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Guru meditation

Learning from investing gurus can help locate promising investment opportunities which may not be otherwise noticeable

Guru meditation

Learning from gurus is a time honoured Indian tradition and investing should be no exception. The mystic saint Kabir famously wrote the couplet which many of us learned in school, "Guru Govind dou khade, kaake laagoon paay. Balihaari Guru aapne, Govind diyo batai." It roughly translates to - Kabir says that the guru is more important than your goal because you can reach the goal only because the guru guides you.

This month's cover story is in the same spirit. We have selected seven 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. These seven are Benjamin Graham, Walter Schloss, Joel Greenblatt, Peter Lynch, John Templeton, Philip Fisher and John Neff. For each of them, the cover story has a brief on their investing principles and their significance in the investing universe.

Further, we have translated their principles into a screening system that consists of a number of financial filters. Then, we have applied those filters to the Indian equity market with the goal of coming up with a set of companies which could fit their investing style. We believe that this list has some important characteristics that are common with what these gurus would have come up with themselves.

Here, I must remind our readers that this is the second time we are doing such an exercise. Back in July 2012, we did a similar exercise with five of these gurus. In the current story, we have shared with you how our 2012 guru-stock recommendations have performed.

The seven gurus here differ a great deal from each other. They also belong to very different eras. Obviously, there are large contradictions among their approaches. However, the most important fact about these gurus is that they are not theoreticians but practitioners. Each of them gained fame not by writing about investing but actually doing it, even though the system is different for each. This becomes apparent when you compare the seven lists of stocks. Walter Schloss has little in common with Peter Lynch, who has little in common with John Templeton. However, there are still some thought provoking commonalities between the guru lists.

Regular readers of Value Research's publications would have expected to see Warren Buffett on this list and will be surprised that he isn't. There are two reasons for this. One is that fundamentally, Buffett's main activity is no longer that of a stock picker. He's someone who buys entire companies or at least substantial controlling stakes. His main criterion in this activity is a subjective evaluation of the quality of management. It is true that he has investment stakes in companies like Gillette, Wells Fargo and Apple, but the scale of these investments is still not something that is directly of use to us. One admires Buffett deeply but the methods of the seven we have chosen are actually more educational for ordinary investors.

We are at a difficult juncture as investors. The Indian economy is poised to stay on the high growth path and yet it is difficult to find value in the markets. However, this is exactly the kind of time when we need to stay focused on evaluating and examining a wide variety of stocks, even those that eventually do not make the cut as investments. There are many businesses that will flourish in the years to come and many of them are not obvious investments today. Through this cover story, we would like to force ourselves to follow different approaches and see what they throw up. Whether we invest in these or not, the learning experience is useful.