Learnings from
my Investing
Career
What is investing?
nsists of three steps: Buying, Sizing and Selling
Buying Sizing Selling
Too much literature Dependent on Is effectively switching
available conviction, upside risk between various asset
and detailing classes. It cannot be
within the same asset
class.
s I Believe In
Contrarian approach to investing
Know the
Careful on Works best in Be
counter Have a grip on
leverage cyclical cognizant
view on the intrinsic value
sectors stock of risk
Have a grip on
intrinsic value
Things I Believe In
Cycles: It is an art; primarily based on how
others are behaving in that asset class
Charts: Price is set by a marginal seller/
buyer; incorporates fundamentals most of
the time - Anthony Bolton
Common Sense
s I Believe In
ASH: A residual asset class but a very important one
S&P BSE Sensex Levels vis-a-vis ICICI Prudential BAF Net Equity
Exposure (%)
Net Equity Net Equity
77.7 38,667
40,000 77.4 80
ICICI Prudential Balanced Advantage
75
Fund Net Equity Exposure (%)
35,000 70
65
Sensex Levels
Net Equity
30,000 60
57.5
55
25,000 50
45
23,002
20,000 40
18,620 35
15,000 30
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sensex Level Net Equity Exposure %
Source: BSE India & MFIE, Data as of September 30 2019. The in-house valuation model starts from March 2010 onwards.
Stock Picking
Trailing
price to Trailing
earnings price to
book Trailing price to
Leverage cash earnings
of per share
company
All big
mistakes can
be avoided by
looking at...
Dividend Market
yield cap
PO/QIP
activity Balance
in sector sheet
quality
Market Cap
Cement + Metal Sectors
osys + Wipro
Rs. 31,623
Name Mcap
(In Crs.)
Rs 1,07,604 Mcap(In Crs.) Metals
Dec-99
Natl.
Aluminium 8,151
Name Mcap Hindalco Inds. 5,995
Name Mcap (In Crs.) Tata Steel 5,208
(In Crs.) Cement Dec-99 SAIL 4,647
IT Dec-99 Ambuja 4,797 JSW Steel 781
Infosys 48,005 IndiA Cements 1,004 Hind.Zinc 697
Wipro 59,599 Heidleberg 132 Vedanta 212
Total 1,07,604 Total 5,933 Total 25,690
Data as in December 1999
Market Cap
Mcap (In Crs.)
Pharma Dec-07
Sun Pharma.Inds. 24,071
Cipla 16,529
Glenmark Pharma. 14,656
Dr Reddy's Labs 12,306
Mcap (In Crs.) Divi's Lab. 12,112
Glaxosmi. Pharma 8,701
Piramal Enterp. 7,493
Biocon 5,772
DLF Pharma Lupin
Jubilant Life
5,168
4,963
Rs 1,83,082 Rs. 1,31,249 Opto Circuits
Wockhardt
4,796
4,576
Cadila Health. 3,952
SPARC 3,236
Aurobindo Pharma 2,919
Total 1,31,249
Data as in December 2007
Market Cap
Mcap (In Crs.)
Name Jun-15
Pharma
Sun Pharma.Inds. 2,10,461
Lupin 84,841
Total 2,95,302
Mcap(In Crs.) Metals
Hind.Zinc 70,605
Vedanta 51,630
Pharma Metals NMDC
Tata Steel
47,061
29,583
Rs 2,95,302 Rs. 2,86,600 SAIL
Hindalco Inds.
JSW Steel
25,379
23,107
21,084
Natl. Aluminium 10,309
Jindal Steel 7,841
Total 2,86,600
Data as in June 2015
Market Cap
Mcap(In Crs.) Top 10 Pharma Companies
Mcap
Top 10 INR CR
(In Crs.)
pharma
ompanies Rs. 3,95,178 Name Sep-19
Sun Pharma.Inds. 93,440
Dr Reddy's Labs 44,874
Divi's Lab. 44,214
Aurobindo Pharma 34,512
Cipla 34,293
HUL Rs. 4,29,055 Piramal Enterp.
Lupin
32,599
32,393
Torrent Pharma. 28,216
Biocon 26,754
Cadila Health. 23,884
Total 3,95,178
Data as in September 2019
Market Cap
Mcap(In Crs.)
Top 5 stocks Mcap
sorted By Mcap (In Crs.)
PSU
Universe Rs. 16,81,081 Name Sep-19
Reliance 8,44,530
TCS 7,87,738
Top 5 HDFC Bank 6,71,509
stocks Hindustan
sorted By Rs. 30,84,528 Uniliver 4,29,055
Mcap Infosys 3,51,696
Total 30,84,528
Data as in September 2019
How to create wealth across asset
classes
Equity Credit Gold/Cash Real Estate
Our Philosophy based on my Learnings
CTS Investment Framework
Valuations Cycle Trigger Sentiment
(How others (What changes (Flows)
are behaving) a cycle)
.
Valuations - Equity
Parameters Used: Price-to-Earnings, Price – to-Book, Market cap to GDP, Earning Yield
170
150 Book Partial Profits
130
Incremental Money to Debt
110
Neutral
108.19
90
Invest in Equities
70
Aggressively invest in Equities
50
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Equity Valuation index is calculated by assigning equal weights to Price-to-Earnings (PE), Price-to-Book (PB), G-Sec*PE and Market Cap to GDP ratio. G-Sec – Government Securities. GDP – Gross
Domestic Product; Asset Allocation – Schemes that invest both in equity and fixed income
Market Cap Analysis
Share in the Overall Market Cap (%)
x 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Mar-19 Jun-19 Sep
100 79 79 75 74 71 79 77 78 79 78 81 75 74 72 65 70 73 73 74
250 9 11 12 12 13 11 12 13 13 14 13 14 15 15 16 16 16 16 15
ve
12 11 13 14 16 10 11 9 8 8 6 10 11 14 18 14 12 11.7 10
op 100 indicates top 100 companies by market capitalization,101-250 indicates next 150 companies by market cap and above 250 indicates 251st onwards by
arketcap. Source : Kotak Research , Data as of September 30, 2019
Valuations - Credit
Parameter: Gap between yield –to-maturity and repo rate
Data as on September 30, 2019, YTM values taken since scheme inception. Past Performance may or may not be sustained in future.
Valuations – Gold/Cash
Gold/Cash is a residual
asset class based on the
aluations on the other
asset classes
When all other asset
classes are costly gold
and cash are cheap
and vice versa.
Valuations
Valuations––Real
Real Estate
Estate
Mortgage rate premium movement over Rental
8% Yields
7.30%
7%
6% 5.70%
5% 5.70%
3.95%
4%
3%
1QFY…
2QFY…
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
Market Cycle
Burst
Best • Equity
Institutional • Real Estate in
Selling
Time to invest Markets in
• e-Commerce i
2006 & 2017
aggressively Institutions not Boring 2014
and valuations • Bitcoin in 201
buying, • Equity in 1999
attractive valuations Institutions both Boom • 2007
attractive buying and
selling, valuations Institutional Bubble
not cheap buying,
valuations Valuations off ch
Lehman costly new valuation mo
Crisis 2008 emerge, investors
forget the existen
Dot com • Equity Markets in the World Risk
burst – 2001 2011-2013 .
• Equity Markets in
2015- 2016 (China Equity Markets
slowdown) currently
• Debt Accrual
Schemes currently
y philosophy will not allow me to ...
Buy high Miss growth
market cap sectors due to Buy consensus
Buy high stocks among
stocks. above
trailing p/e fund managers.
stocks.
set Class performance – Cyclical & Unpredictable
S&P BSE Sensex Returns CRISIL Short Term Bond
me Period Fund Index Returns (%) Gold Returns (%)
(%)
YTD – till Sep’19 6.7 9.9 18.9
018 5.1 6.7 7.9
017 28.0 6.1 13.1
016 2.0 9.8 8.6
015 -5.0 8.7 -10.4
014 29.9 10.5 -1.7
013 9.0 8.3 -28.0
012 25.6 9.1 7.1
011 -24.7 7.9 10.1
010 17.4 4.7 29.5
009 81.0 6.6 24.4
008 -52.4 9.5 5.8
007 46.9 8.0 31.0
006 46.8 5.5 23.2
005 42.5 4.5 17.9
004 13.0 2.7 5.5
urce: MFI Explorer and Kotak Securities; Calendar year returns. Past performance may or may not be sustained in future. Returns mentioned are in terms of CAGR
ur Ways of Investing for Decent Returns:
fficient for 99% investors
Systematic Investment Plan (SIP)
1
“SIP is deliberately doing something slightly inferior, to prevent the likelihood of something very
inferior. It’s such a fine line between stupid and clear. SIP seems clever, but we should
recognise that it’s true value lies in not being stupid.” - Tim Harford, Financial Times, October
19, 2018.
2 Hybrid Mutual Funds
3 Asset Allocation
4 Even Index Funds/ETFs
ey Traits of an Investing Person
me Management: Very critical element. Most successful
viduals know how to manage time.
inking: Often people tend to forget that one
eds a separate ‘thinking time’
perament: Important aspect. It takes
age to give a buy call at the bottom
a sell call at market top.
eading: A must-have habit
hen investing
uisms
No Hubris Forced selling
decision is or buying are
a decision good
Money comes to a
fund manager till he fails investment/dis
There will be Anthony Bolton -investment
mistakes; cant Nothing called
Woodford opportunities
get all calls consistency in
Bill Miller
right Bill Gross performance,
only process
Solutions
Hybrid Credit Closed-end No
funds Funds Funds Leverage
dvantages of being an Investment Professional
There is no age
limitation. Can
continue as long
as one is mentally
fit There are
Over short duration, there
is no connection between multiple way
competence, capability and make mone
alpha generated long run
ng of theory
sy but
mentation of
you know is
Keeps you alive
llenge
and interested in
the world
sadvantages of being an Investment Professional
Can one’s weakness go away? (Mark Sellers
Speech)
Can you keep on learning as you
age
Managing public money has its own
challenges
Handling irrationality in the
market
Short term performance is
never driven by process
My Market Gurus
vestment Professionals I Follow:
James Montier
Howard Marks
Michael Mauboussin
Atul Gawande
Why not Indian Gurus?
Every guru is likely to ha
some biases; a problem
likely to be compounded
one's own biases.
My Market Gurus
James Montier Atul Gawande
CONTRARIAN CHECKLIST
CYCLES PRE-MORTEM
Howard Marks Michael Maubouss
THANK YOU
