Session by Raamdeo Agrawal- Masters at work (MAW) event, Kolkata-2019

Contributed By : Sidhant Daga

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The first speaker to impart knowledge and wisdom to the audience was none other than Mr. Raamdeo Agrawal- Joint MD and Executive Director, MOSL. Mr. Agrawal took us through his life journey, showcasing how he started with a very humble background and now how he has built such a big empire. It was quite motivational for the crowd to listen to his “Buy Right, Sit Tight” philosophy which has helped him to garner enormous amount of wealth overtime. Mr. Agrawal’s presentation revolved around few themes supplemented by his experience on the same.

The major themes were:

Power of CompoundingThe speaker explained how compounding can work wonders in prolonged periods of time. He gave the example of how Warren Buffett is the living example of how if wealth is compounded slowly and steadily, one can become immensely rich. Mr. Agrawal exclaimed that making money in the share market is a slow process. The fact that there is a dearth of young billionaires is because investing in stock market is not a ‘get quick rich scheme’ and wealth will accumulate over a long period of time. Even Warren buffet who started investing at a young age of 11 years could become a billionaire at the age of 60 only. He jokingly said that one can only become a billionaire in the stock markets by the age of 30, if one starts with a capital of 5 billion.

Positive AttitudeThe speaker stressed on how investor’s attitude plays an important role in the investment field. He said that knowing how to be happy is very important. He gave an example of his wealth journey to show how he kept an optimistic view during the tough times.

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Never Speculate Mr. Agrawal spoke in detail about his humble beginnings. He told how earlier, when he started MOSL, he used to buy thin registers rather than fat ones, just to save on cost. Mr. Agrawal said that as he had only a small amount to invest, he would never speculate. He would spend hours reading photocopied annual reports to find out the right investment bet. He requested everyone in the audience to never speculate.

Importance of Patience Mr. Agrawal spoke on how patience is important. He used George F. Bakers quote in the Thomas Phelps book “100 to 1 in the stock market”: To make money in stocks you must have the “the vision to see them, the courage to buy them and the patience to hold them”. and patience is the rarest of the three. Mr. Agrawal told that success is a very rare phenomenon, so once a person has identified a successful company with good fundamentals and good management, one must stay invested and not keep shifting their portfolios to newer companies.

Management QualityThe speaker emphasized the importance of management quality. He said an investment’s success = Quality of Management * Quality of Business. So, even if one aspect is zero, the investment will fail.

Mr. Ramdeo said that the management can be judged by 3 parameters- integrity, demonstrable competence and growth mindset.

Portfolio construction and position sizingMr Agrawal took the audience through his journey of holding 200+ stocks at a time and how now he never holds more than 20 stocks at a time.

He advised the audience to buy only companies which they understand, because conviction and large stakes can only be built in companies which one understand.

On position sizing, Mr. Agrawal spoke of his concept of T+1, T+2, that he buys and adds positions in a stock only when the company achieves the desired success. 

Other takeaways from Mr. Ramdeo Agrawal’s speech were:

  • Mr. Agrawal spoke on the changing dynamics of the market and how this time the markets are “very new” in nature as index is near all time highs and the broad markets are not indicative of the same.
  • Mr. Agrawal explained how one must not live in anxiety and should follow the “buy right, sit tight “philosophy. He said that people who look at their portfolios less often tend to gain more than those who keep checking their portfolios very frequently.
  • The speaker explained as to how he earned from value migration stories and how he keeps trying to identify value migration stories to identify investment bets. He gave example of Infosys – the Boston to Bangalore value migration and HDFC Bank- The public bank to private bank value migration.
  • Mr. Ramdeo sees huge opportunity in insurance and banking companies in the future.

After the presentation, a panel discussion was held which was moderated by Mr. Sunil Singhania, Founder – Abakkus Asset Manager LLP. Here are the key takeaways from the same :

SS- How should one survive in such noisy markets?

RA-Technically speaking, we can’t complain as index is near all time highs, we need to be patient. Good opportunities only come in bad market conditions. We will play every ball even if wicket is good or bad.

SS- How to spot good management and good business when the company is small?

RA- One must know exactly what one is looking for, conviction is also necessary.

SS- What is important good stocks or good companies?

RA- Bad companies never make good stocks. It is necessary to buy good companies at reasonable prices. As per a study if one buys companies with a peg ratio of more than 3, the returns are sub par.

SS- What are the mistakes you have made in your investment journey?

RA- One of the biggest mistakes were made in identifying the integrity of the management ( Manpasand and companies in financial technologies). As soon as one understands he has made an error, one must run away from the stock.

SS-What’s your take on disruptions?

RA-I believe that disruptions are overhyped. Is there a digital way to get drunk? I’m continuously looking for value migration stories. EV can be a space to look out for.

SS- Any book recommendations?

RA-Buffett letters, Snowball, Michael Porter’s Competitive Strategy , Value Migration, Art of execution

Link to the presentation- https://www.cfasociety.org/india/Presentations/Limited%20downside%20Unlimited%20upside%20-MAW%2029th%20June-%20Raamdeo%20Agrawal.pdf

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