Sep 13


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I have not written for a long time because there was nothing which was happening much in the markets. I mean the markets were at stretched valuations. Then in the last month, the values of businesses collapsed and they are again cheap. Some good businesses like Axis Bank, Noida Toll Bridge and Vaibhav Global have 

 become worth buying. I have bought some shares in these three businesses, in the last one week.

As I have written earlier also, the markets give at the most 10 buying days in an year during a bullish phase. The patient intelligent investor deploys his money at that time. The rest of the time he attends to his work, passion or occupation.

In his book The Most Important Thing, Howard Marks, Chairman of Oak Tree Capital, says “Patient opportunism –waiting for bargains—is often your best strategy…..You’ll do better if you wait for investments to come to you rather than go chasing after them. You tend to get better buys, if you select from the list of things sellers are motivated to sell rather than start with a fixed notion as to what you want to own. An opportunist buys things because they are offered at bargain prices. There’s nothing special about buying when prices are not low.”

Please remember extraordinary returns are a function of buying right and then sitting tight. Patient Opportunism is painful.  The markets may ignore your businesses for long, making you wonder about your decisions. But if the business is fine, the price will eventually follow the value.

A lot of people ask me the reasons for my belief in Noida Toll Bridge, what with risks of government making it a free toll road, other bridges being built in vicinity, farmers agitation, etc etc.

My answer is, the business is generating huge free cash flows. This cash will be distributed to shareholders only as dividends. The government is unable to get road projects off the road  because of its wayward terms and conditions, businesses don’t invest in ventures where the dice is loaded completely against them. Other bridges in vicinity will not take away the business of DND Tollway because the number of vehicles have increased exponentially and another bridge will only meet part requirement. The Metro is bursting at seams in peak hours. So, commuters will still use the DND toll way for a smoother and faster ride. And at Rs 24 a share with dividend of Rs 3. It is a bargain deal with an assured 12% return on investment, even if share price does not move for 10 years. In the last 4 years I have taken Rs 0.5+1+2.5+3 ie Rs 7 as tax free dividend per share. At my purchase price of Rs 21 it is a decent return. The share price has yo-yoed between Rs38 and Rs 23 in the interim. What do I do ? I add more at Rs 23-25 range and think of it as a Tax Free Bond.

Just an out of the box thought — If you have Rs 2.5 Million and are thinking of buying a house, purchase 100,000 shares of Noida toll bridge and leave them for 10 years. You will start getting Rs 25000 per month as tax free rent. (dividend of Rs 300000 per year). That’s far superior to the Rs 24000/- my friend gets on his 3 BHK apartment in Gurgaon, purchased for Rs8.5 Million. And the problem of finding tenants, maintaining the house, paying taxes etc is not a botheration any more.

Go there and be brave, if the market falls another couple of thousand points, just buy some good juicy businesses. ITC below Rs 300/- is again a falling knife I would love to catch.



    • anz on September 14, 2015 at 9:42 am
    • Reply

    Dear Sir,

    Refreshing to see a post after so long. I absolutely agree with you that a Patient Investor may be best way to build wealth. There will always be people who will say that good businesses may not be available cheap & you must buy them regularly at all times, disregarding the price. It is correct to some extent & one can make good returns with this approach. Mark my words, u would make GOOD returns, but not GREAT. Great requires Analysis, Patience & Faith. Never to buy something more than what price you have set for it.

    But, as I can vouch for it personally, its easier said than done. Case in point is shares of ICICI bank & SKM eggs, both good businesses showing great promise. I held onto my dear monies for good 4 months, till I lost patience just before the markets went south & bought ICICI at 303 & SKM at 145. Now, they are in red. Not that it bothers me as the business is intact, but had i been a bit more patient on my part, would have been able to buy them much cheaper. So, this is in instructional case study for me. As they say, the hardest lessons are the one which bleed the most.

    Key Take Aways

    1. The markets will keep swinging from High Optimism to High Pessimism. Greed & Fear alternatively. this ALWAYS happens. & its NOT different this time. So wait for your kill.

    2. A good buying price gives good returns. Great buying price gives extraordinary returns.

    3. If u invest in good businesses, you may not LOSE money. If u invest in good businesses with adequate Margin of Safety, U may actually make good amounts of money.

    Happy Investing!!!!

    Sir, your two cents?

    Anshul gaur

      • Fauji on September 15, 2015 at 9:05 am
      • Reply

      I think, the single most important quality in a value investor is patience. It is contrary to human nature. Hence, it is one of the most difficult too. Sitting on idle cash is very very very difficult. That is why there is only one Warren Buffet. He has that singular quality of sitting on cash doing nothing. Develop that quality. I am still learning after 24 years in the market.

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