Bullet proof investing seminar takeways

Yesterday I attended a seminar hosted by TIA titled Bullet Proof Investing. Here is my take on the event.

Disclaimer : All the below is from my memory and I frankly have a poor one. So the numbers, %, stocks and speakers I may have mixed up. Just take the notes for the essence of the seminar and not for the figures.

Basant Maheswari was as usual at his best. His talk echoed the thoughts of his book. He feels people should not attempt to get 15% or similar % returns because that will not ensure financial independence. He joked about a parent with 40 kids will never get to know any of the kids well. Investors should restrict his number of stocks to 8. He was very forthcoming and said he would not have bought Pantaloon retail if he had all the knowledge he has now. He also emphasized buying sector leaders.

Next came Anoop Bhaskar of UTI. He also had a great sense of humour.He said he will hold 80+ stocks in his fund and would also have a huge portfolio in his personal account. He feels 1 or 2 of the large basket will be great enough to carry his portfolio, at the same the large number of stocks will protect the downside. He made an excellent observation about IPOs being less attractive due to entry of PE. He quoted the tweet of Marc Andreessen

Microsoft IPO market cap 1986: $500M. Google IPO market cap 2004: $23B. Facebook IPO market cap 2012: $100B.

He fees PE backed IPOs in India will go the same way, leaving less money on the table for the retail investors 

He showed a 2X2 matrix wherein the 1st quadrant was made up of quality stocks and the 4th made of micro and nano caps which he had termed hope less. His study showed that during bull mkts the tendency of the 4th quadrant stocks returns were a little more than Quad 1 but during the bear period the Quad 4 stocks were thrashed whereas Quad 1 stocks were more resilient. He said he is only interested in the Quad 1 stocks.

Overall his session was very neat. I would have enjoyed it even more if only all my portfolio stocks were not in Quad 4

After the lunch came Porinju Veliyath. He gave a blockbuster session. He feels that the companies with great management and clean balance sheets covered by analysts will not give great returns going forward. He feels investors should look at companies which are undergoing curable issues. He also advised looking at companies which have a change of guard. The old guard giving way to the next generation which have a better perception, education etc could do wonders to the stock. 

He said markets ignore penny stocks which are not penny companies.He gave some mind boggling examples. He had bought 5% of Shyreyas shipping when the market cap was around Rs 50 Cr (cmp of Rs 15). Within a year it is around 20X. At the time he had bought it was a penny stock but not a penny company. It is one of the major players in marine cargo. 

He had bought Kitex when it was around Rs 3. He had bought the company when its PE was 3. He had known the promoters but the reason he had bought was due to a factory visit. It is well known that Kerala used to face severe labour strikes. When he visited the plant there were around 6000 ladies aged around 20 were walking towards the dormitories. They had had a unique solution for the labour problem.

He also mentioned about a news article about Walchandnagar. The article said the company will demerge into 3 companies. The market apparently did not react to the news. Then the company hired GK Pillai as the CEO. Porinju read about the CEO and found he had a great track record and also turned around a sick PSU. Porinju bet on the jockey and the news and bought the stock. The new CEO came in CNBC and informed about the demerger. The stock ran up 80%. The news was the same but the medium was different. So with eyes and ears wide open we can have great opportunities.

He spoke about Wockhardt in troubled times. The company had some FDA issues and forex loss of Rs 1200 cr. The stock was beaten down heavily. The market was evaluating the stock as if the company will have annual forex loss of Rs 1200 cr every year going fwd. Porinju bought heavily in his PMS and some clients even left because of that. The stock was then around Rs 150. Then within 4 years it rallied to Rs 2000.

He had invested in Geojith which also became a multi baggers. He said mgmt interaction should be taken with a pinch of select. For example the very able Swelect promoter does not encourage analyst interaction , all he wants to say is done at the AGM. Another promoter whose company did not do well gave analyst meetings left right and center.

Porinju gave these examples just to illustrate his hits and misses.

The next session was handled by Rajeev Thakkar of PPFAS. He spoke about new age tech stocks. Again it was a great learning for me. For me value investors and Google stock would be like chalk and cheese but his slides showed me a perspective of a true value investor buying GOOGL. On a not so serious note, he mentioned some of the allegations against Google as

• Company managed on the whims and fancies of 2 persons
• Does not interact very well with analysts
• Does not pay dividends
• Does acquisitions of companies which are diverse

Then he said this reminds us of somebody else also and showed the next slide with 2 photographs. They were Warren Buffet and Charlie Munger. Wow. 2 more similarities, the mgmt takes a $1 pay and sends informative letters to shareholders. It does not matter whether you think Google is not a value stock or the current ecom companies in India are too expensive, but you have to respect his super informative perspective.

They key note session was handled by Anand Radhakrishnan SVP of Franklin Templeton funds. He did justice to the theme of the seminar of Bullet proof investing. He shared some learning he had with people he worked with. The slides had no bells and whistles but man they were all gems. He also added his own learning. He said luck played a part but we have to work hard to get that luck. He gave an real life example. Some years ago he was in a presentation show by Eicher Motors mgmt. They spoke mainly about a JV they were going to start with Volvo for manufacturing engines. On a side note they spoke about a old factory in Chennai which was manufacturing Royal Enfield Bullet bikes and that they were going to refurbish the factory. So the fund bought the stock for the JV with Volvo. The stock too of like a rocket but for the bike division. So that was the luck part. He also mentioned about selling too soon and gave the same example. The fund started selling the stock on the way up. If they had held the entire stock lot , the fund CAGR annual returns would have been + 2% or 3%. I sincerely hope Mr. Anand shares the ppt. It was full of gems.

My key takeaways

• Surround yourself with smart people. It really opens up the way you can think. Different people have different perceptions and it can only help us
• Every single one of the speakers had a different style and all of them are successful. So we need to find a way which is suitable for us and also understand there are numerous ways of attaining wealth.
• Learning is the biggest investment we can make.
• When we speak with experienced people we learn a lot by their hits and misses. So theory meets practicals here. The real life examples given by all the speakers were valuable.
• The speakers speak about their failures as a learning experience and not as a embarrassment.

Couple of coincidences among the speakers

• All were aged 40+ and market experience of 20+.
• All of them had a great and superb sense of humour.

Overall I felt the intrinsic value of the seminar today was much much more than the money I paid for it. But if you had come looking for tips or trends you would have been disappointed.

Last but not the least the seminar was organized in a very very meticulous manner. Kudos to the TIA and Shyam Sekar. I think Shyam had a major role in this not only in logistical matters but also in the selection of topics etc. I seriously expected only 2 sessions to be interesting but all the 5 were superb. Thanks TIA and Shyam Sekar.