Believe in the idea? Then run with it, say some of India's smartest investors
“The truly big investment idea can usually be explained in a short paragraph.” – Warren Buffett, chairman’s letter, 1994
Investing is best when kept simple. And nobody understands this better than Warren Buffett. The iconic American investor has shown a distinct preference for ideas that are easy to understand and for businesses that don’t require extraordinary managerial skills. In the real world, though, the number of alert people who can take this straightforward advice to its necessary conclusion is limited. Not only does this need a sharp mind, but it also requires extraordinary observation skills to spot a good business to buy at the right price.
The pages that follow showcase 18 such individuals in Forbes India’s 2015 edition of Wealth Wizards who have stayed true to this idea of wealth creation. They may not be the largest investors but they are among the most incisive: Many of them have been around for the long haul and have ridden the markets roller coaster—from the lows of the turn-of-the-century dotcom bust and the 2008 financial crisis to unprecedented bull runs. Their astuteness is evidenced in how they were able to protect their portfolios during periods of turbulence.
And in their stories, a common theme has emerged, a la Buffett: Their truly big investment ideas have not been complicated. In fact, many of these individual investors have not concerned themselves with the macro factors. Take businessman and investor Rajiv Khanna, who draws on his personal experiences to unearth good companies. He doesn’t meet promoters, instead using basic parameters to understand valuation. Often, he considers the market capitalisation of the company and sees how far it is away from being the leader in that sector. This gives him a sense of the size of the opportunity and he then invests on the basis of growth prospects.
Similarly, Mohnish Pabrai only looks at businesses he understands and those that have sound management and a competitive moat. Porinju Valiyath, a successful value investor, bought into Geojit Securities (where he had also worked earlier) in single digits and saw the price go up to Rs 2,500 in 17 years.
Probably the simplest of all is Sanjiv Shah’s business of an exchange traded fund through which, he says, investors could make good returns by just parking their money in diversified indexes like the Nifty 50 or BSE 30. These are low-cost products and, in many ways, no-brainers.
These individuals have also shown the patience in holding on to their convictions in a volatile market—and emerged successful.
Investing is simple. But then simplicity is not easy to achieve. Just for that, these wizards earn their place in the investing firmament.
(This story appears in the 10 July, 2015 issue of Forbes India. To visit our Archives, click here.)