2. Chapter 1 : Ramesh Damani
• Introduction
• Mr. Ramesh Damani is an MBA from California State University, is one of
the well known faces of the investing community in INDIA. Over the years
he has helped popularize the equity culture in the country through his TV
shows. He started his journey as a system analyst in the US, he first became
a broker in the BSE, and then a successful investor, picking several great
companies at cheap valuations. He is also the chairman of “Avenue
Supermarts”
• Transition from Broker to investor -When he was a broker he used to make
1-1.5% brokerage. His friends were successful proprietary investors where
they were making 100-200%, so comparatively that seemed a better place
for him to be in.
3. • Investment Process -His investment process is the basis of what he does. He has cultivated to read a lot and filter down the
ideas, based on that he forms a working hypothesis and finds companies that fit the hypothesis.
o Mr. Ramesh Damani tracks about two dozens companies on an ongoing basis and analyzes a dozen companies in a year.
So on an average he reads about 2 annual reports in a week so about 100 a year. He has also started reading
international annual report of international companies.
o One of the key learning he gives is the key is doing your own homework and having an integrity of independent thought.
o Mr. Ramesh Damani does mentions that he shares circle of his fellow friendship with big investors namely RK DAMANI,
RAKESH JHUNJHUNWALA, NEMISH SHAH, ETC.
o According to them they have a set of belief constructs, they were bullish in India 20 years ago, and they are bullish on
India today. And will be bullish in India 10 years from now because India gave them the opportunity to create their
wealth no matter what manned or unmanned crisis attacked India. According to him, he believes if we have even 8
bagger in our lives, we don’t need more in our life.
• Learnings - Mr. Ramesh Damani mentioned here that the few ideologies one needs to follow is be bullish on India, to buy
great business, buying them cheap and respecting what the market does.
o When we buy a stock every day and if it goes down a better approach is to give yourself a time frame that this cannot go
beyond four or eight weeks and sell in a disciplined manner. You may not get the top price but when we look back, we
will definitely have got a great price.
4. • Best books and significant reading material to read - The advice that he gives for someone starting up is to read
“The Financial Times ” and “The Wall Street Journal”. Also he advise us to read from “thelongform.org” and
“thebrowser.com”.
• Views on disruptions in various fields like auto, energy, finance & media Entire automotive structure of the world
will change, you will go from internal combustion engine to electric cars maybe driven by renewable energy.
Disruptions creates volatility and volatility creates opportunity.
• Power of doubling money - If we are starting with a portfolio worth 10-20 lakhs, which most people can start it
with, you give yourself this test. Typically, you start your business at 25 and retire at 55. So, you have 30 years, so we
can double your money 10 years, you can start with any amount and you can double your money after 3 years for
10 times, and we’ll be rich.
• The idea here is that we have a nominal GDP of 15-16% and stock capital gains and dividends have low tax rate so
that is a huge advantage.
• Advice to new investors
o Understand the power of compounding early in life. One should have its own thought process that means have
your own investment decisions. One should enjoy the process.
o The market values integrity, intellectual, independence and patience. People should approach this while
working in the market.
5. Chapter 2 : Raamdeo Agarwal
• Introduction
• Raamdeo Agarwal a CA by qualification, is the Joint MD and cofounder of one of
India’s leading NBFCs, Motilal Ostwal Financial Services Limited. He is known for
building a focused portfolio of high quality companies, delivering high growth and
holding them for long period of time, resulting in multi -bagger results. He
believes in the QGLP framework of investments, which focuses on the quality of
the business and management, growth, longevity of growth, and the price, in that
sequence.
6. • Evolution of the “Motilal Oswal Group”
• For starting the business, Mr. Raamdeo Agarwal contacted Motilalji. Actually Motilalji was junior to him by 3 years. They
lived in the same hostel. After the realization of his interest into the Stock Market, Mr. Raamdeo suggested to him that
they should start something of their own. Mr. Raamdeo had no contacts, clients, capital, but was very confident about the
knowledge of the markets. Motilalji had 2 brothers, one in Chennai and another in Ahmedabad. They used to buy stocks
and sell them in stock exchanges in Mumbai. They were looking for a new broker in Mumbai for these transactions. Their
earlier broker had once cheated them. So Mr. Raamdeo suggested Motilalji to partner with them. So the partnership
started in 1987. They worked tight on the budget for the first four years. They didn’t spend on the start up costs. They
were soon making 1000 per day, and within 4 years, they were able to save Rs.15 lakh.
• One important thing they took care of keeping the books clean and paying full income taxes. They believed not to make
mistakes and should be no doubt on the integrity. They couldn’t afford the stock exchange membership as it required a
capital of Rs.25 lakh. So they borrowed Rs.10-12 lakh and bought the BSE card. Then the Harshad Mehta bull run
happened. From the initial Rs.10-15 lakh, they made around Rs. 30 crore in the next 18-24 months!
• The 1992 Crash
• It was a vertical collapse. From 4200 it came down to 2400. They didn’t know what was happening, and it was a total
chaos. At the time, Mr. Raamdeo was close to Mr. Ramakrishnan, the fist SEBI chairman, where he was taking few
interviews, one of them was Mr. Ramakrishnan.
• He wasn’t too bothered as they never had leveraged. The one thing that Mr. Raamdeo had learnt from his father was to
never borrow in life. They were completely fearless. The worst that could happen was they could loose everything, come
back to zero and return to the village. Their portfolio had came down from Rs.10 cr and they were still earning Rs.5-10
lakh brokerage.
7. • The QGLP investment Philosophy
• QGLP is simple to understand, but requires a lot of discipline to implement. All the brackets (Q,G,L,P) have to be filled
otherwise there could be a problem. Zero multiplied by anything is zero. So in any part of the QGLP is zero the result will
be zero. It starts with Quality of business, then Quality of management, growth, longevity of Growth, and finally a
reasonable valuation. It is in that sequence. So if the quality of the business is bad, then they will not be interested in that
business.
• Elaboration on the Quality Part
• Quality has 2 parts Quality of Business and Quality of management. There are 3 types of business – Great, Good,
Gruesome. Good businesses have high return on tangible asset of the company. Great business also has high return but
are able to deploy additional capital even at higher rate of return. The number of great businesses are very few. Not even
50 out of 4000 co. in the market. About 300-350 would be good businesses. So just 10% of the listed companies are good
and the rest 90% are gruesome. What is gruesome business? It is a business which earns less than the cost of capital and
the company tries to grow, making it a bottomless pit of destruction.
o Quality of Management : Good management should have great competencies, passion for growth and above all
unquestionable integrity.
o When you find a top class business, run by the top class management, you get a top class company.
8. • What are the attributes that are very important for an investor ?
• First is to be very positive, there are lot of problems in life and if you stuck on them then we you cannot build a
portfolio. Investing is about having appositive view and a future build up of the companies in which you are
investing in and believing the management team. Thomas Phelps book, 100 to 1 in the stock market, is a wonderful
read. The one who makes money has Vision, courage and Patience. Patience is the most difficult. Equity is about
investing in the future. Don’t be short term oriented. People are in hurry to make money.one has to slog 10 – 15
years. But the journey has to start, one should try to start early. One will then see the history of companies
unfolding over a period of times.
• Being ambitious is important but doing it the right way is equally important.
9. Chapter 3 : Rajashekhar Iyer
• Introduction
• Rajashekhar Iyer, is a Chartered Account by qualification, has over 30 years of experience
in the field of equity research, advisory and investment management.
• He is 61 years old, where he started his career in leading audit firms.
• He has won many hats such as editing a leading stock market magazine, running a
popular value investing newsletter. Also Institutional Broking Business at Kotak Securities.
• He is also the Promoter of Securities Investment Private Limited (SIMPL) which runs a
PMS
• Including many investment strategies, he likes to invest in companies where profit
growth can be very high, but at cheap valuations. He uses Technicals to optimize the
entry points and capture the excess of the market on the upside
10. • What was it that you developed an initial investment philosophy ?
• So Mr. Rajashekhar had started investing since 1980s, where he had experienced the fall and the bull markets.
But the answer to this question was What the Previous 10 years had taught him was that it was not enough to
read Balance sheet, not even enogh to understand the company’s business; an investor had to understand
macroeconomic factors, fund flow impact on stock market cycles. But most important of all was to have a sound
risk management system in place.
• So this was a more complete investment philosophy than just picking stocks on the basis of value that he had
done until 1995.
• Experience in 1992 (the market Peak and the Subsequent Fall)
• So in 1992 he was publishing newsletter, The value investor, for over a year. Every week they recommended
1 stock as the “Pick of the Week”. The average appreciation in the 52 stocks recommended was nearly 80%
that was within a year!
• In this period the markets and the valuations were going crazy, they were up nearly 100%, The markets
crashed in April as the “Securities Scam” unravelled. So what he speaks is he was very well conscious about
incredible over valuation of individual stocks and market , and he always used to cash out when the stocks
moved above value.
• He had necessary skills to read the financial statements and value companies because of his experience of
working with the audit firms over a 5 years. So at that time he was investing primarily based on analysis of
the financial statements using which he would estimate earnings and value the companies and the stocks.
He was attracted to stocks that were “Cheap” in relation to what he calculated using simple valuation
techniques. In retrospect, 1998-92 was the first bull market witnessed by him. He made money because
the value approach made him take profits quickly in a sharp rising markets.
11. • Changes in Investment Philosophy.
By 2000, his philosophy of investing was encompassed a view on how to trade the stocks in particular, how to take
profits. He would first establish worth of the share in his portfolio. Then hold them anyways till they reach that worth. If
they traded above their worth, he would still hold on the logic that the stocks can trade above or below their ”fair
value” for a period of time. So when they trade above their fair value it doesn’t mean that he will sell the stock
automatically. He has a mental note that he is holding the stock for the only reason because it is going up. So when the
price starts to fall, then he will sell. So this was the start of technical part of his making profits after following the
formula of buying stocks with profit potential.
• Experience of using technical analysis.
Investing or trading in the market only using technical analysis is unlikely to be very productive. Unlike some technical
analysts and some Efficient market Theorists, who believe stock prices contains all information. But he believes stock
prices contain some not all information.
In the mid 2003 he talked to his many technical chartist friends about his sense of coming bull markets, and they used
their technical view and gave a view that the stock was ready to crash. But he focused his mind on the business
fundamentals and the impending bull markets. Many of the stocks went up 10-20 times from there.
What he explains is it is ok to look at charts as an additional information but since you are investing in a company and
the stock is only the instrument through which you invest a company look at other ways too!
12. • How do you generate investing ideas?
• He used to look at lot of companies, the initial names are generated either from screens, by someone else
telling us the company is interesting, through news reports/advertisements that triggers interest, and multiple
other sources. After quickly scanning relevant information like annual reports, management interviews,
presentations, etc. He would have a mental picture of the company and the business, whether it was worth
spending more time on it or not.
• Probably the most important aspect in finding good ideas is to eliminate bad ideas fairly quickly.
• He also tells us to read companies faster example if we read 100 companies we can tell 10 good companies. We
should ask ourselves “how much time do I have to spend on the company before I can say its no for me? If I can
do that fast then I can look at more ideas in the time available.
• What are the few specific habits one should inculcate to become a better investor ?
• One very important habit is to rely on your own thinking. Even if you get numbers from a reliable person, you
should gather your own facts and draw your own conclusions.
• Reading is a very important habit. You will learn anything iof you read a lot. Now with the internet, there are
vast sources of information and if you can read a lot you will have better insights. It will help to create your own
approach to the market.
• Writing down what you are doing and the reasons why you are doing it whether it is buying a stock, selling a
stock or not selling a stock is useful.
• Reviewing these later will help you spot flaws in thinking that can be corrected.
• Think about individual investments and portfolios strategically and tactically. Don’t let the fear of missing out
drive your actions.
