Sunil Shah has 25-years experience in the Indian equity markets. He started his career in the equity markets in 1994 and worked with Securities Capital before moving to Indsec Securities as Director Equities. In 2003, he moved to ABN AMRO, where he along with his team managed a PMS corpus of Rs 1,500 crore. Then in 2010, he joined Enam Securities Direct as Head of Research. Sunil is currently partners with Turtle Star Portfolio Managers. He qualified as CFA (ICFAI) and CWA (ICWAI) way back in 1997.
Archives for May 2019
In the 2008 shareholder meeting of Berkshire Hathaway, a shareholder asked Warren Buffett and Charlie Munger –
“If you could not talk with management, could not read the annual report, and did not know the stock price of the company, but were only allowed to look at its financial statements, what metric would you look at to help you determine whether you should buy the company?”
They replied –
Buffett: Well, what we’re doing in investment – and what everybody does – is we’re laying out money now to get more money back later on.
Now, let’s leave the market aspect of the asset out of it. When you buy a farm, you really aren’t thinking about what the market on it is going to be tomorrow, next week, or next month. You’re thinking about how many bushels of beans or corn per acre you can get, and what the price is likely to be. You’re looking to the asset itself.
I had written about Cognitive Dissonance a few years back. You can read it here. Over the years, I have collected some more insights on the topic.
For the uninitiated, here’s a definition from Wikipedia —
In psychology, Cognitive Dissonance is the mental stress or discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time; performs an action that is contradictory to their beliefs, ideas, or values; or is confronted by new information that conflicts with existing beliefs, ideas, or values.
Leon Festinger, the psychologist who developed the theory of Cognitive Dissonance, figured that human beings do not deal with conflicting beliefs and perceptions by testing them against facts. They reduce the conflict by reinterpreting facts that challenge the beliefs to which they are most attached.
[Read more…] about Behaviouronomics: More Thoughts on Cognitive Dissonance
On December 24, 2014, AirAsia Flight 8501 took off from Surabaya (Indonesia) at 5.30 am local time. With 155 passengers and 7 crew members onboard, the flight was headed to Singapore. About 43 minutes into its flight, the Airbus A320 disappeared from the radar. The worst had come to pass. Two days later, the rescue team discovered the plane wreckage in Java sea. All 162 people onboard perished in the crash.
The crash investigation revealed that it was a pilot error. The in command Captain Iriyanto — a 53-year old former Indonesian Air Force pilot — performed a non-standard reset of the onboard flight control computers. Which means he did something which was not mentioned anywhere in any of the operating manuals. Why would someone with an experience of more than 20,000 flight hours do such a thing?
[Read more…] about The Risk of Worrying About the Non-Risk
If you’ve been a long time reader of Value Investing Almanack, you’d have guessed that I am a big fan of Scott Adams. For the uninitiated, Scott Adams is the creator of Dilbert, one of the most popular and widely distributed comic strips of the past century. He has been a full-time cartoonist since 1995, after sixteen years as a technology worker for companies like Crocker National Bank and Pacific Bell. Apart from being a cartoonist he has written many bestselling books and is sought after speaker in corporate circles.
I had written about this book in December 2015 issue of VIA. However, some books are so good that they deserved to be read multiple times. This book falls in the category of those “must re-reads.” Don’t let the slipshod title fool you. I can vouch for the tremendous utility of Scott’s methods.
[Read more…] about Bookworm: Revisiting How to Fail at Almost Everything and Still Win Big
It was sometime during late 1999 through early 2000, near the peak of the dot-com bubble, the legendary George Soros and his hedge-fund team were working on how to prepare for the inevitable sell-off in technology stocks.
The man in charge of Soros’ high profile technology funds was Stanley Druckenmiller – one of the best-performing hedge fund managers of all time, till date – and he was busy warning his team that the sell-off could be near and could be brutal.
As the markets soared further in March 2000, Druckenmiller was quoted as saying, “I don’t like this market. I think we should probably lighten up.” Soros himself would regularly warn his team that tech stocks were a bubble set to burst.
Despite this, when the sell-off finally did begin in mid-March 2000, Soros Fund Management wasn’t ready for it. His funds were still loaded with high-tech and biotech stocks. Just in five days, starting 15th March, Soros’s flagship Quantum Fund saw what had been a 2% year-to-date gain turn into an 11% loss. By the end of April, the Quantum Fund was down 22% since the start of the year, and the smaller Quota Fund was down 32%.
Post that, in April 2000, Soros said at a conference, “Maybe I don’t understand the market. Maybe the music has stopped, but people are still dancing.”
Inspired by Charlie Munger’s super quote — All I want to know is where I’m going to die so I’ll never go there — Peter Bevelin wrote a book with the same title. Bevelin’s book distills the wisdom from Charlie Munger and Warren Buffett’s quotes from their speeches, interviews, and annual meetings. The book is an extraordinary compendium to learn how to make better decisions in life, investing, and business.
In this multi-part series, I am going to share some insights from this book. These ideas would be focused on identifying anti-patterns — things that one should do to increase the odds of undesired outcomes. Learning the anti-patterns is a more robust form of knowledge acquisition than focusing on success patterns. Anti-patterns are those patterns which consistently lead to poor outcomes and thus need to be avoided.
These ideas are like cautionary tales. Following these anti-patterns gives one a head start on the path to failure — which of course no one wants. That’s another way of saying that if one avoids these anti-patterns, then it increases the likelihood of living a highly satisfying life.