.
38:05So your revenues came under severe pressure.
38:07Your interest cost stayed the same.
38:08Depreciation stayed the same.
38:09So your PAT turned negative.
38:11But if the management is right, they fought back—and now they are thriving.
38:16So now, in Bharti Airtel, the problem is going to be the opposite.
38:20They’re going to generate ₹70,000 crore of free cash flow every year, and they’re thinking about where to invest it.
38:25It’s the opposite problem—what you call a “problem of plenty.” Whereas at that time there was a cash crunch.
38:33But they fought back.
38:35So these experiences—where you had taken a bet that a stock would perform,
38:41but the crowd was saying no, and the crowd turned out to be right
38:45what learnings did those experiences give you?
38:48One big learning for me has been: don’t fight technology disruption.
38:53That’s why I’ve also mentioned in my fourth dynamic fact sheet
38:59that we don’t want to go up against technology disruption.
39:03If technology itself is disrupting things
39:05and because of that the relevance of a business is a bit at risk,
39:10or its revenues are at risk, or its cash flows are at risk,
39:13then do your work diligently and take a calibrated position.
39:20Don’t get so overweight that if you end up being wrong,
39:24the returns for your customers and investors get impacted.
39:30Can you share an experience where the crowd had taken a bet,
39:35but you went against it and stayed put patiently
39:38you waited, and a stock made you wait for a really long time, and then finally it paid off for you?
39:46NTPC, Bharti Airtel—those are that kind of names.
39:50Tata Consumer as well.
39:51These are all stocks where I often felt that, like—if you remember
39:59During Trump’s first regime, when the trade war with China was going on,
40:05metals were getting crushed—metal stocks had fallen a lot.
40:12Hindalco, which was around 185, had come down to 65.
40:15And I’ve always liked Hindalco as a company,
40:18so that phase really tested our patience in the portfolio.
40:22But luckily, as I said, if you’re backing great managements
40:28with strong balance sheets and deep pockets to support their businesses
40:33like we’ve seen, we have a lot of investment in Mr. Kumar Mangalam Birla’s companies.
40:39Every time the company needs money, he himself puts in money
40:43through a rights issue or whatever—he brings in the capital himself.
40:47So basically, you have the confidence that the promoter is also putting in his own money alongside us.
40:53Like in Grasim, there was a rights issue around 1,850 during the global financial crisis.
41:00Right in the middle of the crisis,
41:02Hindalco also came out with a rights issue at ₹95, and at that time the stock price fell to ₹45.
41:08There were so many problems back then, but now we’re seeing the stock at 950, and my view is it can double from here as well.
41:15So I’d say that if you stay with good management for a long period of time, it really helps you.
41:22But yes, as a fund manager handling public money
41:25where your performance is judged every quarter—you can’t afford to be that patient.
41:30So that is, a problem we face as public fund managers.
41:37We have to buy success stories—without overpaying for them.
41:42Because one thing I told you: if you want a good price, the time will be bad.
41:48And the reverse is also true.
41:50If you want everything to look perfect—no problems anywhere
41:53and then you go and buy a stock, you’ll end up buying it at the most expensive level, at the peak.
41:57Because everyone feels there’s no problem, so everyone is buying the same thing.
42:03Like what’s happening today in AI stocks or semiconductor stocks
42:07people are launching leveraged funds to buy Samsung stock or to buy Hynix stock.
42:13The craze is such that people aren’t just taking leverage, they’re basically buying only that one stock.
42:20Generally, that’s a sign of a bubble—but I wouldn’t call it a bubble,
42:24because who knows; we don’t have that level of understanding of that sector.
42:28But when it gets this crowded, typically that trade is getting ready to form a peak.
42:36And sir, if you could tell our retail investors one story—not a tip,
42:43but just to explain how this whole approach actually works—what would it be?
42:48Basically, this is my favorite way of thinking: when a company hits an inflection point, how do you recognize it?
43:03My all-time favorite stock has been Bajaj Auto.
43:09A few years ago—maybe three or four years back
43:13the company announced a buyback, saying they would buy back shares up to ₹4,600.
43:22At that time, the stock was trading around ₹3,700.
43:26So the stock was about ₹900 below the buyback price at which the company itself was willing to repurchase.
43:33Since it was one of my favorite companies, I studied why the stock had fallen so much.
43:39The reason turned out to be that Nigeria was a big export market for them.
43:43In Nigeria there were political issues
43:45something like demonetisation, a regime change
43:49so the 60,000 bikes they used to export basically became zero every month.
43:55That’s why the stock came down.
43:57Now management very rightly felt this was a temporary problem.
44:04Like, okay, something happened there, my volumes dropped there,
44:08and my stock price has fallen—so they said, we’re ready to buy back up to ₹4,600.
44:12And the promoters did not participate—they said we won’t participate.
44:17They did an open market buyback, and around ₹3,800 the market actually gave them about 65 lakh shares.
44:23And I turned very bullish: the stock was at 15 P/E, dividend yield was about 4.5%.
44:29The promoter isn’t tendering his shares at ₹4,600, and
44:34here people are selling to the company at around ₹3,800.
44:39And the stock was only at 15 P/E.
44:40Top-class management—like I said, in capital allocation nobody can beat them
44:45and even in controlling fixed costs, nobody can match them.
44:49That’s why KTM and Triumph come to Bajaj Auto and say,
44:53you manufacture for us, we’ll sell it to the world—because they have the lowest fixed cost.
44:58And the company was sitting on cash—there’s always around ₹15,000 crore of cash on their books.
45:03So what was the risk?
45:04The valuation was cheap, the group was excellent, the company had net cash,
45:08and the company itself was ready to buy shares at higher prices—so there was basically no risk.
45:13I couldn’t understand how the market could ignore this,
45:16but still, the stock that was at 3,800—today we’re seeing it at 11,000.
45:20And the company has again declared a buyback at 12,000 rupees,
45:23where once again the promoter didn’t participate.
45:26So these are very strong signals that even a retail investor can understand:
45:30there’s a buyback happening, and the promoter isn’t tendering his shares.
45:34I’m not saying he’ll be right in everything.
45:37There are exceptions in everything.
45:39Every time you apply this theory, you might even be wrong.
45:44But apply it when you’re convinced about the company and the business.
45:48If this kind of thing is happening there, then you can definitely invest more than usual.
45:53So this is a very good story that I tell everyone
45:57there were enough signals, and in a good company,
46:02in fact a blue-chip company, there were signals that some investors maybe couldn’t catch.
46:07Got it, sir.
46:08And sir, after hearing your experiences,
46:10I think our retail investors will get quite tempted to pick the same stocks you pick,
46:17or the ones you’re very bullish on.
46:20But your positioning and their positioning are definitely very different.
46:24The infrastructure you have, the management, the experience—they don’t have that.
46:29Absolutely.
46:29But still, if you could share two or three things that our retail investors can follow,
46:36Right, so I believe—though there can never be a 100% guarantee
46:43that this formula will work 100%, because there are exceptions in everything.
46:48So I want to add a caveat.
46:51Second: don’t use leverage for anything.
46:54I would give this advice to every retail investor.
46:57In the stock market, invest only the money you have left over—the money you would otherwise put in an FD.
47:03From that money, first make sure your basic needs are taken care of: food, clothing, shelter—cover all of that.
47:10Buy a little gold too, around 10%
47:13though in India right now the duty on gold has become very high,
47:17so it’s becoming unviable—but my view is: first fulfill your basic needs.
47:22Then, whatever portion of your investments where you want more than 15% compounding, put that money into the stock market.
47:29And there I have a formula: stick to known business groups—for example, my favorite example is HDFC Bank.
47:37Although for the last five years, because it hasn’t delivered returns,
47:41people don’t even want to hear HDFC Bank’s name these days.
47:44But I’m talking about earlier, when HDFC Bank’s IPO came.
47:49I myself bought that share at ₹28.
47:52Just ₹28.
47:54After that there were so many bonuses, so many splits and all of that happened.
47:57I haven’t even calculated what that ₹28 share would be exactly today.
48:00But I bought it at ₹28, and my simple logic was this:
48:05HDFC Limited was a successful housing lender, right.
48:09They were giving home loans to salaried people.
48:13So Mr. Deepak Parekh was running that business, right.
48:16They’re the ones who started HDFC Bank, right?
48:19So they understand the lending business.
48:21They know whom to lend to,
48:22so he will run it very well, and in the hands of good professional people it will be executed properly.
48:28So I felt it was a complete no-brainer.
48:32Similarly, if we talk about the last three years—JSW Infra’s IPO came at ₹119, if I remember correctly.
48:41All you had to do was check what its market cap was, which these days anyone can easily see on Screener.
48:46The IPO was coming at a market cap of ₹22,000 crore.
48:49That company generates about ₹1,300 crore of cash flow every year.
48:54What does the company do?
48:55A major chunk—actually 60% of the business—comes from handling cargo for JSW Steel.
49:04JSW Steel brings in iron ore and coking coal, and JSW Infra handles it.
49:09To make one ton of steel, you have to handle roughly three tons of material.
49:13So in that business, it’s basically assured business,
49:17because JSW Steel will obviously keep producing steel
49:20and they’re also the most efficient steel manufacturer
49:24so that company will keep growing, keep growing.
49:27And along with it, this will have to grow too.
49:29It’s certain.
49:30So you were getting a 6% cash flow yield.
49:32You were getting a group like JSW Group.
49:34Debt—zero debt—meaning after the IPO the company became zero debt.
49:39Now they’ve taken debt again for expansion, but it’s under control.
49:43Pre-tax ROC was 19–20%.
49:46So there was nothing to think about.
49:48It was a no-brainer.
49:49In fact, we were in a PMS, so we couldn’t apply in the IPO.
49:54So I wrote and requested all my investors: if you want, withdraw money from my PMS, but don’t miss this IPO.
50:01Because what I’m trying to say is—when there’s already a strong, proven group,
50:09and then you get another extension of the same business coming as a new IPO, getting listed,
50:14and you’re getting it cheap—that is, I would say, the lowest-risk but big opportunity.
50:21Because you already know everything:
50:23you know the quality of the management, you know their execution, you know their cash-flow generation.
50:27And now you’ve got one more way to play that same story, available at a cheaper price—so don’t let it go.
50:34Like I gave the example of HDFC Bank.
50:36I gave the example of JSW Infra.
50:38Those are very good cases where a retail investor can
50:42actually make very good money without taking too much risk.
50:46And sir, if you could go back 15–20 years and give yourself just one piece of advice—patience.
50:54Patience.
50:55I like patience; that’s my problem.
50:58Like I said, if I come back to that same point
51:03take Indian Hotels for example:
51:05if I bought it during Covid after Pfizer launched the vaccine, then I didn’t need to sell it at all.
51:11Right?
51:11There was no need.
51:13The company was doing everything correctly.
51:15The hotel industry was booming.
51:17Just thinking, “I’ve made so much money, so I’ll sell and buy something else”—that was a mistake.
51:23How do you see the situation going forward?
51:29My view is: I believe in data, and that’s why I don’t make predictions.
51:35If this geopolitical crisis doesn’t drag on too long
51:40so far our government and the RBI have handled it very well.
51:47And if, from here, hopefully crude oil—which was at 100—has already come down to 96 dollars;
51:54if crude cools off and moves into the 85 range or below, then in my opinion India has no problem.
52:02Even if it stays around 85, it comes somewhat under control,
52:06and I think then a very good phase will begin for India.
52:10One thing people miss in India is that India’s corporate debt-to-GDP is quite low compared to other countries,
52:18India’s corporate balance sheets are very strong.
52:22Pick any company where capex is actually going to happen—I’m not talking about FMCG.
52:28Hindustan Unilever, Marico, ITC—there it’s just cash flow after cash flow.
52:30Bajaj Auto, Mahindra & Mahindra—again, cash flow after cash flow.
52:33I’m talking about Hindalco, JSW Steel, Tata Steel—businesses where real money is required
52:38or the power sector, where industry truly needs to invest.
52:44All those companies, leverage-wise, are very much under control.
52:48Of course there will be one or two exceptions, but overall it’s quite controlled.
52:52So on one side, your corporates are under-leveraged,
52:56and on the other side, your banking balance sheets are very strong—fantastic.
53:01The way the RBI has managed it, and the way the government has turned around PSU banks
53:05In my view, books should be written about that.
53:08Why nobody is writing them, I don’t know.
53:10Just look at Indian Overseas Bank, or any PSU bank—compare its profit in 2013 with its profit today.
53:16Right?
53:18I mean, ten times, ten times over—going from losses to making profits that are even bigger than the losses used to be.
53:23Such a massive turnaround has happened.
53:25So I believe that on one side you have banks like this that have a lot of capital available to lend.
53:31For example, Kotak Mahindra Bank’s Tier 1—what we call Tier 1, CET1—is 22%.
53:37Meaning it’s one of the most well-capitalized banks among large banks, I think, in the world.
53:43So what I’m saying is that banks have the capacity to lend.
53:47And the corporates here have such light balance sheets that
53:50they can take loans and still earn enough to pay the interest and make money.
53:55The point is, this combination—why hasn’t it been playing out, and why hasn’t this virtuous positive cycle started?
54:02Because one event after another keeps happening continuously.
54:04Like first there were tariffs—first a 20% tariff, then 50%, then it stayed at 50% for a few months.
54:10Then right before that there was the Russia–Ukraine war.
54:13After that, interest rates went up in the US.
54:15And now this US–Iran war has come up.
54:17So what’s happened is that the “animal spirits” of a corporate, of an entrepreneur,
54:21have been badly suppressed
54:23they feel, let things calm down for once, then we’ll invest money into the business.
54:27So that virtuous cycle isn’t getting triggered.
54:30Just look—over the last three months, if you’re running any business,
54:33your raw material price goes from 60 to 100, then from 100 back to 70, and from 70 back to 110
54:40how are you supposed to run a business like that?
54:42In such a volatile environment, if you have money, you can invest in your business.
54:47You feel there’s a long-term opportunity,
54:50and some promoters—take Hindalco and JSW for example—are making very large investments.
54:55Just the day before yesterday, at Hindalco’s AGM, Mr. Kumar Mangalam Birla said,
54:58“I’ve already done capex of fifty thousand crore”—meaning it’s under construction—and
55:02“I’m evaluating another fifty thousand crore.”
55:04But only a few people can do this
55:05those with very deep pockets and a very big vision for the next ten or fifteen years.
55:10They can do it.
55:11But if you’re an average businessman, and what’s happening to you is that sometimes a tariff gets imposed,
55:17sometimes raw material prices shoot up 50% within two months
55:20if you’re facing problems like that, you won’t invest.
55:24So, to cut the story short:
55:27if the geopolitical environment cools off a bit, this constant tariff tantrum
55:32whatever you want to call it
55:33settles down, if that noise reduces and oil comes down a little,
55:38then India has a very strong story for the next two to three years.
55:41And I can tell you, if things remain even somewhat predictable,
55:49there are quite a few large-cap stocks which, in my view,
55:54can double from here in a minimum of three years and a maximum of five years.
56:00So it’s a great opportunity.
56:01And this whole craze people have suddenly developed for overseas investing—I’d say it has come at the wrong time.
56:10When it actually made sense to do it, people didn’t.
56:12Now that everyone is doing it, everyone feels they must do it too.
56:14So my request is: first understand the Indian stocks you’re buying.
56:23Even understanding companies like Samsung and Hynix—many people will fail at that.
56:28When memory chip prices start falling and earnings there take a hit,
56:33there’s so much leverage tied to that theme that it can create a big problem when it happens.
56:38I’m not saying it’ll happen tomorrow, but when it happens, it will.
56:41As of today, don’t think, “My friend invested in Korea through some route,
56:47or put money in Taiwan, or in US tech stocks, and made a lot—so I also need to do it right now.”
56:55Sorry, I’m taking a bit more time.
56:57One last piece of advice to all my viewers and retail investors:
57:01whenever any asset class—gold, silver, the stock market, real estate,
57:06or overseas investing as an asset class, whatever it is
57:11starts running a lot, is being talked about everywhere, and is all over social media
57:16like what happened with silver recently, right?
57:18Silver that was around 40 went to 115 dollars
57:22at that time I myself said on NDTV, “I am selling my family silver.”
57:26When it had run up a lot, I used to say:
57:29when there’s too much euphoria and everywhere you go you keep hearing the same thing,
57:34don’t get pulled in by FOMO.
57:37You won’t miss anything.
57:38If you buy at such elevated levels, you’ll be the one who ends up missing out on everything.
57:43Just understand this: stay away from that asset class for some time, until it normalizes.
57:49When something is extremely overheated, don’t get crazy about it.
57:53Even I feel this a little, because you have very limited money.
57:58And with that limited money, if you buy something at 100
58:02that had already moved from 40, and then it corrects a bit from 100 to 60, you’ve lost 40% of your capital.
58:08And a lot of these products are leveraged too—so your entire capital can get wiped out.
58:13So my request to every investor is:
58:16where there’s too much hype, where it’s too overheated,
58:20step away from that asset class for a while—take your attention off it.
58:23Otherwise you’ll keep feeling, “I’m missing out, I’m missing out.”
58:27Sir, now coming to the last section of our episode where we take questions from our audience.
58:31And for the audience as well—if you want to send us your questions, do follow us on Instagram: Money Talks by Groww.
58:40So sir, the first question is from Atharva.
58:42He’s asking: in your view, should Indian investors have exposure to US equities?
58:48If yes, how?
58:49You already answered that.
58:50But if you had to tell Atharva in one line—should they or shouldn’t they?
58:52They shouldn’t.
58:53Not at this moment.
58:55Clear answer: at this moment, I don’t see value in investing in the US.
59:00Right now, you should stagger your investments in India itself and gradually buy quality large caps in India.
59:09Got it.
59:10Abhas asks: when a stock isn’t performing as expected,
59:15how do you gather the patience to hold it for a long time?
59:19Basically, I’ll speak frankly—I won’t exaggerate or make it sound bigger than it is.
59:26It’s simple: this situation comes up when we’re managing someone’s money,
59:32and if that stock is 7–8% of our portfolio and it’s not moving
59:37and it’s testing our patience, then we also lose sleep at night.
59:42No doubt about it.
59:43We’re human beings too.
59:44So what do we do?
59:46What we do is we keep going back and checking that thesis again and again
59:51whether what we bought it for, the fundamental thing that was supposed to play out, is actually happening or not.
59:56If it isn’t—right, if it isn’t—then we have to surrender.
1:00:02And then, whenever we get a chance, when there’s a small bounce,
1:00:08we sell a bit, reduce the weight, bring it down to a manageable weight, and leave it there.
1:00:13Right—so we also have to do all of that.
1:00:15Basically, it happens with us too, so it’s a normal thing, but you have to manage that risk.
1:00:23And proper management is when, if you feel something has too many moving parts
1:00:31like a cyclical stock, where the commodity price
1:00:34you understand that predicting that commodity price is very difficult for me,
1:00:38because China could come and start dumping, anything can happen
1:00:41but you still like the stock, then keep it at a 2–3% weight.
1:00:45Take a small position, but don’t take so much weight that you can’t sleep at night.
1:00:52So basically, weight adjustment is the way to handle it.
1:00:57Got it, sir. Thank you so much for joining us today.
1:01:00I think I enjoyed listening to you and hearing your experiences,
1:01:04but the audience must have enjoyed it even more.
1:01:06Thank you, thank you.
1:01:06And I feel like, even though I asked you all the questions I had, I still have quite a few doubts
1:01:12because you have such a vast, long experience that
1:01:15I think we’d need a really long podcast, maybe three or four hours, to cover everything.
1:01:21Thank you so much, sir.
1:01:22You shared everything in such an unfiltered way.
1:01:24I also really enjoyed the conversation.
1:01:26Thank you.
1:01:26Thank you, thank you.

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