Masterclass with Super Investors
Shyam is a Chemical Engineer by qualification. He had started his investment journey in the early 1990s. His investment style is a combination of deep value (Graham) and qualitative (Fisher). He follows thematic investment, i.e., tracking a macro theme and then looks for stocks that will be able to outperform. He manages risk in his portfolio by position sizing and holds on to stocks throughout business cycles.
His early life:
Shyam was born in Chennai and after his studies joined the family business. He ran the same for about 22 years. He attributes his understanding of Indian regulations, taxes, and industries to his experience running his family business.. He was able to apply the same learnings in stock picking as well.
He initiated his investment journey due to his neighbour, Mr. M.K. Sudharsan. He taught him to read annual reports and to concentrate on looking at the balance sheet of a company. They never discussed companies, instead talked about promoters, balance sheets and accounting. He, along with Shyam’s other friends, taught him the art of trusting the right people. This also meant staying with trustworthy companies and promoters for years.
His capital in the year 1993 was ~10 Lakhs. Astonishingly, he spent 4 Lakhs on the Capital Line database, which helped him in the analysis of financial statements.
His investing journey:
Shyam’s first major investment success was Ponds India Limited (Hindustan Unilever). He bought 60% of his portfolio. It became 3x in three years.
The other successes were Hatsun Agro (bought at 60 cr market cap and today it is trading at a market cap of 20,000 cr), Cera Sanitaryware, Amara Raja Batteries and TTK Prestige.
Lessons from Shyam’s investment journey:
- The balance sheet is the mother, not the P&L. The growth that you see in the P&L comes from the balance sheet. Hence it is important to invest in a company with a strong and stable balance sheet.
- Look for companies that can grow without raising much external capital.
- Portfolio stability comes from buying businesses that are better franchises and that can take value from the market.
- High P/E stocks can be a hold in certain situations when the growth in the business is exceptional.
- He tracks 100 companies at a time but his core portfolio comprises 20-30 stocks only.
- Don’t take leverage beyond 5-10% of the portfolio.
- Books recommended: Zurich Axioms, Poor Charlie’s Almanac, Illusions by Richard Bach, James Montier’s Value Investing – Tools and techniques for Investment and Ralph Wagner’s Zebra in the Lion Country.
- One should enjoy every minute of the investing journey, only then it is worth pursuing.