Disappointments are part of investment process, buying great businesses cheaper is the best, says Ramesh Damani
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Ramesh Damani is member of the Bombay Stock Exchange (BSE). Damani is considered as one of the most successful investors in India. A proponent of the Warren Buffett style of value investing, Damani’s views about equity is ardently followed. In a wide-ranging interview to CNBC-TV18, Damani said disappointments are part of the investment process and …
Continue reading “Disappointments are part of investment process, buying great businesses cheaper is the best, says Ramesh Damani”
Ramesh Damani is member of the Bombay Stock Exchange (BSE). Damani is considered as one of the most successful investors in India. A proponent of the Warren Buffett style of value investing, Damani’s views about equity is ardently followed.
In a wide-ranging interview to CNBC-TV18, Damani said disappointments are part of the investment process and buying great businesses cheaper is the best advice that he give to youngsters.
He also adviced the young investors that be bullish on India and don’t be afraid of the convictions and betting when opportunity seems right. “Not wary of bull market ending. Buying dips is better strategy than selling rallies,” Damani said.
He also spoke about the election, the stocks that may do well in the future and his expectations among a raft of other topics
Watch the full interview here.
Edited Excerpts:
What would be that one piece of advice that you would give to your 19-year-old self?
What I would have told my younger self – the two things I have learned over the last 30 years is Be bullish on India and don’t be afraid of your own convictions and betting when opportunity seems right. It took me a long time to understand those principles but it is never too late.
The young people should understand that markets are magical, that you have to be patient, you can compound money over large periods of time and make a substantial difference to your wealth. Most importantly, the underlying tone must be bullish because this country is giving us such great opportunities – the index has gone from 800 to 36000 in the last 30 years.
So the opportunities are to make money, to be a great entrepreneur, to contribute to society is so enormous and we should not lose the trees for the forest.
What is your investment style or lesson? Do you look for corporates with good governance or do you look for underlying theme that there is an economy tailwind in a particular sector, what would your mantra be?
It is a mix of all this as you would imagine, of course, you look for sectors that are going to do well, you look for corporate governance but at the end all great businesses, all great investments boil down to the same thing that you want to buy things which are cheap and you want to buy things which are run by people of integrity.
A great business bought cheap is the best investment advice that I can give. It has worked like a charm. You really don’t need to do much. As Warren Buffet says this is not a very high IQ business. It is a business where you have to just think, read, understand and place your bet accordingly. So, it is very clear, for example, in India in the mid-’90s that IT starting to do well and subsequent events have proved it right. In the 1990s, for example, we knew economic liberalisation was going to be a dramatic change that took place in India. Usually, a lot of themes pre-announce themselves and one has to have faith. Disappointments are a part of the investment process
So all we still look at is to find great businesses and valuations we understand.
This whole equity cult that we saw last year, so much coming into mutual funds, if we had the kind of FII (foreign institutional investor) selling 5-6 years back, the market would have collapsed but it stayed put because of the kind of domestic buying support that we had. Do you think this equity cult is going to be intact even through this volatility?
I hope so and I think it will be. It seems to me that the Dow finally appears very tired, the leadership has been under pressure, the FANG (Facebook, Amazon, Netflix, Google) stocks have been under pressure. The yield curve is getting inverted that suggest oncoming recession and there is a talk of a trade war, which could be very dampening for the US and there is a general fear that the economy is going to face recession.
All this benefits us. So money moves out from developed markets to emerging markets. As interest rates rise in the US, trade war settles, I think we will be better placed. So as long as oil remains around $60 per barrel or $70 per barrel, we will chug along.
I think the markets fear of election uncertainty is perhaps over placed. I think there is a good chance that state elections might disappoint the market but people would vote differently between the state election and general election. I think the market will overcome those sort of fears because the country itself is in a sweet spot in terms of consumption, growth, demographics. So, I would not be particularly wary of this bull market ending. I would say that buy the dips is a better strategy than sell the rallies.
It is great that Anuj brought up the new Wizard series. The first Wizard series that you did was 10 years back where you featured the likes of Rakesh Jhunjhunwala, Raamdeo Agrawal. Since then you have come such a long way, you are now not just the chairman of D-Mart, you are also a grandfather. You have seen such a long journey. What is the one trait that you see in this new breed of successful fund managers that you have interviewed which helps them sort of wade through a lot of these murky times?
Just to put some perspective on what I am doing, you are right, the first series I started with a wonderful producer who used to be with CNBC-TV18 and we did Wizards of Dalal Street. The people we profiled have all gone to become giants in their field. I am very proud of the fact that we have got them at a fairly nascent stage in their career.
A couple of years back we did with my producer now, Nimesh Shah, a series called Wizard of Dalal Street A Fresh Breeze. We tried to find some of the younger stalwarts who are going to make a name in the future for themselves. What we thought was that two years after I did the initial show, let me go back and revisit with them, how they are handling the turbulent time that 2018 was, what are the promises for 2019 onwards. So we are doing this contemporaneously. We have done one show, we will do another couple of shows in the next couple of weeks. So, we will see how the later interviews speak of themselves.
However, generally, like I found on my earlier shows that what distinguishes this batch and the older batch is similar. It is the passion they have for the markets. I think they are all surprised that they get paid to invest in the market, they would probably do it for free anyway. It has been a great privilege to actually have seen some of the best minds in India speak about something they all love so passionately. I am going to give a shout out to my grandson; as you mentioned, it has been the great pleasure of my life to play with him. So thank you for mentioning him.
You spoke about the IT theme which just pre-announced itself in the 90s or the late 90s and the early 90s India going into liberalisation. That also kind of pre-announced itself. Are there any themes that are pre-announcing themselves now which you will look for, quick service restaurants (QSR)?
That would be a good example of what I have been betting on because I think as more women start working outside the home, as domestic help becomes less available, as people just want a good environment to eat and not eat at a roadside stand, QSR will be probably a good place to go. Some of the stocks are still fairly cheaply valued in a manner of speaking compared to the potential, not necessarily on the earnings basis. So that looks good.
A little bit of the alcohol because human habits do not change. The sin stocks will probably do well. The gaming stocks, I think increasingly India will become a very important gaming market in terms of casino across Asia as a jewel, starting from Japan, Singapore, Malaysia and the Philippines you have gaming everywhere. So you want to be a part of the MICE (meetings, incentives, conventions and exhibitions tourism) market, you will have to introduce gaming. So we are fairly optimistic. I think there are a couple of companies with early leadership in that sector. So that will do well.
Among the new sectors that we started looking at, particularly after this fall, an old theme favourite of mine, PSU stocks, particularly the recently listed railway PSU stocks that are trading below IPO (initial public offering) price and offer fairly good value according to me.
So we have looked at both of them. We look at the company that deals in the petro-chemicals, petro additives business, making chemicals for the textile, and oil drilling industry. We think packaged food is going to boom. While we have not been able to find a packaged food business per se that we like tremendously, we like the company that makes the machinery that allows them to do that. So I think those are some of the new themes that I have been betting on.
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