There are too many biases.
Actively managing the portfolio is a bias; and being too passive is a bias.
A Concentrated portfolio is a bias to conform to Munger's thoughts and a diversified portfolio is a bias to dissipate risk.
Managing other people's money causes incentive and agency biases, and managing only your family's money makes you complacent.
There are lures of greed and envy and exciting names and fantastic prospects,
As Marathe's post said: Biases about circle of competence can interfere with pursuit of knowledge - - many sectors tend to fall outside a value investor's realm of understanding; and yet, a pharma company or a commodities oriented company or a telecom company are still businesses - and these have generated wealth over decades - so, is it our complacency, or is it our bias that keeps us in the consumer goods/ financials spaces?
As my friend Arpit said, there are no fixed ways, and we have to find our way with our investing styles. And once we find that style, may be the style can change, there are no set templates.
So, what should a value investor do?
If the basic principle is margin of safety, then one should keep reverting to that.
And then, one can pursue a pharma company or a graphite electrodes manufacturer, or a lender, etc.
The balance between price and value, and an operator's ability to be an outlier in his industry, can be maintained.
The balance between a megacap and a small cap can also be maintained. A 100 Cr mcap company may struggle to grow because it doesnt understand the power of IT or employee empowerment, and a 50000 Cr mcap company can grow because it has the world as its addressable market; while we still believe that small caps tend to give better returns than large caps.
I last wrote in April 2017; and since then it seems that India has become stronger, companies have started investing again, we have seen a mad rally in the stock market and a great corrective phase now.
But how are our companies?
There seems to be a big dichotomy in lenders (v strong and v weak), there seems to be an unforeseen impact of China environmental/ economic clampdowns on Indian chemical complexes and paper and recycling, and commodities, Indians seem to be becoming much more mobile - for work and leisure.
Things seem quite good.
As for my favourite bias - I remember Mr. Bean's host in the US in the movie.
Mr. Bean was entrusted with taking care of a valuable painting - Whistler's mother.
And he told Bean: "Do nothing! And nothing will go wrong!"
Of course, soon after, Bean was drawing over the painting with a sketchpen.
So, I remind myself; as long as my companies are good:
"Do nothing! And nothing will go wrong!"
Of course, I could get hit by a cab, but that's another story.
Actively managing the portfolio is a bias; and being too passive is a bias.
A Concentrated portfolio is a bias to conform to Munger's thoughts and a diversified portfolio is a bias to dissipate risk.
Managing other people's money causes incentive and agency biases, and managing only your family's money makes you complacent.
There are lures of greed and envy and exciting names and fantastic prospects,
As Marathe's post said: Biases about circle of competence can interfere with pursuit of knowledge - - many sectors tend to fall outside a value investor's realm of understanding; and yet, a pharma company or a commodities oriented company or a telecom company are still businesses - and these have generated wealth over decades - so, is it our complacency, or is it our bias that keeps us in the consumer goods/ financials spaces?
As my friend Arpit said, there are no fixed ways, and we have to find our way with our investing styles. And once we find that style, may be the style can change, there are no set templates.
So, what should a value investor do?
If the basic principle is margin of safety, then one should keep reverting to that.
And then, one can pursue a pharma company or a graphite electrodes manufacturer, or a lender, etc.
The balance between price and value, and an operator's ability to be an outlier in his industry, can be maintained.
The balance between a megacap and a small cap can also be maintained. A 100 Cr mcap company may struggle to grow because it doesnt understand the power of IT or employee empowerment, and a 50000 Cr mcap company can grow because it has the world as its addressable market; while we still believe that small caps tend to give better returns than large caps.
I last wrote in April 2017; and since then it seems that India has become stronger, companies have started investing again, we have seen a mad rally in the stock market and a great corrective phase now.
But how are our companies?
There seems to be a big dichotomy in lenders (v strong and v weak), there seems to be an unforeseen impact of China environmental/ economic clampdowns on Indian chemical complexes and paper and recycling, and commodities, Indians seem to be becoming much more mobile - for work and leisure.
Things seem quite good.
As for my favourite bias - I remember Mr. Bean's host in the US in the movie.
Mr. Bean was entrusted with taking care of a valuable painting - Whistler's mother.
And he told Bean: "Do nothing! And nothing will go wrong!"
Of course, soon after, Bean was drawing over the painting with a sketchpen.
So, I remind myself; as long as my companies are good:
"Do nothing! And nothing will go wrong!"
Of course, I could get hit by a cab, but that's another story.
