Top-notch CAs throng Dalal Street in quest for fortune
One unique aspect about Dalal Street is that it offers equal opportunity to highly qualified professionals as well as illiterate/ semi-literate persons to rake in massive fortunes from stocks.
Rakesh Jhunjhunwala, the Badshah of Dalal Street, is a striking example of one end of the spectrum.
The Badshah surrendered a highly lucrative practice as a CA to make his career in Dalal Street.
Radhakishan Damani, who is revered as Rakesh Jhunjhunwala’s mentor/ guru, is at the other end of the spectrum.
Radhakishan barely passed his SSC exam but still managed to rake in a fortune of $14 Billion from the stock market.
This peculiar dichotomy prompted Rakesh Jhunjhunwala to ask us the poignant question “If SSC Pass Like Radhakishan Damani Can Make Billions From Stocks, Why Can You Not?”
Atul Suri, who is the Badshah’s protégé, eloquently explained what it is about Dalal Street that lures highly-qualified professionals into it.
“I am a forward-looking person, who likes to look into the future and the stock market is the ideal place for me. Here, we look into how economies, industries, companies will shape up in the future. The passion of looking into the future and to be able make a profession out of it was something in which I found a much better alternative than practising as a chartered accountant where I would be looking at the past and pointing out the people’s faults,” he stated.
Rigorous training into principles of value investing under the tutelage of Parag Parikh
Atul Suri has the unique distinction of not only training under Rakesh Jhunjhunwala but also of learning the ropes of value investing under the guidance of Parag Parikh.
Parag Parikh, the founder of the PPFAS Mutual Fund, was a stickler for quality and valuations.
He passed away in a tragic accident in Omaha where he had gone to attend Warren Buffett‘s Berkshire Hathaway‘s shareholders’ meeting.
He summed up his “mantra” for finding winning stocks in a succinct manner:
|Parag Parikh’s Mantra For Finding Winning Stocks|
|– Buy stocks only of fundamentally sound businesses which are run by credible management, have pricing power, have low debt and are relatively easy to understand and which are quoting at reasonable valuations;|
|– Be disciplined. Don’t buy fancy stocks at absurd valuations;|
|– Keep your emotions in check and take advantage of others’ irrationality;|
|– Buy systematically in small lots over a period of time;|
|– Keep a wish-list of your favourite stocks and seize the opportunity when it comes.|
“I was intrigued by Parikh’s thought process and philosophy in his initial years in the early’90s,” Atul Suri disclosed, paying tribute to the late stock picker.
— ETMarkets (@ETMarkets) January 23, 2020
Techno-Funda approach to finding multibagger stocks
Atul Suri revealed that his PMS Fund, which is named ‘Marathon Trends’, follows a unique stock selection process of blending fundamental stock research with market technicals.
In fact, this process enabled Rakesh Jhunjhunwala to cherry-pick Titan as far back as in 2002 when it was quoting at a beggarly valuation of Rs. 65 (adjusted for splits, bonus etc).
In those days, it was common for the well-known investors to hold a “Durbar” at the BSE Convocation Hall in which they discussed their stock picks and offered recommendations to novices.
Rakesh Jhunjhunwala was somewhat diffident about Titan when he recommended it (see Rakesh Jhunjhunwala Said Buy Titan …. At Rs. 65!)
“One should be very careful when you buy it and one should buy it only if one has a three-five year perspective“, he said.
Obviously, the Badshah had himself not realized at that stage that the stock recommended by him would blossom into one of the biggest megabaggers in the history of mankind.
“Titan is probably the first chapter one learns in every textbook on finance. I saw it happen in front of my eyes. It was a very big education,” Atul Suri recalled.
He added that his Marathon Trends PMS is seeking to create similar wealth for investors by following the mantra of being “Fearless in thought, integrity in action and risk control as an overriding mantra.”
Key holdings in the portfolio of Marathon Trends’ PMS
Atul Suri disclosed that he follows a sensible and safe strategy in picking stocks.
“Companies that continue to grow or deliver even in tough times are something that really stand out and are the kind of stocks we like to own in our portfolio,” he stated.
Some of the key holdings in the PMS portfolio during the year are Bajaj Finance, Berger Paints, Bata India, Bajaj Finserv, Kotak Mahindra Bank, Jubilant Foodworks, HDFC Bank, Procter & Gamble, Reliance Industries and Pidilite Industries.
It is notable that all of these stocks are fail-safe and qualify as “consistent compounders“.
“In a bull market, you will earn Re 1 less because they move slowly. But in a bear market, you will save Rs 10 more and that is how cycle of compounding works …. It’s always better to go in gradual, compounded stories,” he had advised on an earlier occasion.
— CNBC-TV18 (@CNBCTV18Live) December 12, 2019
Diversified portfolio is the best
The debate on whether investors should have a diversified portfolio or a concentrated portfolio is as old as the Hills.
Peter Lynch was one of the strong proponents of a diversified portfolio.
“I never saw a stock I did not like,” he famously quipped in reply to queries from bemused investors as to why he held 200+ stocks in his portfolio.
Atul Suri advised that we should have a balanced approach and not go overboard one way or the other.
He is a believer in the merits of a moderately diversified portfolio and holds about 20 stocks at a time.
No doubt, having a moderately diversified portfolio is most sensible given the kind of mishaps we have seen such as Yes Bank, DHFL, Jet Airways, IndiaBulls Housing Finance etc.
If Ackman has taught us anything, it's that if you run a concentrated portfolio, don't be wrong. https://t.co/G2uyydQRgk
— Michael Batnick (@michaelbatnick) August 3, 2016
This sensible approach has enabled Marathon Trends PMS to deliver a healthy return of 17.45 per cent in 2019 which compares favorably with the return of 7.30 per cent given by the benchmark NSE500 index.