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Value Investor Interview: Rajeev Thakkar – Part 2

Note: This interview was published in the January 2016 issue of our premium newsletter, Value Investing Almanack. To gain instant access to more such interviews and other interesting stuff on value investing and business analysis, click here to subscribe now.

Read Part 1

SN: Is there a mechanism in Mutual Funds where you repay cash to shareholders if you’re not finding opportunities for a long period of time?

RT: Some people do it by the way of dividend payouts. Other mechanism is that you can shut the doors for the inflows. What you can say is that I’m not getting opportunities now so I wouldn’t be buying anymore. Lot of people have done that also. So you shut the door and say I’ll not take any more inflows from this date onwards. And you can open it as and when the opportunity arises. You can keep it shut for may be 3-6 months or 1 year or whatever period you deem fit.

SN: Being a fund manager, what are your thoughts on indexing?

RT: Indexing has a very important role to play but you can’t overemphasize it. People typically fall into two categories. One category of people are completely pro indexers. And the other is people who are completely against indexing. I am someone who is in between. So at one side indexing acts as a huge control on excessive fund management fees. Since indexing is a low cost mechanism for people to participate in equity markets. It’s a fact that if all the money were to be managed by professional managers the aggregate return that they give to investors will be market return minus fees. They can’t outperform themselves as a group. So mathematics is fine and I appreciate indexing from that point of view.

Value Investor Interview: Rajeev Thakkar – Part 1

Rajeev Thakkar possesses over 15 years of experience in various segments of the Capital Markets such as investment banking, corporate finance, securities broking and managing clients’ investments in equities. He is currently the Director and Fund Manager at PPFAS Mutual Fund.

Rajeev’s tenure at PPFAS began in 2001. His passion for researching and analysing the fundamentals of companies was evident from the very beginning and very soon he was heading the Research division at PPFAS. His responsibilities soon expanded as he was appointed the Fund Manager for the flagship scheme of the Portfolio Management Service, titled “Cognito” in 2003.

Rajeev is a strong believer in the school of “value-investing” and is heavily influenced by Warren Buffett and Charlie Munger’s approach. In his interview with Safal Niveshak, Rajeev shares his wide investment experience and how investors can practice sensible investment decision making.

Video Series: Latticework of Mental Models

We perceive this world through our five senses – sight, sound, touch, taste and smell. So our eyes, ears, skin, tongue and nose are the five receivers which help us make sense of the world around us.

Nature has designed each of our senses meticulously. In spite of that, if used individually, these five instruments are insufficient to help us function normally. That’s why for most of our routine activities we use combination of more than one sense organ. For example, walking requires use of eyes, skin and ear (for balancing), for communicating we use ears and tongue etc.

For most people who are passionate about learning, reading is a primary source of information. However, in reading you’re only using one instrument – eyes. These days, audio books is another popular and very effective medium to learn new things. In audio books (and podcasts), you’re again engaging only one sense – hearing.

In fact, for thousands of years, until the discovery of print medium, most human civilizations transferred their knowledge orally from one generation to other – their own version of audio books, if you will.

But what if you could engage both these senses together? Don’t you think the retention of what you learn would be much better?

Latticework of Mental Models: Inattentional Bias

“Where is it?” I asked my wife, while my eyes scanned the kitchen cupboard again. I was looking for the sugar jar. The plan was to impress her with my exceptional tea making skills which I acquired after watching few YouTube videos.

“It should be there. Right in front!” informed my wife from the other room.

“It’s not here. I can’t see it.” I again scanned all the shelves in the cupboard.

“Look again. I kept it there in the morning.” My wife sounded very sure about it.

“No! It’s not here. I am sure.” I confirmed while closing the cupboard. What happened next shouldn’t be surprising for you because most of you have experienced it before.

She came, opened the cupboard, grabbed the sugar jar which was obviously sitting right in front and handed over to me. I stood there flabbergasted. How could I miss it? What’s wrong with my eyes? Have I gone blind? It felt as if the jar manifested itself out of thin air. It was like…magic.

Haven’t you experienced something similar in your life? I see a smile on your face. 🙂

Now that embarrassing episode in the kitchen may look like a minor incident but it holds an important clue to a fascinating behavioural bias inherent in every human brain. It’s called Inattentional Blindness, which means not being able to see things that are actually there.

Results: Book Review Contest 2016

Safal Niveshak Book Review Contest 2016 We recently concluded the first edition of Safal Niveshak’s Book Review Contest. Today, I feel happy to announce the winners of the same.

We received 22 entries in total and found it extremely tough to rank most of them in terms of quality, simplicity, and thoroughness of review.

While our choice of winners does not devalue the quality of reviews sent by others, it’s just that we had to pick the best very few, and here they are –

1st Prize

Vikas Kasturi – Education of a Value Investor

2nd Prize

Prashanth Rayakar – A Random Walk Down Wall Street

3rd Prize

Akshay Malhotra – Rich Dad Poor Dad

4th Prize

Pranay Bhatia – How Adam Smith Can Change Your Life

5th Prize

Rohit Kawathekar – The Outsiders

Here are the prizes winners have won –

1st Prize – Books of choice, worth Rs 3,000/-
2nd Prize – Books of choice, worth Rs 2,500/-
3rd Prize – Books of choice, worth Rs 2,000/-
4th Prize – Books of choice, worth Rs 1,500/-
5th Prize – Books of choice, worth Rs 1,000/-

Congratulations to all the winners, and thanks to all who participated!

Click here to view/download all the submitted entries.

Safal Niveshak is 5 Years Old

Safal Niveshak completes five years today. 🙂

A lot has happened in these five quick years, but as with any five-year-old, we’re just getting started.

Most of all, I and Anshul want to thank you for “raising” this initiative to this point — it truly could not have happened without you, dear tribe member.

I know I’ve said it before, but it bears repeating – Thank you so much for reading, for commenting, for your interest and support, for keeping us honest, for helping this entire movement of creating smarter and independent stock market investors become greater and spread wider.

You are magnificent, and we are supremely grateful for your time and attention.

Just in case Safal Niveshak has touched your life, we would be happy and honoured to read your thoughts in the Comments section of this post.

Thanks again for being there!

Latticework of Mental Models: Wisdom of Crowds

Kaun Banega Crorepati (Indian version of Who Wants to Be a Millionaire?) is unarguably one of the most popular reality show on Indian Television. So here’s a question which has never appeared in KBC before and probably never will.

Among all the different types of life lines that Mr. Amitabh Bachchan offers to a KBC contestant, which is the most reliable one?

We’ll come back to this little later in the post. However, you can keep thinking about it while you read on.

Have you ever seen an ant at work? If you closely watch a single ant when it’s away from its other ant friends, the little fellow seems to be taking a stroll in the park with no specific purpose or sense of direction. It seems to be looking for something but its approach appears largely chaotic.

Dumb insect, isn’t it? But wait a minute. If the ant is so dumb why is there an army of scientists enamoured by the behaviour of ants?

In numerous fascinating studies, these scientists have discovered that in spite of seemingly unimpressive behaviour of a single ant, the ant colony works as a highly efficient entity for exploring and exploiting the sources of food. Somehow an ant’s individual pattern-less behaviour, when combined across several thousand ants, transforms in to a very intelligent strategy.

Safal Niveshak Book Review Contest 2016

It’s said whenever you read a good book, somewhere in the world a door opens to allow in more light. I don’t know about you but for me there have certainly been instances when a book changed the course of my life completely, for the good.

But there are hundreds and thousands of books out there. And if you don’t read the best books first, you may not have a chance to read them at all. So it’s vitally important that you pick up the best books first.

Now how do you find the best books? Here’s a clue – to get something, you have to learn to give first.

Drawing the analogy, to receive the best recommendation about books, you need to first offer a good recommendation about your favourite book. Isn’t it?

Latticework of Mental Models: Lindy Effect

“Many happy returns of the day Anshul!” One of my old friend wished me on WhatsApp. Dropping a message on WhatsApp is more convenient these days than calling up. It was still better than the standard birthday wishes you get on Facebook, which you know have come as a result of constant pestering from Facebook notifications – “Hey! It’s Anshul’s birthday today. Write something on his wall.”

“Thanks man. I am glad you remember.” I replied. I still didn’t believe that he actually remembered my birthday. May be Facebook sent him a customized birthday wish to be forwarded to me from WhatsApp. After all Facebook now owns WhatsApp.

“You know what? You just wasted another premium of your life insurance!” He joked.

“Well, that’s an interesting way to look at it. But I am glad that it was wasted. After all life is perishable and can end at any moment – insured or uninsured.” I told him with a smiley.

But that got me thinking about insurance (especially term insurance) and life. On one hand, every additional year I live on, the insurance premium seems to go waste. But on the other, as I grow older, since my life insurance premium remains fixed, I get more and more value for each rupee spent on insurance. How?

For anything that’s perishable, including human life, every additional day in its life translates into a shorter additional life expectancy. Isn’t it?

When In Doubt, Please Don’t Predict

A leading Indian brokerage – let’s not take names here – is in the limelight these days for being consistent in revising its Sensex targets at the drop of a hat. In fact, it has been consistent in such revisions for almost the past two years. But the real beauty of all this lies in the fact that experts from this brokerage have no qualms about ditching their existing Sensex target to adopt the new one.

Just a month ago, its Head of Research appeared on CNBC and advised people to “take the market’s exit opportunity with both hands,” as he predicted “the Sensex is likely to touch 22,000 mark by the end of this year (March 2017).” He reiterated this target on 31st May.

Then, just a week later, he did a complete u-turn and raised the Sensex target to 29,500, again by the end of March 2017. On a lighter note, I suspect some superstition in this new target because unlike the earlier rounded-off targets of 36,000 (January 2015), 34,000 (March 2015), 32,000 (May 2015), 28,000 (August 2015), and 22,000 (March 2016), the new target is 29,500 (midway between 29,000 and 30,000). 😉