(Anti) Consensus

There are so many investor letters/blogs these days – domestic and foreign – that I am really not sure how anyone can keep up with the latest and greatest in this area. But themes across most of these letters and blogs remain consistent enough that nothing new can be spoken of an art as old as investing. But in these days (and year?) of low market returns, frustration is also yet another common theme that I’d like to introduce as a leading thinker in banter. Therefore, treat this post as ramblings of a frustrated investor, looking through some of the common themes in these investor letters/blogs.

1) “We continually look for scalable opportunities and opportunity is expanding…” – I don’t know if you are a visionary, but I am – and with my vision I can say that there is no investor in the world who are looking for opportunities which shrink/shrinking (unless the price is so so cheap, that the shrinking business is also worth something along with cash on balance sheet). Every investor that I have come across atleast dreams of investing in a small cap that goes onto become a large cap. If visionaries and leading thinkers like me can’t understand why this ‘scalable opportunity’ thing is written ad nauseam in every investor letter, then how will the small investor understand.

2) “We continually look for mispriced opportunities..” – Like, who doesn’t? Like who in their right mind (except mutual funds) and take investing seriously look for fully priced opportunities? Like the wise old men have said, ‘don’t double count’ – if it’s at greater than 35-40PE, then fully-priced; if it’s at 12-20PE, then ‘mis-priced’; if it’s 7-12PE, then ‘dis-priced’; if it’s 2-7PE, then ‘ill-priced’. The defense to such blabber seems to be that PE ratio doesn’t capture the full ambit of cashflows that the business is going to generate – and we are the only ones that can identify this. First of all, like really first of all, nobody knows how to calculate cashflows (everybody adjusts earnings and ebitda and do some random approximations and call as cashflows). Second of all, unless you are in the kicking-can-missionary business, in a fairly robust market like India, PE is a decent approximation (other than exceptional scenarios like Covid/Demon). Visionaries like me can clearly see that most of the guys writing the letters ask for the PE multiple first/look at the chart and then dig deeper into the business. ‘Start with As..’ is basically starting with Amrut Fusion.

3) “We are neither value investor nor growth investor…we don’t like getting labeled as any particular type of investor” – Also, called ‘we are opportunistic investors’ by the more sophisticated junta. The other variation that I personally use liberally with all novice investors is that ‘value and growth need to be joined at the di…hip’ and appear as a visionary to the fools (which obviously is more important than being a visionary). I have no idea what the statement means. It probably means, that I will invest and depending on the return an idea generates, I can justify that I am value also, growth also, visionary also, kicking-can also. If it doesn’t generate a return, then I can call ‘we made a mistake’ and move on with life. AUM is anyway sticky, so why label oneself as a certain type of investor and invite unnecessary and incisive questions from the fools.

4) “We could see that the opportunity could expand in the next 10-15-20 years” – This is usually written/said by older investors (by age) where they were in this insane opportunity period in which explosive returns were made. I am firmly of the belief that ‘great investing returns % is a function of when one is born, good investing returns % is a function of luck, average investing returns % is a function of following an investing process and bad investing returns % is a function of investing in either fraud/debt’. Look back, and it is probably true of every asset class. Your neighbour uncle who couldn’t multiple 3 x 4 bought 30×40 land parcels on the real cheap in the late 1990s (because he had the privilege of being born in 1970s and having disposable income by late 1990s), and now is a multi-crorepati touting infinite wisdom of his vision of how he could see the city/district/country grow. Equity investors born in 1970s and who had disposable income in late 90s-early 2000s made returns %s which you or I will never be able to make in your lifetime. And hilariously, and given the demographic decline across the world, our kids will probably never see returns % like us – maybe 20-30 years later, they would be competing between 8% return and 10% return. These multi-stellar returns that the older investors made or the decently good returns that our generation has made in the last 10-15 years has nothing to do with things like vision or some crap like that – it was just a matter of ‘staying in the game’ and ‘avoiding fraud/debt’.

5) “Our investing process…” – I basically skip the paragraph where this is written, essentially because everyone writes about mispriced opportunities, large scale of opportunity, management integrity, improving return ratios/balance sheet strength and crap like that and none of the insight. And as individual investors, why are you even bothered about things like investing process when the idea is to continually look over multiple businesses and position size rightly in where you think good returns can be made. I personally believe our individual personality and thinking/traits has an outsized influence on the eventual investing process you land on. Like, I can’t understand for the world, why any small investor would take positions in 30-40-50000 cr market cap companies as an entry position (if it has grown to that market cap from a smaller market cap when you had invested, you’d obviously not be reading this visionary blogpost but be spending time in Goa). Churn is good process, buy and hold is good process, buy and sell is good process – like, I really go numb when people start talking about investing process. Strangely, no one is investing in compressing businesses, or fraud management or fully priced opportunities – no investing process speaks about investing in such opportunities – but majority of MFs and PMSes underperform the index. Hilarious. And then they write about ‘oooo..battle scars’, ‘we admit that we made a mistake…’ etc. etc.

The End. None of the above is applicable to me of course, because I am a visionary investor, and my investing is multi-strategy, multi-cap, multi-year and eventually multi-amazing obviously and that you need to measure me not in the short term, but long term, so long a long term that even long term doesn’t believe it is long term.

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