Investor Manish Chokhani is legendary in the Indian capital market. A chartered accountant with a management degree from the London Business School, he was the MD and CEO of Enam Securities, and serves as a non-Executive Director on various boards.
At the Morningstar Investment Conference in 2021, he shared these learnings for young equity investors.
Don’t ignore the Bottom Up.
I learned early that you make money bottom-up. The Indian market wasn't very well researched when I started off. Investors needed to study the basics of the business, the moats, the HR culture of the company, its potential to scale and change orbit, the numbers - to see what degree of optionality exists within the business and how it can be taken advantage of.
It's very easy to get carried away by the hype. Ask tough questions to stay grounded. You have to be careful of what price you are buying. It's very hard to make money when you're buying at exalted multiple to sales, because you need those sales figures to first of all scale rapidly, you need perfect execution, and you need unit economics and operating leverage to be visible and evident as they play out.
Don’t ignore the Top Down.
As I evolved as an investor, I learned that while money is made bottom-up, it can be lost top-down if you don't understand market cycles and economic cycles. You can play cycles with some knowledge of economic cycles as well. I read geopolitics and what's going on and what shifts could affect us. It just gives you a kind of innate common sense as to whether the reactions are too pessimistic or too optimistic.
Don’t ignore the powerful role of human incentives.
Incentives of people and the players involved in the game that you're playing. When you're investing, you're either backing the entrepreneur or a management team. What is the role of incentives in shaping how that company does? Also understanding the incentives of policymakers and how that will come to impact the underlying playing field.
Don’t ignore your mental make-up.
As a market player, how are you positioned? How are you aligned with what is going on? Everyone is not going to become a value investor or a Warren Buffett. The world doesn't owe you any money.
There are different ways to play this. You could be a very long-term investor, a value investor, a growth-at-reasonable-price investor, a buy-at-any-price, buy-quality-and-hang-on type of investor, a momentum player, a trader…. There is no perfect route or one way to go to heaven. And have to figure out what works for you and resonates with your own inner calling and your personality. You play according to your strengths.
You decide what will create money for you in the long term.
Don’t ignore the long-term vision or the short-term detail.
If you're playing with few thousand rupees today and learning the skills, think of it as experimentation. But don’t get misled into thinking that you are a great investor based on a one-year record, that too in a rising market. It's longevity which defines greatness. There are Sachins and Gavaskars, and there Vinod Kamblis.
The long term is a series of things that you do right in the short run. Like it's said in the Upanishads that you are your deep driving desire. Your desire shall shape your will, your will shall shape your habits, and your habits shall shape your destiny. So, you need to get a series of short-term things right while keeping eyes focused on the long run to get that right.
