Pranav Gokhale's most precious investing lessons

When I started my investment journey during the early 2000s, markets were conducive for anything with a growth mindset. The macro didn't matter, nor did the cash flows. The P&L mattered more than the balance sheet, which also percolated down to my investment style then. The global financial crisis made me understand the importance of the balance sheet and cash flows. If I look back through my investment journey, we have travelled from a lack of data to an overburden of data. Filtering valuable information from data and avoiding noise have become paramount and I was lucky to have a mentor who led me to the path of ignoring the noise and relying on hard facts supported by data. This is essential in the context of the current market, where one is overloaded with data. One important aspect I learnt over my investment career is that real research doesn't always happen sitting in front of spreadsheets. One needs to understand the various facets which make the industry by speaking to subject-matter experts, various participants and understanding the situation from the ground level. We avoided a few companies using this scuttlebutt approach, which helped us over the longer term.

The other essential aspect is being nimble. It is important to avoid investing in companies and cut your losses when the investment hypothesis doesn't go your way, or one comes across a new set of information. Investing is also about tempering your ego and relying on hard facts to make appropriate investment calls. Don't be shy of questioning your hypothesis and changing your opinions based on facts and information.

What we have also observed is that newer companies come better prepared to take on incumbents unlike in the past. Existing players need to be continuously on the lookout to better themselves. One constantly needs to be on the lookout for the changing nature of technology and its impact on various businesses in the new world. Every crisis teaches you something; one such recent instance was undermining the transformation ability of the Indian chemical industry during the COVID-19 scenario and the positive impact of the substitution effect away from China. The learning here was that sometimes the emerging opportunity/macro tailwind is so strong that it gives ample opportunity to buy and hold onto multibaggers rather than sticking to compounders. Sticking to those high-conviction ideas when the sector has macro tailwinds provides ample wealth-creation opportunities, which shouldn't be missed.

To sum it up, the key to successful investment decisions is to learn, to evolve and to change oneself. It involves a hard decision of sometimes losing out on shorter-term gains and sticking to your conviction for larger wealth-creation opportunities over the longer term.

This interview was conducted in June 2022

Also in the series:

Ajay Tyagi's most precious investing lessons
Pankaj Tibrewal's most precious investing lessons
Samir Rachh's most precious investing lessons
Chirag Setalvad's most precious investing lessons
Sandeep Tandon's most precious investing lessons
Aniruddha Naha's most precious investing lessons
Shreyash Devalkar's most precious investing lessons