Archives for 2022

[Transcript] The One Percent Show: Manish Chokhani

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Manish Chokhani is one of India’s most respected financial market experts. Manish is a Director at Enam Holdings and a Governing Board Member at Flame University. A qualified Chartered Accountant, Manish was one of the youngest MBAs to have graduated from the London Business School.

When he is not making decisions about where to invest, or even when he is doing that, you may find him singing, reading, painting, travelling, meditating, or at a Vipassana course, practicing the Buddhist meditation technique.

Manish is one of the wisest people I know of, and the kindest. I experienced his kindness when he offered to help me with his advice while I was working on my book The Sketchbook of Wisdom, and then readily agreed to write a foreword for the same, which I will be grateful for the rest of my life.

His insights and advice are the result of a life of critical thinking, reading, curiosity, and humility. Studying his ideas and thoughts over the years are a proof of how great things are accomplished through small, persistent steps.

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A Lazy Marwari’s Guide to Stock Market Investing

Value Investing Workshop: June 2022 Batch

I recently opened admission to the May 2022 cohort of my online Value Investing Workshop. Seats got sold off within a few hours. And so, I have opened admission for the June 2022 cohort, and accepting only 50 students, out of which 15 seats remain. If you are interested to join, click here to register now.

Coming from a Marwari business family, I have grown up on the idea of ‘opportunity costs,’ which is simply the value of the lost opportunity, or the benefit of the thing you could have done instead of what you are doing now.

For a Marwari businessman, opportunity cost is at its most expensive when he misses opportunities. Standing by as something important is happening without him, or not moving funds to where they are most productive, are like wasted opportunities. Most Marwari business houses act like venture capitalists and keep scouting for opportunities to grow and for their heirs to run.

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Think in Market Caps, Not Stock Prices

Consider these stock prices –

NTPC – Rs 144 per share
Bajaj Auto – Rs 3600 per share

Do these prices tell you something if you were to decide which of these stocks to buy?

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Should You Sell in May and Go Away?

I keep receiving questions from readers about what they should be doing with their investments, and more so when the markets are falling. Here is my attempt to answers a few such questions I have received over the past few days.

You won’t find perfect answers below, but this is just my attempt to help you get over your fears, which may otherwise lead you to act in haste, which can cause some damage to your process of long term wealth creation.

Let’s start right here.

1. Why is the market crashing?
It hasn’t crashed…so far! The BSE-Sensex is down just 11% from its peak one-month ago. And so are the BSE-Smallcap and BSE-Midcap indices. 11% down isn not a crash!

If you think it is, you maybe be suffering from ‘denominator blindness’, which is the tendency to focus on the absolute number than the percentage decline. Or you just seem to have been spoilt by rising markets over the past few years, that a 11% fall seems like a crash.

I still see rampant speculation and short-termism around. Like Warren Buffett said at the recent Berkshire meeting –

My general assumption — there’s no way to prove it — but essentially, people are now behaving somewhat more tribal than they have for a long time. It’s fun to participate in, but it can get very dangerous when people say two plus two is five and the other says two plus two is three, you know, and they’re gonna give you those answers.

I also see companies with extremely poor financials and track record are quoting at market capitalisations and valuations more than much established, profitable, dividend paying companies. So, we are still not on a slippery slope as of now.

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The Five Most Irrelevant Facts of Stock Investing

Look at this. This is a stock price chart. Not from today, given the market’s crash. But just a random stock price chart.

Now look at it another way. This is not just a stock’s price. It is, borrowing from the legendary John Bogle, a “giant distraction to the business of investing.”

Long term investment returns are created by how businesses perform, but most investors make their investment decisions based on where stock prices have come from and where they may be going.

Anyways, now look at the following chart. This is a stock’s price plus four other “irrelevant” facts that drain most investors when they consider their investments.

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The Biggest Danger of Investing in Bad Businesses

Focusing on what can go wrong has long been a mantra of sound investing.

The legendary investor Seth Klarman put it the best in an investor letter –

We are big fans of fear, and in investing it is clearly better to be scared than sorry.

But chances are that even the biggest pessimists among us can have their focus on risk muted by extended periods of generally favourable market conditions.

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A Reminder to Focus on the Journey, Not the Destination

I recently read a story to my son, which was about a martial arts student who went to an accomplished teacher to seek training under his guidance.

He asked the teacher, “I am devoted to studying your martial system. How long will it take me to master it?”

The teacher casually replied, “Ten years.”

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Reflections on My Life

19 years have passed since I entered the stock market through my first and last job as an equity research analyst. 11 years have passed since I left that job to start on my own.

I recently tweeted about my experiences during both these phases, which I thought I would share with you here too.

There have been numerous lessons I have learned along the way, but what follows below contains some of the most important ones. Mostly, it’s about the memories I have made on this journey.

This is how an important part of my life has flowed over the past 19 years, and the best thing I have enjoyed about the whole journey is, well, the flow, with not much idea about where I would go.

If you are still reading, let’s start right here.

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Reflections on the Purpose of Life

I did not know who Dr. Sarah Hallberg was till yesterday morning. By the end of the day, however, I had known her well. At least that is what I felt after seeing her multiple videos and reading about her outstanding work in the field of reversing type 2 diabetes without medications or surgery.

And the reason I got to know about Sarah and her work just yesterday was because I read news of her passing away a day before yesterday, after suffering from advanced lung cancer, at the age of fifty.

Sarah was revered in the medical community, especially those working in the field of diabetes, for the path-breaking work she did over the past few years. As much as I got to read and know about her, all I could gather was the amount of good karma she had accumulated over the years for helping diabetics sort out their lives through just food and lifestyle. The best part about Sarah’s story is that her work did not stop even after she got to know she was down with a terminal disease. She was selfless to the core.

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Why Value Investing Works

The Sketchbook of Wisdom: Special Rs 200 Discount till 31st March 2022

Buy your copy of the book Morgan Housel calls “a masterpiece.” It contains 50 timeless ideas – from Lord Krishna to Charlie Munger, Socrates to Warren Buffett, and Steve Jobs to Naval Ravikant – as they apply to our lives today. Click here to buy now and claim Rs 200 discount. Offer valid till 31st March 2022.

Jack Schwager, the author of Market Wizards series, when answering a question on whether value investing works, turned to the wisdom of Joel Greenblatt, one of the foremost experts on the subject.

Schwager quoted this from his interview with Greenblatt –

Value investing doesn’t always work. The market doesn’t always agree with you. Over time, value is roughly the way the market prices stocks, but over the short term, which sometimes can be as long as two or three years, there are periods when it doesn’t work. And that is a very good thing.
The fact that the value approach doesn’t work over periods of time is precisely the reason why it continues to work over the long term.

Why Value Investing Works - Safal Niveshak

You see, the biggest problems in the long-term practice of value investing are that –

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