For stock investors, it’s been six long and eventful years since Wealth Insight was launched. For the most part, these haven’t been particularly happy years as far as investments are concerned. We’ve seen one huge crash and many other upheavals of smaller intensity, and not to speak of long periods of stagnation when the markets didn’t really go anywhere. All in all, it hasn’t been easy for investors to keep their faith in equity investments.
For Value Research, Wealth Insight was not a natural extension of its activities. In the two decades since we started, people have come to rely on us as India’s most trusted source of mutual fund research and analysis. However, much of our audience never saw equity analysis as our core competence. To be frank, before Wealth Insight was launched, equity analysis was not a major activity for us. However, starting a magazine like Wealth Insight was always something that I’d dreamed of; believing fully all the while that Value Research would be able to pull it off handsomely.
The reason is simple and is now for all to see — the kind of equity research that Value Research does for its readers is very different from what is being done by others. The name Value Research derives its genesis from the concept of value investing, and value investing is something that is much more directly related to equity investing than it is to mutual fund investing.
Finally in 2006, we got the opportunity to bring this dream to life in the form of a tie-up with ICICIdirect, the online brokerage arm of ICICI Bank. What followed was the launch of a magazine with a sharp focus on fundamentally-driven value investing principles. ICICIdirect, meanwhile, committed itself to distributing the magazine to its most active members. The end result: we started reaching a huge audience right from the day one of our launch. Even more importantly, this was the perfect audience for us — seriously interested in equity investments, and as an online audience, one that could warm up to the new ideas fairly easily.
Over these six years, we’ve come a long way from those beginnings. We have built a great team of analysts and writers who create the magazine, and we’ve also evolved our approach to the content we carry. In fact, a contemporary issue of Wealth Insight has hardly anything in common with one of the early issues. Everything that a reader gets today has evolved far beyond from where we began — today’s Wealth Insight offers the best set of articles, ideas and analysis on fundamentally-guided and value-oriented investing in India.
At the same time, we’ll be the first ones to confess that Wealth Insight is not meant for everyone. The magazine appeals to the thinking elite among the India’s stock investors. This set of investors isn’t interested in getting just a prescription, or any random list of stocks to buy. It, instead, focuses on people who’d like to learn how to analyse, and understand the reasons as to why a certain investment is good (or not). Observing what others say and then adapting it to one’s own needs is a far better way to invest then just following instructions.
A perfect example of this approach is the cover story of this issue. For this, we have selected five of the greatest investing gurus the world has seen. Obviously, we have chosen from those who are associated with value investing and avoided the showmen who infest the airwaves nowadays. We have written about the principles of each of them — Benjamin Graham, Walter Schloss, Joel Greenblatt, Peter Lynch and John Neff — and then have applied those principles to the Indian stock markets today; with the goal of coming up with a set of companies which could fit their investing style.
The five gurus differ a lot from each other and they all belong to very different eras. Graham, the oldest, was born in 1894 and was active as an investor from about 1920 till the mid-1950s. The youngest, Joel Greenblatt, was born 63 years after Graham and has been investing since 1985. However, the basic idea has remained unchanged through the decades. Find a stock that has long-term quality, make sure it’s available at a lower price than what it’s intrinsically worth and invest in it for the long-term.
The most important fact about these gurus is that they are not theoreticians, but actual practitioners. Each of them gained fame not by writing about investing but actually doing it. As you read the set of articles and data tables that comprise the cover story, you’ll find that the basic formula differs considerably in details. For example, in the Graham screen, we have built starts with earnings yield with the current yield of AAA-rated bonds serving as a qualifying post. By contrast, in John Neff’s system, low PE plays a central role. Surprisingly to most investors, Neff actually considers high-growth as a disqualifier. His approach incorporates decent but not very high growth. In the modern paradigm of investing, where growth is next only to god, this would be considered blasphemy. And yet, it makes perfect sense in Neff’s approach to value investing.
In many ways, the most difficult system to understand is that of Peter Lynch, simply because it is the most subjective. Lynch begins not with numbers but with the knowledge that investors themselves have about companies’ businesses, and the numbers come later. In our story, we’ve created a screened list of stocks that we think Lynch would like in India today, but you should take this particular list just as something that provokes thinking. The very essence of Lynch’s approach is that you must start with your knowledge and understanding and therefore it is axiomatic that you, the reader, must know more about your investments than us.
No doubt, there are contradictions in the approach of these five gurus. Benjamin Graham has little in common with Peter Lynch. But that’s the whole point of reading about them — it’s more about learning how to do your own thing than just copying our approximation of what these gurus did. In fact, as you’ll see from some of these (Graham, in particular), the right conclusion could well be that there isn’t anything on the Indian stock markets today that would end up appealing to a particular investor. But that’s actually fine — not investing in anything at a given moment is as much a legitimate investment decision as a list of stocks to buy.
Regular readers of Value Research’s publications would be surprised to see Warren Buffett missing from the list. The primary reason is that Buffett is no longer a stock picker but someone who buys entire companies, something in which the main step is a subjective evaluation of the quality of management. One can admire Buffett but the methods of the five we have chosen are actually more educational for ordinary investors.
These last six years have been a rollercoaster ride for the markets and in terms of general mood in the country, this is probably the lowest point. However, this is when value investors need to stay focused on their agenda. There are many businesses that will flourish very well in the future and now is the time to make sure that you participate in their prosperity.
As always, we’ll do everything to make sure that Wealth Insight helps you do exactly that.
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