Basant Maheshwari’s bestseller book “The Thoughtful Investor” has an entire Chapter devoted to detailing the several mistakes that Basant has committed in the course of his illustrious career as an investor. There are mistakes of commission and omission, where Basant did, or did not do, what he should have, or should not have, done, as the case may be. Basant describes his mistakes in graphic detail in the expectation that they will serve as a lesson for future generations of investors.
In the talk that he gave to the students of IIT-Ranchi, Basant describes how, when he heard that the RBI had imposed curbs on gold imports (on 11th June 2013), he feared that Titan’s business model was impaired forever and was desperate to sell his entire holding. He describes how he was watching the screen while talking to the broker and as the price slid, his anxiety to sell more and more of the stock increased.
With the benefit of hindsight, we can now say that Basant’s decision to dump Titan was perhaps knee-jerk and hasty. The RBI imposed the curbs as a temporary measure to control the CAD. Within a few weeks, when that situation improved, the curbs were relaxed (on 23rd July 2013). In fact, even the 80:20 norm introduced in August 2013 was relaxed a few days ago.
Since that fateful day (11th June 2013), when the curbs were first imposed by RBI, Titan is up 64%. This is quite commendable when you consider Titan’s stature as a blue-chip large cap stock.
Of course, one way to rationalize Basant’s decision is that he hates taking chances. What if the RBI had continued the restrictions indefinitely? Also, what if the RBI reintroduces the curbs at any time in the future? There is a Damocles sword hanging perpetually over Titan’s head must be Basant’s thinking. Basant has in fact pointed out in his book that if you desire to have a concentrated portfolio, there is no margin for error and you must always err on the side of caution in your stock selection.