Recently I started a course on Business Valuation and Behavioural Finance by Prof. Sanjay Bakshi. He says, we need to reduce the errors and increase the insights in order to take better decisions. I was completely sold on this idea.
So, to utilize and execute this first rate advice I thought I would maintain a list of mistakes I made and what I learnt from them. If we acknowledge our mistakes in public we are less likely repeat them.
These are the mistakes of commission or omission, I made in the past, Knowingly or unknowingly, which I realised and I am unlikely to repeat them.
As Prof. Sanjay Bakshi teaches, you have to have a mental check-list of models which you need to go through before you take any decision. I feel, few of these things contributes to that check-list of mine.
For better understanding check out my personal portfolio.
1. Lumax/Infosys Mistake : Exiting Early.
It was the starting of learning value investing and after doing research I invested in Lumax Auto Tech. During that time, I can recall, the research for me was Steady increase in Sales, Steady increase in profit and understanding what the company did.
I found that Lumax Auto Tech was(is) a part of the D.K. Jain Group of companies that has gained strong position in automotive parts like sheet metal parts, fabricated assemblies, tubular parts, for two wheeler and three wheeler industry. I also found read brake light of my Yamaha FZ 16 of Lumax. I considered the company good and invested.
In the case of Infosys, I didn’t do any research. I just bought it because I had surplus capital. No brainer bat.
At the time, I was not so aware about power of compounding and holding the good investment for the long time was the key. After one and half years I found the profit good enough and sold them.
I have learned that I have to hold good companies for longer time. And that kind of research was not enough I will have to dig deeper. Lumax pick could have been a beginners luck.
2. Technocraft – Low ROCE Bet
I am writing this on 5th July. I have recently sold TIIL. When I bought, I screened this company earlier with strict fundamental criteria and found it a good company. The company was having a good position in Drum Closure business and it has done tremendous in terms of Sales and Profit growth. At that time I didnt have any kind of knowledge about characteristics of potential multibagger or a great company. So at that time I didn’t consider ROCE and ended up buying those shares of sizeable position considering my overall portfolio.
Recently after reading few people and their philosophy I determined that all my business will be of ROCE more than 25% because I believe this is the one of the important pointers of the great company.
TIIL was not a good fit in that criteria so I booked the loss of 31% and exited the position.
I have learned that I will focus on highly capital efficient business which produced great returns on their capital invested. It’s not a rigid rule but It’s the top priority.
Zen Technologies – Low Conviction & Ignorance
I started reading about Value Investing around early 2012. I also attended Vishal Khandelwal’s (Safal Niveshak) Art of Value Investing seminar in July 2012. After that seminar my interest grew because all he was talking was neat wisdom. The investing was less about number but more about behaviours. So I also started reading books and doing some research.
After few months of reading and experimenting, I did shoot a mail to Vishalbhai with my proprietary research 😀 😉 😛
After few days, I got the following reply.
After this reply, I jumped to the forum but I observed that the forum was having very less activity so I didnt post it on the forum. As on the date the stock has been an 8 bagger, if I am not mistaken.
I have learned that if at any point of time, I come across a company which has the potential and fits my Investment Philosophy then I will follow it until I don’t loose my conviction in the company. This will help me to reduce my opportunity loss.
These are the mistakes I have made and I am not likely to repeat in future. Have you made such mistake which you feel you shouldn’t repeat further? Please share in comments.