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Masterclass with Super Investors

Govind Parikh


Govind Parikh is a chemical engineer by qualification and a stock broker by profession. His journey is an interesting one as it tells us how even buying widely known shares can create massive wealth if bought at the right valuation. He believes in investing for the long term in credible companies. He also believes in booking profits when shares are quoting at extreme valuations. Let us read about his story.


How did he start investing?

Govind started investing at the behest of his sister’s father-in-law (Mr. Khandala). Govind’s family business was lending (at higher interest rates of 18-24%) and therefore had no stock market background, instead of the mentality of focusing on making 18-24% and anything above that was labelled as  risk.


After his graduation in 1981, he met famous institutional broker and investor Mr. K.R. Choksey, who advised Govind on what to look at in the financial statements of a company. Thereafter, Choksey became his mentor.


What was his first major success in the stock market? 

It was Ramco Cements. Parekh bought Ramco when it was trading at just 3x its Profit Before Tax (PBT), and the market cap was less than 9 cr. He visited Ramco’s AGM along with Mr. Khandala and K.R. Choksey. They all were convinced that the company under the management had huge scope for growth. Since Govind was a broker, he was also influential to many widely known names in the market, like Asit Kotecha (ASK Group), Nemish Shah (ENAM), etc. That way he was able to convince a lot of influential investors of that time (1980s) and thereby make Ramco Cement a multi-bagger for himself and his clients.


By the year 1992, Govind had given up on broking and was working as an individual investor. 


Lessons from the journey of Govind Parekh:

  1. You make the most money by buying at the time of crisis.
  2. Tax planning plays a huge role in return generation in stock markets.
  3. Never take leverage to invest.
  4. Do not go by somebody else’s buying/selling rationale. Always develop your own. Govind recalls how he was fooled once. He sold his shares of Ramco Cement to BNP Peregrine at a price of ₹13,500. However, it struck him why such a reputed bank would buy his shares at such premium valuations, there must be some insider news or something. This made him buy the quantity he sold in the market at a price of ₹11,000. This was at the peak of Harshad Mehta boom and the prices crashed to ₹900-1000. 
  5. Look for opportunities to double money every two-three years.
  6. Have a concentrated portfolio. Although Govind owns 70-80 stocks, 90% of the portfolio is concentrated in the top 10-15 ideas.
  7. Investing is a business of cumulative knowledge. Govind tracks only a few companies and keeps updating himself on those stocks every year. He attends the AGMs, investor calls, visits factories, meets competitors, etc., in order to know more about the company.
  8. His investing success is based on the principle of buying in crisis and selling during boom times. He doesn’t time the market at all.
  9. Always estimate that 25% of your portfolio value is yours; the rest is of the market. Basically, learn to live/ increase the standard of living only by 25%. The stock market is volatile and hence there is a high chance that you may end up losing a lot during a downturn. It’s therefore prudent to keep the expenses under control.
  10. He recommends investors to read books such as Common Stock Uncommon Profits (by Philip Fisher), One Up on Wall Street (by Peter Lynch) and The Intelligent Investor (by Benjamin Graham).
  11. Always maintain 10% of your portfolio value in cash. This gives you a cushion to invest at times of market crash.
  12. He also has a philosophy of Sell? Regret ? Grow Rich. This means that when you sell, most of the time, you’ll regret the decision as the value of your stocks will keep rising post your sale. However, if you invest in a better idea or are able to catch the same stock at a lower valuation in times of crisis, you are destined to grow richer.

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Units 6/12