The Game
You can't judge another investor's actions without understanding the game they're playing. There's so much underneath it... position sizing, capital flows, portfolio construction, timeframe, objectives, risk management, composition, etc... investing/trading is idiosyncratic.- @EdBorgato
True.
We are not in the game of minimizing volatility as many institutions are. Institutions, running billions of retail money, want to retain that capital. So their objective is minimize volatility and give comfort of not-showing-any-contraction to the retail investors guys. Finally, retail gets exactly what they want.
We want to maximize returns, using volatility, still being in cheapest unloved, under researched areas of markets. Chaos is welcome part of process, not some unexpected hindrance. Volatility is like speed breakers on the way... a car slowing at speed breakers doesn't mean the car is faulty. Best advantage to us is that 99% people view volatility and uncertainty as indigestible, and hence get off the car at wrong time.
Know the game you want to play.
Planted
Our companies r doing well. Growing by 20-25%. The growth may not be visible, but it is working, under the hood.
Investing isn’t about PE ratios, ROEs, balance sheet analysis, company analysis … its being able to sit and take decision when everyone is losing their heads and blabbering same narrative, when the brain is freezing, prices are contracting, there is no visibility or certainity, and hopelessness all around and no new information is in sight –
and still remain focused on workings of the underlying businesses in such turmoils. Our everyday OPERATIONAL HUSTLE is TO TIRE OUT THE MARKETS, not get tired out by the markets. Its not feeling down or wreaked or deprived due to falling prices. This is real face of investing.
Some random general observations
- Many swashbucklers of yesteryear have fallen due to governance problems - punj, ranbaxy, sun, thapars, gaurs. Major and interesting shifts are happening in Indian corporates. Shows that only conservative, non adventurous and debt free may survive in long run. Check, Billions to Bust - link.
- Many beloved stocks are down to 2014/15 or earlier levels - Yes! No return for last 4+ years in many beloved high quality names - Tata motors, kajaria, kaya, greenply, greenlam, NBCC, vst tiller, symphony, db corp, HT, jagaran, navneet, bajaj auto, eicher, MPS, poly medi, eveready, poddar housing, bse, lupin, amara raja, gateway, emami, mayur uniquoters, sun pharma, cera, hero motors, crisil, acceleya, eclerx, dhanuka, lupin, cipla, Dr Reddy, ajanta .. list is endless. All of them were beloved stocks at some point of time. Many of them had poor capital allocation or having no growth (and hence management not going for capex) leading to PE contraction, or just repaying debt or dividends.
- Observing that "Start-ups" dont make money or are not in the business of ever making money*. Its just playing musical chair business.
- Finding that even listed companies from new economy, optically showing high RoE, but are in fact, unable to bear cost of equity capital of the investors (unless investors go ahead and play musical chairs). Ex- check the capital invested in Matrimony.com , and see RoE generated on real cost of equity invested. As going concern, RoEs are not lucrative. Its tough to start a business from scratch, (tougher to bootstrap), and generate honourable RoE.
Recommended
Read - Masterclass with Super investors
Watch - Investing is hard
--The end.
*Definition of making money - In one conversation, a friend hitting a start-up musical chair jackpot, thought he "made some money" - without realizing that his process is non-repeatable, and he is developing no repeatable skills, and he cant do same work in next 50 years of his life! Moreover, easy money killed the purpose of life!
Making money = attaining and growing skill time after time + repeatable process + having some purpose + having fun doing that in next 50-60 years! Anything, not adhering to this, is just not making money!
