Seven investment tips from Warren Buffett in India

On August 14, Rakesh Jhunjhunwala, an Indian billionaire, stock investor and known as “Indian Buffett”, died in Mumbai at the age of 62. Left 5.8 billion US dollars (about 39.1 billion yuan) wealth.

His best shot was to buy jewellery brand Titan, which he bought at an average price of Rs 4.5 per share in 2002-03.

When Titan’s stock once rose to 80 rupees, and then fell to 30 rupees, is it that most of them have to cut their meat. However, when it fell to 30 rupees, Rakesh continued to increase his holdings, and finally Titan’s stock rose to 400 rupees, a full 100 times.

Today, 20 years later, the price of this stock is 2,500 rubles per share, an increase of more than 833 times.

1. Observe the scalability of the business

Rakesh pays attention to the expandability of the enterprise’s business when emphasizing the growth of the enterprise. He likes to buy companies that can be transformed into large-cap stocks through expansion. In the selection of large-cap and small-cap stocks, he believes, “you should forget all of this and look at value. If large-cap stocks have value, buy large-cap stocks, and if small- and mid-cap stocks have value, buy mid- and small-cap stocks.” Other things being equal, if given the choice, he would choose mid-cap or small-cap stocks first because they are likely to have lower valuations due to being out of the spotlight, and they have the opportunity to expand rapidly.

2. Persistently analyze and be patient

First, you must always remember that you are buying the company’s share price, not just a stock price that is going up and down. A high-quality business requires the ability to grow over time. After you’ve worked so hard to analyze and research, you also need to be patient and wait for your investment to slowly sprout and mature in the market, waiting for the world to discover your gem, and the market will eventually reward you for your work.

When Rakesh bought Robin, it was just an average mid-sized pharma company. He sees it as a well-managed, well-debt company with a solid product line and growing market share. These are enough. Rakesh bought into the company and got into the waiting game. When the market time came, Rakesh’s investments made millions. Rakesh also talked about his investment in Karur Vysya Bank, an investment he has held for around 20 years, where a measly Rs 2,000 was now worth tens of crores thanks to patience and conviction.

3. Forget PE and ROE, look for profit sources

Most investors keep their eyes on the company’s current sales and profits. They look at the company’s quarterly performance and focus on the return on equity (ROE). “It’s a tree-and-forest approach,” Rakesh said. “The focus should be on the source of the company’s profits. Investors need to understand why companies are growing their profits in the medium and long term, and understand the opportunities that companies have in their fields. .”

4. Rakesh gives typical examples of Infosys and Wipro.

In the 1990s, when the public made meaningless calculations based on the PE and ROE of Infosys and Wipro, a shrewd investor had realized the Internet revolution in the next few years and realized that the offshore service business will grow rapidly. , he bought these stocks. Rakesh gave another example: Praj Industries, a biofuel ethanol production and operation company. When Praj Industries was established, no one realized that alternative fuels such as ethanol would be in huge demand in the future. Anticipating future demand and megatrends is the key to finding 10x stocks.

5. Analyze the reasons behind a performance “mine”

Too many investors are often swayed by a company’s poor quarterly results and bewildered by the company’s short-term earnings aberrations, thereby losing sight of the big picture. Rakesh stressed that he is not concerned about the company’s quarterly results. If the company had a bad quarter, he pored over it and looked for reasons behind the numbers. Find out if the abnormal performance is the beginning of a downtrend in performance, or just a mere accident. The trick here is to distinguish between the short-term trend and the long-term value of a company’s stock. He cites the example of 1999, when people were buying into hot industries, the shipping companies and electronics companies he invested in did not perform well, but he saw their long-term value firmly buy and hold, and ultimately benefited greatly. Don’t be fooled by aberrations, acknowledge and accept them, and remember that while it takes time, the market will eventually correct its imbalances.

Rakesh suggested that if the market dumps a stock because of its short-term problems and irrational pricing occurs, that’s the time for investors to buy. He cites the typical Titan watch company as an example to prove his theory. Titan’s operations in Europe were in crisis and lost a lot of money. But Rakesh is not alarmed, because he knows that India’s prosperity and domestic consumers are more important to the company. Rakesh sees the future, subconsciously thinking that Indians are going to buy more watches and that the company’s underlying business is solid. “In times of crisis for a company, you can buy at a cheaper price, and if you can see the future and see future demand and growth for its product, you should take that opportunity to buy.”

6. Buy with determination and conviction

The biggest challenge for value investors is that all the information looks scary when the market is in a bottom. So when prices are making new lows every day, often people’s hands are shaking uncontrollably. Investors hesitate and procrastinate, and question their own judgment. They’ll say, “What if I’m wrong to buy now? I should wait a little longer, maybe the price will come down a little more?” A lack of conviction and courage is the source of mediocrity. Almost every value investor says, “If I had bought that stock 10 years ago, I’d be rich.” The problem is, they haven’t spent enough time convincing themselves of the stock’s value to reinforce their beliefs , they also do not have the unwavering courage to act, but faith and courage are the hallmarks of wealth.

Rakesh often talks about the power of belief: “If you see an opportunity, take it!” The best opportunities often appear to be insoluble problems at first. Many wonderful opportunities were missed due to investors’ own hesitation and procrastination. Don’t try to time the market, the truth is that no one can consistently get in just right at the bottom of the market, and if you think the stock is cheap in terms of the company’s intrinsic value and future prospects, it’s time to buy.

Finding opportunities in the market is important, but it’s not enough. You have to be aware of the simple yet powerful logic behind the opportunity that most people ignore. And crucially, you have to have the courage to make a decision. Value investors often push themselves into a trap where they are forever seeking additional information to validate their ideas, or waiting for lower prices. In this regard, Rakesh believes that if you think it’s cheap enough, buy it firmly.

7. Don’t chase growth alone

Rakesh’s first rule of thumb on how to find 10x stocks is to change your mind: “Don’t chase 10x stocks. Let them come to you!” He believes that investors need to look for hidden growth potential that is overlooked by the market. company. Most people are keen to invest in ten times stocks, which also leads them to absurdly priced hot stocks, which in turn can lead to losses for investors. Instead, Rakesh says: “Going back to the basics of investing, if your research analysis is correct, you’re investing in companies that have good prospects, and over time, companies that you’re investing in will do well. income.”

“To really own something, you first have to learn to let it go.” “In order to see better, you should first close your eyes.” So in order to find a tenfold, you must first stop being obsessed with it. And start from the opposite direction, find out the mistakes of the market, find companies that are ignored, and have the wisdom to dare to invest in the opposite direction.

Rakesh generally looks for stocks that are not heavily researched and heavily held by institutions, or whose prices are suppressed by a pessimistic outlook. A good example is his investment in Bata India in 1996, a shoe company that was considered a bleak investment at the time. But Bata’s stock has nearly tripled since then. Another example is BEML, whose share price was low a few years ago because the market thought it was a lazy state-owned enterprise. However, Rakesh sees its efficient management, an excellently rich product line and strong cash flow generation capabilities. Today, the company’s stock price has risen tenfold.

Author: Wise Investor

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