Parag Parikh’s interviews usually have some tips that you can pick up and apply to your investing career. His latest interview to valueresearchonline.com is no exception.
One of the important pieces of advice that Parag Parikh offers is that investors should remain prepared to grab stocks when the golden opportunity comes their way. Unfortunately, the universal experience is that when the golden opportunity does come in the form of a crash in stock prices, most investors (me included) are like a deer caught in the headlights, totally paralyzed to do anything.
To overcome this syndrome, Parag Parikh suggests that we prepare ourselves psychologically by having a ready check-list of stocks to buy. “Fortune favours the prepared mind” Parag Parikh said, with a smile on his lips.
|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.|
Some other valuable bits of advice offered by Parag Parikh were that investors should not obsess over economic or political predictions while buying stocks. Instead, they should focus on investing in fundamentally sound businesses at reasonable valuations. Investors should pick businesses that are run by credible management, have pricing power, have low debt and are relatively easy to understand, he added.
Parikh Parikh also suggested that investors have to keep their emotions under control and take advantage of other investors’ irrational behaviour. This is exemplified by Warren Buffet’s immortal quote “Be fearful when others are greedy and greedy when others are fearful” Parag Parikh added. It is also not a good thing to time the market, he said, suggesting that investors adopt the SIP route to buy stocks.
Parag Parikh was also grilled about his fascination for Noida Toll Bridge and Maharashtra Scooters which have underperformed their peers. Parag promised that the good times would dawn for both stocks, sooner than later.
Interestingly, Parag Parikh put up a spirited defense over his fascination for foreign stocks. It may be recalled that he has faced a bit of flak on this aspect because one school of thought is that the Indian avatars of the foreign companies offer better bang for the buck than their foreign counterparts and that there is a great currency risk. However, Parag Parikh turned the tables over his detractors by arguing that his gameplan of hedging 90 per cent of the foreign exposure through exchange traded currency futures contracts earned 7-8% instead of bearing a currency risk. He pointed out that the USD-INR ‘Forward’ / ‘Futures’ rate is always higher than the spot rate in order to reflect the inflation or interest differentials between the two nations, and that this created a gain instead of a risk. He did, however, admit that the residual 10 per cent of the foreign exchange denominated portfolio is affected by prospective changes in the value of the USD-INR rate.