It rankles me that I am not a Billionaire while my peers are
One of Ramesh Damani‘s constant laments is about how he missed out on being a Forbes Billionaire owing to his inability to bet big even when he is supremely confident about the prospects of the stocks which he is buying.
In a talk given in May 2014, he cited examples of stocks like McDowell (now United Spirits) and Bharat Electronics which were then available at throwaway valuations.
Though he had the vision to see that both companies were catering to a gigantic and profitable market and were destined to become mega multibaggers, he bought piddling amounts of both stocks instead of buying truckloads.
“The biggest failure of my life is in the inability to dream big” Ramesh Damani said, his eyes moist with emotion.
He repeated the same theme in his latest interview with Nikunj Dalmia.
“Is there one thing you would like to change about your investing career?” Nikunj asked in a delicate manner, knowing that he is touching Ramesh Damani’s emotions.
Ramesh Damani took a deep breath and a moment to collect his thoughts.
“The big problem in my investing career is that I have not been able to write big,” he said.
“There have been so many 100-baggers and 50-baggers,” he continued, lost in his own thoughts.
“Some of my friends have become Billionaires and I have not. It really rankles me ….
… We all started at the same time. with the same small amounts of money, the same opportunities …
… We all got great business for our portfolios like Titan, HDFC Bank, McDowell ….
… but why is the outcome so different?”
It is obvious that Ramesh Damani is referring to Radhakishan Damani and Rakesh Jhunjhunwala, the two illustrious Billionaires of Dalal Street.
While Radhakishan Damani is a 9x Billionaire, Rakesh Jhunjhunwala is a 2x Billionaire.
It is also obvious that Ramesh Damani is trying to influence us to give up our petty ways and think big.
“You will never get seriously rich by buying 50 or 100 shares. When you get a seriously attractive opportunity, back up the truck with the stock” he emphasised.
— ET NOW (@ETNOWlive) February 6, 2019
Forget worrying about elections & macro. The Sensex is itself up 50-60X in 25 years
Warren Buffett had once hauled up novices for giving various pretexts to avoid buying stocks.
Warren cited Coca-Cola as an example of how, if you buy a wonderful business and hold it tight for decades, you will get stupendous returns despite all the problems that may come in the way.
A paltry investment of $50 in one share of Coca-Cola and a reinvestment of dividends would now be a fortune of $5 Million, Warren pointed out.
“If you are right about the business, you don’t have to worry about anything else” he added.
Ramesh Damani reiterated the same advice.
He pointed out that despite all the travails and perils that the Country has gone through, the Sensex has surged from a paltry 800 in 1989 to the present 36,000.
“So India has gone up some 50-60X during the last 25 years,” he exclaimed.
“All kind of events have taken place in last 30 years which had negatively impacted the stock market — from Kargil to DeMo to the global financial crisis. But the index always finds its way higher,” he added.
“The underlying truth is that rather than being fixated on macro events or forecasts, investors should find a great business run by credible people at a price they understand,” he explained.
Contempt for Gurus making forecasts
Some experts have a penchant for making predictions about the way events will unfold.
This is because such predictions make them feel superior to the hoi polloi.
We saw earlier a live case where Saurabh Mukherjea and Andrew Holland, then both with Ambit Capital, expressed completely opposite views as to the state of the market (See MMB Punters Roast Ace Stock Picker Saurabh Mukherjea For Doomsday Call Of 22,000 On Sensex Even As Andrew Holland Predicts Nifty Boom Level Of 10,000)
Naturally, the two stalwarts were given an earful by the public for making a mockery of themselves.
Ambit Volte Face again.
Flips straight from 22000 to 29500 Sensex
Should we get wary now!
— sandip sabharwal (@sandipsabharwal) June 10, 2016
What a 20% rally from lows can do to your Index Targets..
Ambit revises Sensex Targets for FY17 frm 22k to 29.5k 😛 pic.twitter.com/TeASBUMh1E
— Ankit Chaudhary (@entrepreneur987) June 10, 2016
How does Ambit reconcile when Andrew Holland and Mukherhea take opposing views. What does house view mean?
— ????? ????? (@moneybloke) June 7, 2016
My friday morning laugh courtesy this article https://t.co/OmaTg1fv4M
— NEIL PARIKH (@npparikh6) June 10, 2016
There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.
– John Kenneth Galbraith
— Mangalam Maloo (@blitzkreigm) December 8, 2018
Ramesh Damani made it clear that he has nothing but contempt for such Gurus.
“If you want to forecast, do it in the shower because no one will listen to you and do not risk coming on public television! And nobody will remember you also,” he said with a chuckle.
“The point is that markets correct and then they move back up. So, you remain invested,” he added, implying that it is futile for anyone to second guess the markets.
— ET NOW (@ETNOWlive) February 5, 2019
Difficult to be bearish at these levels
Ramesh Damani advised that while it appears that the Bull market in mid and smallcap stocks is over for the present, one has to prepare for the future by tucking into high-quality stocks when they are available at steep discounts to their intrinsic value.
“I look largely at smallcap and midcap stocks, trying to find hidden gems,” he said with a big smile on his face.
“It is hard to be bearish at these points, at these levels on these companies,” he added, implying that the valuations are dirt cheap and at bargain basement levels.
“In a new bull market cycle, there will be new leadership in the market and that would come from some of the small and midcap stocks,” he said.
He cited the example of Bajaj Finance which was an unknown stock in 2013.
Yet, today it is a mega-multibagger and is holding strong despite its peers in the NBFC sector collapsing like a ton of bricks.
“Over the last 30 years, I have learned one thing, you always want to look out for good businesses at a valuation you understand and run by decent people,” he emphasised.
— ET NOW (@ETNOWlive) February 5, 2019
Bull market is not over. More gains are waiting for us
Ramesh Damani explained that the bull market is not over and that it is merely undergoing a “very painful consolidation” period.
He pointed that a Bull market top can be said to be made when there is a lot of leverage and euphoria.
“When small men make long shadows, that is when you start worrying,” he added, implying that when novices start strutting around Dalal Street pretending to be Gurus, it is a sure fire giveaway that a top is made and we should look for an exit route.
“I am fully committed to the market with very little cash. My cash levels are very low. I remain invested and long-term bullish,” he said, confirming that his money is doing the talking.
Which are the ‘hidden gems’ that Ramesh Damani is buying?
Ramesh Damani did not provide a ready-made list of ‘hidden gem’ stocks that he is buying.
Thankfully, there is no reason to despair because we have already been given a list by other experts.
Sanjiv Bhasin, the veteran stock market expert, has homed in on a stock which is likely to blossom into the “next HDFC Bank“. He has described it as a “huge wealth creating opportunity” and advised us to aggressively tuck into the stock.
Porinju Veliyath has recommended a high-quality stock. He has claimed that the stock is at “inflection point” and has the wherewithal to become a “Billion dollar mega cap“.
Mohnish Pabrai’s latest stock pick stands to benefit from the boom in the realty and retail sectors. The stock is fail-safe and is exhibiting all signs of being the next multibagger.
Sunil Singhania of Abakkus Asset Manager LLP has identified the sectors and mid-cap stocks that are beaten down and ripe for a buy now.
These recommendations give us more than enough material to chew on!