Rakesh Jhunjhunwala has a skill that has helped him become the billionaire that he is – the skill to pick the right people to work with. On the fundamental side, Rakesh Jhunjhunwala has the assistance of Utpal Sheth who is well known for his incredible ability to pick multibagger stocks. On the technical side, Rakesh Jhunjhunwala has the assistance of Atul Suri, the wiz-kid trader with an ice-cool temperament, who can taken million-dollar buy-sell decisions in a split second.
Now, in an incredible treat for all of Rakesh Jhunjhunwala’s fans, Atul Suri has revealed the techniques that the Badshah of Dalal Street uses to invest and trade in stocks:
Be Clear Whether You Are A Trader Or An Investor:
One of Rakesh Jhunjhunwala’s traits is that he is very clear headed about what he wants from a stock. “It is almost as if he has two separate brains” Atul Suri says “One dealing with investment stocks and the other dealing with trading stocks“.
When Rakesh Jhunjhunwala is looking to buy a stock for investment purposes, his training as a CA takes over and he looks at the stock from the parameters of PE, PBV and the other valuation parameters. Also, he is able to visualize the long-term (10-20 years) prospects of the stock. Also, he does not hurry up his decision and likes to take his time over it.
On the other hand, when Rakesh Jhunjhunwala is trading in a stock, he can be bullish one moment and bearish the other. Atul Suri says that it is common for Rakesh Jhunjhunwala to buy and sell large quantities based on raw instinct and without a second thought.
In contrast, the lay investor gets into serious trouble because he is really buying the stock because he wants to take advantage of the momentum in the stock (trading) but when the price slumps, he is afraid to sell and book a loss and so he holds on to the stock in the misconception that he is an “investor“. Such “investment” decisions, taken without any regard to the fundamentals of the stock, always lead to disaster, Atul Suri says.
So, if you look at your portfolio (100 stocks?), you will find it strewn with lots of worthless stocks that shouldn’t have been there in the first place, Atul Suri points out.
Jesse Livermore, in his classic “Reminiscences Of A Stock Operator” referred to this phenomenon as “speculators who are forced to become investors and compelled to lug a corpse“.
So, the advice from Atul Suri/ Rakesh Jhunjhunwala is that you must be crystal clear in your mind why you are buying a stock. If you are buying for investment purposes, you must do the hard work to research the fundamentals. If you are buying for momentum purposes, you must be ready to book profit/ loss at small percentage changes in the stock. “Don’t let your trading picks become your investments only because you are afraid to book the loss” Atul Suri says.
Be With The Trend, Whether In Trading Or In Investments:
Atul Suri’s next piece of advice is that investors must recognize the trend and flow with it, whether in their investment calls or in their trading calls. “Big money is made only when you are with the trend” he says.
He gave a simple illustration to explain the concept. Though the trend of the overall market is down nowadays, the trend of FMCG and Pharma stocks is up and they are hitting new highs every day. An investor who bought stocks like ITC, HUL or Sun Pharma would have made a lot of money even though other investors who invested in other stocks would have made huge losses.
So, a savvy investor should recognize the trend and shift his money into those stocks that are currently in fashion (FMCG and Pharma stocks).
Atul Suri pointed out that sooner or later the trend would change and capital goods and PSU bank stocks would come into fashion. Investors must be on the lookout to spot the change in the trend and be the early movers. If they shift their funds into those stocks at the beginning of the trend, they can make a lot of money, he said.