Sanjoy Bhattacharyya, the doyen among value investors, makes some very valid points in his latest article “Make the Most of Tumbling Stock Markets” published in Forbes India.
In an article distilled with the wisdom of the investment gurus Warren Buffett, Benjamin Graham and Peter Lynch, Sanjoy Bhattacharyya points out that the single key to consistently successful investing is ‘cheapness’ i.e. buying stocks at low prices relative to their intrinsic value. He emphasizes that this holds the key to earning dependably high returns, limiting risk and minimising losses.
At the moment, when stock prices are tumbling, sensible investors should be at the forefront buying stocks slowly but steadily says Sanjoy Bhattacharyya. He sends the powerful reminder that periods of turmoil in the market are wonderful opportunities to buy quality stocks at cheap valuations.
Sanjoy Bhattacharyya suggests that investors should get rid of the gnawing fear and self-doubt that plagues their mind. Instead, if they are convinced that a business is available at significantly less than what it’s worth, they should stay calm, remember that the mathematics of compounding and the power of free cash flow work wonders for the patient investor, and take advantage of the situation and buy stocks.
Sanjoy Bhattacharyya strongly advises that investors who are too scared to act or who are waiting for cheaper prices to come by are doing themselves a great disfavour. He points out that while it is always tempting to try to time the market and wait for the bottom to be reached, this strategy is flawed. Firstly, it will not be obvious to the investor that the bottom has arrived. Secondly, when the markets settle down and the economy begins to recover, there will be a scramble for buying stocks and the price recovery from the bottom can be very swift. Investors will then be loath to buy at higher prices and regret not having bought earlier.
So, a sensible investor should put money to work amidst the throes of a bear market, appreciating that things will likely get worse before they get better says Sanjoy Bhattacharyya, quoting from the legendary Seth Klarman of The Baupost Group.
On the question of what stocks an investor should buy, Sanjoy Bhattacharyya indicates his preference for the stocks of well known and established companies like Supreme Industries (Rs 338), HDFC (Rs 737), Engineers India (Rs 129), Navneet Publications (Rs 52), Cummins India (Rs 387) and Torrent Pharma (Rs 421).