By R Jagannathan
An interesting point emerging from a recent discussion between four investment pros is this: it was easier making money from stocks in the good, ol’ days.
But does this mean the future will be less lucrative? The answer is: no. If the Indian economy keeps growing, stocks will grow even faster, since a very small part of household savings comes to the markets.
At the Motilal Oswal global investor conference, the discussions were led by Sanjoy Bhattacharya of Fortuna Capital, Raamdeo Agrawal of Motilal Oswal, Akash Prakash of Amansa Capital and Motilal Oswal himself. Excerpts from the discussion can be accessed here at DNA’s website.
And these are the key takeouts for investors:
One, since all stocks are over-researched, the opportunities for multi-baggers may be lesser now. Raamdeo said: “The basic data earlier, even with the simple return on equity calculation, was an insight for somebody. But now...there is nothing which cannot be computed online. So, clearly that data arbitrage is not there. Actually, all the multibaggers were produced then.”
Two, investor time-horizons are shortening, making it more difficult to generate multi-baggers. Said Akash Prakash: “People’s time horizon has fundamentally shortened, (and) it is not unique to India. This is proven academically as well that holding horizons have dropped dramatically all over the world.”
Three, today’s stock researchers tend to be super-specialists, which comes with its own problems. They tend to be experts in narrow industries, but sometimes lose the big picture. Sanjoy Bhattacharya made this point: “Today, you have these guys (researchers) who are razor sharp and know a huge amount about very little, that is about one sector. To which Akash Prakash added: “I (have) always believed in the generalist model - that’s the right approach. I think since we tend to focus on India, which is itself quite specialised; we don’t think it makes sense to specialise further within that to get into industry specialisation.”
Four, the information overload is producing more noise that information. Akash Prakash said: “This is proven academically as well that holding horizons have dropped dramatically all over the world. Is getting information every quarter or every month or everyday necessarily a good thing? I frankly have my doubts, but I think in hindsight, I would probably be a better investor if I didn’t get so much data.”
Five, buy and hold may still be the best strategy for investors with a long-term time horizon. While the problem of transient money comes from open-ended mutual funds, Raamdeo Agrawal is clear buy-and-hold is the only game in town: “What makes significant money is buy and hold. I think that’s the only form of investing.”
Six, the future of stock investing cannot but be bright. Hear Motilal Oswal on this: “I don’t know what’s going to happen next quarter or next year. But look at the fundamentals of the business, and the savings being generated in India. Although it has not seen any kind of worthwhile money going to the markets in the past 4-5 years, going by the kind of explosion we have seen in 2002-08, I think it will come back even at a much bigger magnitude.”
Conclusion: Big money will come to the markets, with consequences for stock prices. Oswal said: “On a $2 trillion economy, 30 percent savings are being generated and when the economy size is going to be even much bigger …equities and markets will have to face that challenge of how to adjust to that kind of money coming.”