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Masterclass with Super Investors

Anil Goel

Anil Goel’s story of the stock market is a different one. He was rather a successful entrepreneur in the steel business, and in order to follow his passion, he quit the well run steel biz and came into equities full-time. His journey had a lot of speed breakers as he recalls selling his ancestral property once to come out of a large stock market loss. But as they say, where there is a will, there is a way, he came out pretty well over the long run.

 

How did he start investing in the stock markets?

Anil invested in the stock markets on the advice of his auditor, who in order to get tax exemptions, suggested investing money in a few IPOs in the year 1990. During this time, he had no clue about how the stock markets worked.

 

About his early stock market experience:

In 1992, Anil got into stock markets in a big way. He invested ₹50 Lakhs into the market. This however, did not work quite well and he suffered a loss of ₹17 Lakhs within a few months. Contrary to the will of his family members, he invested a massive ₹5 crores into the market in the year 1993. He invested mostly into NBFCs, which had a bull run and by January of 1994, his portfolio was worth 20 crores. This was his  first major success in the stock market.

 

By the year 1998, he was very mature in the markets. He found a discrepancy in the valuation of Global Depository Receipts or GDRs (These are instruments issued by companies to foreign investors). These were available at lower prices than the issue price, sometimes as low as 10% of the issue price or a 90% discount! This made him focus on buying these GDRs of well run companies and minted money out of them.

 

How did he  survive the 2000 stock market crash?

Anil did not quite understand how the IT companies worked and hence being a fundamentalist did not touch this sector. Hence he got saved during the 2000 dot com burst.

 

His Investment Philosophy:

 

Anil has developed his investment philosophy called KCPLTD which means:

  • Knowledge: Have proper knowledge of the business you are investing in.
  • Conviction: Once you have proper knowledge, it’s easy to develop a conviction on that idea
  • Patience: Have patience in the stock market as it takes time for the value to converge to the market price.
  • Luck: you need luck in order to find the stock at the proper price in order to buy it at the desired valuation.
  • Timely Deploy: You need to timely deploy your money as the prices come down.

Learnings from Anil Goel’s stock market journey:

  1. Buy at a cheap valuation. Anil used to buy companies at an extremely cheap valuation. He bought Relaxo Footwear at a PE value of 2.5-3x. When you buy companies this cheap, you can earn a multi-bagger just by the PE re-rating itself.
  2. Buy only those companies that are run by capable management. He acknowledges that it takes time to judge a management. Therefore, he allocated capital to a company slowly as he gained more conviction in the management.
  3. Don’t invest for normal returns of 15-20%. Anil invests  5-10 times over the next few years.
  4. Look for companies with high dividend yields as this provides regular income.
  5. When you sell a stock, don’t be disheartened that it has gone up. Instead sell when you find an opportunity a lot better than the previous one.
  6. He takes a small amount of leverage (up to 10% of the portfolio) in order to take advantage of sudden market falls.
  7. Anil has recognized that the majority of the market cycles have lasted for eight years. When the market crashes it goes down for 2-3 years, remains subdued for the next one-two years and then finally the bull rally happens in a short time period of 6 months.
  8. He hasn’t read any investing books. Rather he advises investors to learn through observations.
  9. One needs to be quick in changing their mind. This means that you need to recognize a disruption ahead of the market and take a contrary position or at least move out of the stocks getting hammered due to disruptions.

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Units 5/12