Basant Maheshwari is confident that India’s top 40-50 companies will continue to grow and drive Nifty 50 higher even as he cautions investors about chasing small caps.
Formalisation of the economy and the corporate tax cut will largely benefit the top companies, founder of his namesake portfolio management firm, said on BloombergQuint’s special series Alpha Moguls. As a result, the benchmark will continue to grow, he said, adding that investors sceptical about Nifty 50 returns in the new year will be repeating the mistake of 2019.
Basant Maheshwari Wealth Advisers returned 15.3 percent year-to-date gains till November against an 11 percent rise in the Nifty 50. It outperformed the gauge during a period of volatility when investors increasingly piled into heavyweights driving the benchmark indices to records highs even as small- and mid-cap indices tumbled. That has led to polarisation in the market where the top stocks continue to be expensive while the broader market is bleeding.
Maheshwari, however, isn’t worried about valuations but growth slowing down. “If you ask me where do I lose my sleep, I lose my sleep only when I have this fear about the company which I own would not grow at the rate at which we thought that it would.”
He, however, advises caution when picking stocks.
The earlier theory of buying a company which has a sectorial tailwind—that if the sector grows at 15 percent, the chosen company will grow at 25 percent because it will elbow out two to three people—has gone for a toss, he said. In a lot of sectors, according to Maheshwari, the growth is coming not because the sector is growing but because the competitors are going bankrupt. To an investor, it should not matter whether the sector grows or the competition goes bankrupt, as long as the chosen stock has that extra market space to get into, he said.
Maheshwari, who manages nearly Rs 250 crore, doesn’t expect many companies to grow at a very high rate in the current environment. “If the economy is growing at 4.5 percent, we cannot have 450 companies doing well. The system has changed, from small is beautiful to big is great,” he said. That’s why he advises people to stop hunting for small caps compulsively.
When a company is supposed to grow at 30 percent and suddenly starts growing at 25 percent, he won’t buy the stock even if it’s available 25-30 percent cheaper. But if a company is supposed to grow at 30 percent and keeps growing at that rate, he will buy it even if it’s 10 percent expensive.
“You cannot buy today’s stock at yesterday’s price. You cannot buy a stock on a credit card. You will buy it only when you have money and by the time you get the money and the stock is right, the stock would have rallied 30 percent,” Maheshwari said. “So, there is price to pay for certainty. There is price to pay for not having enough money in your pocket when you first thought of buying a stock. There is price to pay for everything in this world.”
A reason why he believes that a higher growth rate will take care of the expensive valuation by showing growth in the years to come. He did that by buying Pantaloons Fashion and Retail Ltd. in 2003 and Page Industries Ltd. in 2008, and he will continue to follow the strategy.
Watch the full interview here:
Read the edited transcript here:
I would love to talk a lot about how your approach to investing is, but cannot help because we are at the end of the year or at the start of the new year to talk about how do you expect the year to be. I mean there is lot of expectation about what the government will do, there will be a tax cut, earning etc., Budget, GDP will bounce back, and the markets are still at a high. There are still talks about the economic indicators that they are not in best of their shapes and therefore the market is overd. Now, when you are building your portfolio, how are you approaching this scenario?
So, two parts to it. When we build our portfolio, we don’t care, we don’t bother about what the government is doing. Of course, you must have seen me tweet on the government because that’s our job. Because if people or participants from the stock market take a back seat and don’t tell the government to save us, who is going to say that? The poor talk about poverty. The unemployed talk about employment. The business class have their own forum, the CII and the FICCI, where is the forum for the stock market guys? So, if all us take a back seat and say, no, it looks little too embarrassing to come out on social media. I have a different view, so that’s the product. I think, if you are looking at the Nifty, I think we are set for a huge rally. The top 40-50 companies, if we are looking at the broader market, I think the pain, toil, grind is still going to continue. I would say that because I don’t see any reason why our GDP growth from 4.5 percent should go to 6.5 percent immediately. If it goes good enough but at least not for the next six months. I see a huge reason why this government would like this top 40-50 companies to do even, not intentionally but unintentionally. When I say that it means that the measures that are supposed to come across like for example, the corporate tax cut, whom did it benefit? It benefitted people who had a lot of cash flow mostly the foreigners. So, 70 percent of the money is going out of India because it is controlled by the foreigners. 51 percent is out of India, the FMCG guys, they are top notch guys. So, I think the Nifty is fine, it is going to do well. It is poised for a huge rally, may be pre-budget but beyond that people will stick back and say: Hey, this one has gone up too much, but I think that will be the mistake that we will again make.
Yeah, I think that got summed up in a tweet that I used in one of my articles as well that cribbing about a stock when the Nifty is moving up or venting out frustration on social media won’t help. Maybe buying that stock actually will. The conundrum would be it is the conundrum that is existing for the better part of I think the second half of 2019. Is that, how do you tell yourself that let me go out and buy this stock at the current valuations, when you have seen it a few notches lower and you still found it difficult to buy it then?
So, we are not worried with valuations. We are worried with growth slowing down. If you ask me where do I lose my sleep? I lose my sleep because only when I have this fear about the company which I own would not grow at the rate at which we thought that it would. That’s the best part to me because if a company is supposed to grow at 30 percent and it suddenly starts growing at 25 percent, I would not buy the stock even if its available 25-30 percent cheaper. If a company is supposed to grow at 30, it keeps growing at 30, I would buy it even if it is available 10 percent expensive. We have done that. If you want, I can explain my own thing to you because you know. In 2003, I got Pantaloon. It was Rs 7 and it went up to Rs 875. I sold when it came down to 300 or 280. So, I made 40x but you could say from top I lost so much, when I bought Pantaloons at Rs 7. The stock immediately ran up to 100. It went up to 150 but I wanted to buy it at 100 and when it went to 200, I wanted to buy it for 150 and I just couldn’t position up my entire portfolio the way I wanted to have. Fast forward 2009, I mean from now it’s rewind when I bought Page Industries, the first was at Rs 350. I kept buying it right up to Rs 9,850 and I sold it at Rs 14,500. You cannot buy today’s stock at yesterday’s price. You cannot buy a stock on a credit card. You will buy it only when you have money and by the time you get the money and the stock is right, the stock would have rallied 30 percent. So, there is a price to pay for certainty. There is a price to pay for not having enough money in your pocket when you first thought of buying a stock. There is price to pay for everything in this world and I gave you this example because this is something that has taught me because buying a stock 100 percent or 200 percent is not expensive at a price at which you have entered it and it’s not a crime and you have to do it once or twice and make money to actually understand what I am saying. Till the time you do it and see, like I said you will only crib on social media.
Would you then say that your purchase price in your decision to add or in your decision to cut has got no relevance?
Purchase price becomes irrelevant from the time you have bought the stock then it is for use for your CA. He is going to file a tax return. How much LTCG, how much STCG you have made. And I will tell you why, so all of us have our own portfolio, excel sheet. So, I have this excel sheet where I run my own portfolio. There is no column for the cost price. There is no column for a profit made on a stock. This doesn’t mean that I don’t know when I bought it but since you keep on buying repeatedly, the average cost price gets lost. You remember the first price and the last price, but you don’t have the attitude of going out and finding out the weighted average cost price. I would know that I bought it for 600 today and the price is at 800. That’s all I know. And the reason is you don’t want to be clouded in your head. See, removing the cost price and selling it when the market price is above the cost price is great but if you know the cost price and the market price is below the cost price and when you are going to sell it, it is going to create that extra bit of stress in your head. So, it all started with that and now that has become a habit. Now, whenever we make portfolios for ourselves or even for clients, the first thing is to remove the cost price that’s got no relevance and of course 99.99 percent people in this world would look at the cost price but what can you do with the cost price? You can only cry by looking at the cost price or you can laugh or you can smile. You can’t make money out of it.
I know a lot of people will say that people love talking about the winners. What about the losers? We will talk about some mistakes as well. I want you to try and share some of the mistake that you have made as well but let’s try and bring that conversation to the here and now because on this show we try and figure out how these managers or investors generate Alpha. Now, you mentioned that you believed in 2020, it will still be the larger ones that will continue to do well, it is a very interesting story that one of our Alpha Moguls guest we started this series with, Samit Vartak of Sejvaan. He has done this back-testing from 2011 till alpha FY19 of companies of over a Rs 1,000-crore market cap or thereabouts which have given the maximum returns. Some 68 companies fit that bill and most them expect two companies were mid caps. So, if we leave out 2020 and if you look at two-to-four-year period. If you look that far. Would you believe that there are companies or opportunities available that you would also invest in which could help you generate a much higher alpha than what a tried and tested large cap name would do?
So, first thing I think it’s just discussed too much that we look only at large caps, it’s not like that. We look at growth. If I find growth in Rs 300-crore market cap company, I would like to buy that company, if I find growth in Rs 6,000-crore market cap company, I will buy that company. If I find growth in Rs 200,000 market cap company, then I will buy that. This method has worked for last 20 years for me while I was winning and first nine years while I was losing, and I was not following this. So, I can discuss this with you later. So, the problem with such quantitative analysis of data is that there is always that outlier which you would never realise and let me give you another thing to it. 95 percent of people die while sleeping on the bed, does it mean that you should not go to bed at night. So, when you take too much of data and analyse it, the outcome might appear great or 95 percent die while sleeping on bed. Should I go to bed tonight? And why I am saying this is out of those 2,000 companies, out of those 1,800 companies, four would become multibaggers but the averages will hide them. So, don’t look at averages because we don’t bet on averages unless you have to buy Russel 2000 for example. We don’t own it so I can talk about it. Then you can look at those quantitative analysis otherwise those are just too much effort without gaining anything in return.
You are saying that you are going out looking for growth in this scenario as well. Where is it that you are finding growth currently? A lot of people will say that I see it in multiple spaces but I know you don’t hunt like that I mean you are not going out looking at 20 ideas which are showing growth. Where is it that you are finding the kind of growth that you are watching for that will help you generate the Alpha?
See, the earlier theory was you should buy a company which has a sectoral tailwind so the sector grows at 15 percent, my company will grow at 25 percent because it will elbow out two-three people that theory is gone for a toss and I will tell you from the NBFC space, from the aviation space, from the jewellery-retailing space. Now, the growth is not coming because the sector is growing, the growth is coming because your competitors are going bankrupt. So, how does it matter to you whether the sector grows, or my competition goes bankrupt. I will still have that extra market space to get into.
So, if we use that analysis right now for me, do you remember the cricketer called Ravi Shastri, he used to play just two strokes one was the chappati and the other was the lofted right then in 1985 when he was declared the champion of the champions. He couldn’t play the square card, he couldn’t pull, hit, he couldn’t play the sweep and the reverse sweep. So, for me to make money in this market, all I want is one good company, two and three is great, four makes my life. Why I am giving this to you is because people normally look at buying 10-15, 30 companies but if you buy 30 companies you are only going to do as good as the Nifty and if there are 30 companies doing well in India, growing at 30-35 percent you are probably nearing an economic top which was the case in 2017 and 2018. Right now, with 4.5 percent GDP growth, I don’t even know whether it is 4.5 or 3.5. Who is going to vouch for that?
You cannot have 4,500 companies doing well, you cannot have 450 companies doing well. You can only have four, five or 10 companies doing well. Globally, look at the situation at Facebook, Amazon and Apple. That’s three American side to Byju’s, Alibaba and Tencent. These seven companies reflect 8 percent of global market cap. So, if you want to say that the entire world has gone crazy, I am one of them. Eight companies. How can they represent 8 percent of global market cap? No, people haven’t gone crazy. The system has changed from small is beautiful to big is great because the more globalisation you have, the more opening up the economy you have. The inefficient players would find it more difficult to survive and that’s what has happened. You show me a small cap growing at 30 percent top line, 25 percent ROA, I don’t need the dividend, they can keep that for themselves. With a sustainable predictable growth, I don’t know what the company is trying to do, what China is doing because there is a pollution problem in China. I don’t want a company that is trying to make graphite because I know the ultimate outcomes of those things, you show me a company I am willing to put 10 percent of my fund’s portfolio and my portfolios in that company as long as I think there is growth. I will buy that at 40 PE and I can tell you that even at 40 PE if there is 25 percent predictable growth, you would make money over the next 10 years but the question is you want to buy a 10 PE stock then you realise that the sales have actually contracted by 15 percent and the promoter has run off somewhere else.
I am guessing you are of the belief that while the world may be worried about higher valuations, higher growth of a select few companies will climb over the wall of worry of valuations very easily. Is that a correct assessment?
Absolutely correct, because liquidity chases growth and if there are 200 investors coming to India, they are not coming here to buy our cement companies, chemical companies, or our ‘Vedanta’. They are coming to India to buy growth. See, over the last 10 years, if you see, there have been big instances in India—Page industries, Sun Pharma, Gruh Finance, Eicher Motors, to name a few. Who were the ones who bought them? The white skin. The foreigners. Indian mutual funds never bought them because they are the ones who can bet on growth. They are the ones who can understand how growth travels because they have seen growth. There is a Chinese company that’s connected to Alibaba called Ant Financial. If its revenue grows 50 percent, [and] the profit grows 5 percent, then the stock price goes up the next day. In India, if the profit grows 5 percent, the stock price would come down. So, that’s how it is.
So, one thing is that growth will climb over the wall of worry of valuations. My question then is are you finding thematic sectorial patterns to certain companies? I know you started off by saying that sectorial tailwinds are not a thing, which is in the current scenario, but I am still asking you that in your quest for finding out some of these names, you have owned most of these. But [if you are] are getting capital you have to deploy it somewhere. Are you finding sectoral themes to these or are all of these bottoms up and therefore completely unrelated to each other in terms of the business that they do?
No, we don’t find sectoral themes. But for us, one good idea a year is great. We don’t need one good idea every month. We don’t need one good idea every day. We need one good idea every year. That too, when you buy that, it doesn’t mean that you have to trim across. You have to only look at one stock that you would like to exit and put that money into that idea. It could be the stock that’s been closest to you or made you maximum money. It could also be the stock that didn’t work for you. It is thoroughly irrelevant because what is relevant from that point onwards is which one looks to be a better risk-reward payoff.
Let me ask a follow-up on investing style. How do you decide when to either buckle down or double up? You mentioned you bought a stock at a particular level and then you continued buying at a particular time. At some point of time, when these stocks would be doing well, you already have a position, you might want to trim that position as well. What are the indicators that you use before deciding to add on to further investments or trimming it down even if the going is looking good right now?
So, again, let me give you an example. With the PMS that we do, we started buying this stock called Can Fin if you recall. It went up 6-7 times. So, every fortnight, we would sit down with a portfolio and say,”... this guy’s allocation to the Can Fin has exceeded 30 percent (of its portfolio ), so let’s just trim it off.” So, the moment it would go to 32 percent, we would trim the two percent. If somebody’s portfolio would go to 33 in Can Fin, we would trim three percent. As a result, what happened was, you started selling a winner. We would normally not do it for ourselves but because you run a PMS, you think you have that added responsibility which forces you to make logical errors. Why would you sell a stock which is doing well? Let it go to 40 percent.
What was Narayan Murthy’s personal portfolio allocation to Infosys when Infosys was doing well? What was Bill Gates’ allocation? So, I am not trying to say that the level of information dissemination is the same between those promoters and us. What we do know is we don’t go and trim. We don’t, and we won’t. There have been instances where a couple of guys have hit 45-46 percent allocation in a single stock in a client portfolio. But we are in no hurry to trim it off. We will call up the client and ask if they are okay with it. He says, “What are you doing?” We will tell what we are doing and they will say please do it. That finishes our talk.
Initially, we used to buy 15 percent allocation [at a] personal level, a little bit of the stock and then see if it goes up and what results come through. These days, we are taking a leap of faith. We will put in 20 percent of this price [since] we don’t want to be chasing this stock as it doubles up or triples up. So, these days, the idea of doubling up doesn’t exist because when the stock price goes up the allocation also goes up. If the company doesn’t respond in the way it was supposed to respond, then we sell it. Let me tell you the mistake which we did. We bought PNB housing at 860 post demonetisation. Then the stock went up to 1700. Then there was a stake sale. The girl had to be married off and nobody was ready to take the girl, so the stake sale bought the stock down and down. Finally, we exited at 950 because we thought 860 has now become 950, what is there in the company that anybody comes but nobody buys it? We don’t want to be saddled with a company that has an ownership issue. Right now, the stock is at 430. So, you could say in hindsight we should have sold at 1,500 or 1,700. We didn’t. We sold at 950 because there was nothing wrong with the fundamentals at that point in time. The only problem was there was no one willing to pick up the stake. See, demand and supply are the primary drivers of the stock price. The earnings create supply, or it creates demand. So, when there are great earnings, you have more demand. When there are bad earnings, you have more supply. So, if there is somebody who says he wants to sell 40 percent of this stock, he has jumped ahead of the earnings yardstick. He suddenly comes to the market and says irrespective of the earnings, he wants to sell. It is as bad as bad earnings. It took us to see a stock go from 860 to 1,700 back to 950 and this is a lesson that we learnt.
But the counter to that might be that a lot of people says it works until it stops working the price slide is so swift that either you can’t sell at the desired side or you don’t get the gumption to sell because you would believe at the initial stages of the price fall no there is a technical reason and it will bounce back. Does that come into your mind at all, does it hurt you ever?
You keep making mistakes, you are worried about losing money but then there is no second chance here. It is like somebody holding a revolver in front of you and he says, “Do you want to run?” and asks you is you will run. So, we don’t give any second chance. If we sell a stock, it’s interesting so we will tell the dealer to keep selling. If the price falls then make a call but then don’t leave it. So, it is not like you stop it and then you call up because the risks to not selling a stock which is doing bad on the fundamental front can only be experienced to be directed.
I would also want to talk about some mistakes that you would have made because that will be good learning. I was wondering, just want to squeeze in a question. All of the stuff that we have spoken about in some parts has relation to noise. The noise that you get from the market about what is happening and what could happen, the mind gets polluted and then you might make errors as well. There are compulsions as you mentioned, those compulsions make you do things that you don’t want to do. The one pocket on which there has been maximum noise over the last 12 months has been NBFCs. Without adherence to what you have an don’t have in your portfolio, how have you navigated the noise in the NBFCs? Do you believe that the year of pain has gone by or could there be more in the coming year 2020? Can some of the companies which have bombed out make a comeback (because the business model has been proven in past that they went through liquidity crunch in the interim) or will it be a winner-takes-all strategy and the winners will only expand their dominance in this space in this next few years?
Generally, our theory has been that every company should do well for the leader to do well. It is a very isolated case where only the leader and nobody else does. In the NBFC space, I think except for a handful of companies, most of the rest will take years to see all-time highs again. I mentioned this last year also when the crisis blew up that 70-80 percent of companies will not see their all-time time high because there has been a fundamental punching of the entire system and the longer the government takes to create a resolution, the longer the problem will exist. For each and every day of the delay, the damage becomes irreparable.
So, I think it is a classic case of winner-takes-all. Remember when we had these search engines call Yahoo! Before that we had this Alta Vista. So today we just have Google. So, sometimes you need the competition to be blown away by the leader, on other times you need it to be blown away by the regulations. See, this is a very classic case. Would you write a fixed deposit cheque to any of the C-line NBFC companies? You wouldn’t. Money is a raw material for them. When the leader gets a CP paper at 5-5.5 percent or 5.7 percent, it lends it out at a competitive place. So, there the game finishes for everyone else. The longer it continues, the longer it impacts everybody else. So, I think it is a very tough place to be in unless you are with the leader.
So, stick with the leaders when it comes to the pockets [is the way to go]. I want to ask you two questions; one is on some mistakes that you have made, and one is on some of the best excerpts of your own book that you have written, but first is ‘The Here And Now.’ We have a busy earnings season coming up, we have a budget coming up where the expectations are maybe there is something with the personal tax rates. But on the counter side, there is a lot of talk about GST rates moving up as well or getting tinkered with, too, which is not what the markets want. What happens to the equity market over the course of the next 6-12 odd months at a time when a lot of action looks like it’s being front-loaded in the year as opposed to the back end?
I think the government wouldn’t increase the GST rates, they have understood that trying to hit a child who is failing his exams will only prevent him from going to school the next day. So, you can raise rates to 100 percent, but then what happens when income tax goes up to 100 percent? People stop working. We had 97 percent, then the parallel black economy developed. So, the more you raise the rates, the higher will be the pilferage, the more will be the stealing around. So, I think the government understands and realizes that. The need of the hour if you ask me (not that they are going to do it because we are discussing it) is to decrease the income tax rate for Rs 10 lakh per annum household income guys. They are the ones who are going to flash their credit cards around at different malls and they are the ones who are going to revive the economy.
The second thing to do would be to remove LTCG. Of course, I am an interested party. But I would be called interested if the government is making some of the money out of LTCG. You can apply LTCG to promoters’ stake. They are the only ones who are going to pay the government some LTCG. You can say anybody who sells more than five percent in a company attracts LTCG. Anybody who sells less than five percent goes scot-free.
[Look at] dividend distribution tax. You have to initiate and inculcate the habit. People have lost money for years and it looks easy to say that people have made money, but they have actually lost money. All these three things don’t help the stock market beyond the first 100-200 companies. What helps the balance 5,800 companies out of the listed 6000 is the seven percent GDP growth. We are not going to go there for at least the next two years. If you want to say an inefficient guy makes as much money as an efficient guy, then there has to be too much growth, development, and prosperity. So, right now there are too many things involved.
Have you as a result of misunderstanding GDP growth or trying to bet on companies which you would have thought have got the tail-wind committed a mistake? We have spoken about some of the things that you have gone through the past? Winners. But they were of the previous decade. Is there anything that is from the recent past that you have committed which you think our viewers can learn from?
[There were] several mistakes. [For the] first nine years, I kept losing and because there was a family business and my dad used to write me a cheque for being in the office for eight hours a day. I used to put that money into the stock and then lose it in the next six months, or one year. And that is interesting. My friend and I used to go on the landline since there was no mobile concept there and we used to say, “ Look at low PE stocks nearing 52 weeks lows.” We used to say, “P mai dekh, accha toh yeh chaar ka P hai, Rs 16 daam hai, toh ye gola karo,” (Look under ‘P’. This one is at four and costs Rs 16, so circle it) and in then in the Economics Times I used to just circle it around. So, that was the first mistake. At that time, you may find it strange, if were in Calcutta and had to buy a stock listed on the Bombay Stock Exchange, you had to pay two percent brokerage. Calcutta stocks could be bought at one percent. So, it is like, “Who will buy Nestle and pay two percent brokerage?” “Who will buy Infosys and pay two percent brokerage?” Go and buy Hindustan motors because it was trading at the Calcutta Stock Exchange because you wanted to save on brokerage.
A recent mistake was once we started this PMS thing, we thought that people won’t come to us if we buy this “Headline” stocks for them. So, let’s try and do something cute. You also know those names. So, we bought Marksans Pharma and there was some Mangalam Drugs. I can talk about them because we don’t own them and there are no recommendations. Those are small-cap companies at Rs 300-400 crore market cap. So, everyone in their own sense looked to be a sector leader. So, Mangalam Drugs said they were the only supplier to WHO for anti-malaria drugs and they gave writing cheques to them. Cupid was the only manufacturer of female condoms in the world. So, you can twist your head to presume that any company that you look at is the best in its class. Like every Mom thinks that her child is the most beautiful in the world, he might not be the most beautiful in the house also but that’s what the mother thinks.
So, we were twisting our heads. There was Marksans Pharma. It was one of those companies that used to make soft gelatin capsules and we thought it had a huge market ahead of itself. We lost 30-40 percent of the portfolio in these companies and thankfully for us, we never allocated 30 percent in any of them. We just allocated 5-7 percent. We thought of making a basket of 25 percent out of these. That 25 percent basket fell 60 percent. We were left with almost 10 percent of that. So, 15 percent of that hit that we took was because of that adventure which we did. We thought, if we are opening a PMS, people are not coming to us for buying Page Industries or Gruh Finance. These are all known names. After that happened, we took a conscious decision that we are not going to be cute or over smart in this world. Whatever looks good, we are going to buy it. If people are going to come to us, we are going to buy for them. If they don’t like our strategy, that’s how the world is.
One last question. I see on social media and Twitter a lot of references to people that are reading pages out of your book and learning from it. What to your mind is a key excerpt from the book that has held you in good stead?
I think, it is more the initial years. They were 2002/03- 2008/09. There are two parts to it. From 2002 to 2008-09, since you hadn’t tasted the success, the moment you hit your first milestone you think you have become great. But then the fear of losing it all keeps you awake at night. So, as you said, it is easy to learn from somebody else’s mistake. But unless you make the mistake, unless you stay awake at night, it wouldn’t teach you not to do that again.
There was this story of myself and my wife going around in a taxi to Pantaloon and I used to tell the taxi guy, “Westside chalna hai. ” (Take me to Westside). He said,”Kaha
jana hai, Westside kidhar?” (Where is Westside?) I said, “Pantaloon jante ho?” (Do you know where Pantaloon is?)“Haan, who pata hai.” (Yes, I know that). So, that was the idea that Pantaloon is going to do well, because even a taxi guy knew about it.
So, people would know where Pantaloon is, but not Westside. Because of these two reasons we picked up the stocks. Secondly, and strangely, today I don’t know if I’d pick Pantaloon. On the balance sheet basis, it was not the best stock to buy at that time but sometimes little knowledge is great. That’s one part.
In 2008-09, we went through pain. The portfolios fell 65 percent and as usual I was leveraged. I never knew when to fold up. So, I told you, Rs 7 Pantaloon went to Rs 875 came back to Rs 800 and then interestingly I saw this. When I saw this clip about Fannie Mae and Freddie Mac going bankrupt and then I said, “I read about Peter Lynch buying this company that went bankrupt, then who am I in this world?” In the next couple of days, I went and sold Pantaloons off. So, in 2008, it is very easy for people to read the textbooks, the journals, and the internet search engines. But unless you pass through it, it is very difficult. Baaki paisa banne ke baad toh sab aa jaata hai, courage aa jata hai, widom aa jata hai, log mil jate hai. (After making money, you get courage, wisdom, people). But you know the real pain is when you go through the down year.
Last year was also down year for us when bought stocks during NBFC were in crisis. So, that’s the real-time to gather all your courage and grit.
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