Masterclass with Super Investors
Bharat Jayantilal Patel
Bharat Patel is a CA by qualification and was an equity broker. He is known as an activist investor taking large stakes in mid and small cap companies and influencing the management in order to act in the best interest of minority shareholders.
His early life:
Patel was born in Gujarat and was the son of a school teacher. His family started a business in Rajasthan, however due to lack of knowledge and interest he shifted to Mumbai. He procured a broking license in BSE despite having no experience in equity broking (earlier BSE norms required a broker to have at least two years of experience in equities in order to obtain a license). The market was booming in 1985 and brokerage during that time was 2% and hence got Patel’s career on track.
When asked about the future of the stock broking industry, he advised that at present, the margins in the broking industry have shrunk to a great extent and hence the industry players need to play on size.
What is his investment philosophy?
Patel’s principle to investing is very simple, buy low and sell high. He does not believe in averaging up. He does not go by the research reports and other analysts’ calls and does his own research even for his own firm, where he has a few research analysts working for him.
He tries to remain liquid in the bear market scenario and believes that opportunities come to those who are liquid.
Lessons from Bharath Patel:
- Never regret the opportunities that have passed by. If you are liquid, opportunities will come.
- Stick yourself to a few stocks rather than trying to find new stocks all the time. He himself tracks just 10-15 companies.
- He looks for companies with pricing power.
- Taking leverage when the return expectations are low (14-15%) does not make sense. Hence use leverage only when the return expectations are very high.
- One should not just accept the fact that their investment is not working because of promoter quality. Since there are a lot of laws in place, you should always fight for your rights. He advises on being an activist investor. “When you put money in, you have to protect it. You cannot accept defeat just like that.”
- Never show haste while making a deal. One of his major activist investing successes was Rubfila. In this company, even though the investment banker was his friend, he insisted on getting the deal right, even if it meant a long gestation period, or losing the deal.
- Invest in companies with good corporate governance policies.