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Buffet, Lynch and other legends - Investing Strategies
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basant
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Quote basant Replybullet Topic: When Buffett got behind the curve.
    Posted: 04/May/2010 at 5:33pm
It is utter contempt to even attempt picking holes in anything that Warren Buffett does but I could not resist myself from putting in a few thoughts relating to the great man’s vision for India that Indian will live better  – 20 years hence.

First everyone knows that Indians will live better then what they are in 2030. Any attempt to quantify this statement would be boringly repetitive. But Mr. Buffett took about 20 years to predict what Indian would be in 2030. A man of his class and repute should have had his predictions the moment India opened its gates of liberalization in 1991 so here we go, no points for that prediction.

Secondly it is bizarre to see why he needs one year prior notice to be in India He can come through his private jet which he has named “The indefensible”. He can use that and be in this country of snake charmers as it was known a few generations earlier. Well, these days we have charmed the richest men from the Forbes list is a giant step for the Investing community but only a small one for India.

But why does he need to be In India to invest. From all the history he had invested in quite a few companies without being to the point of operation so the India trip is more for the formality then for the analysis.

Indian journalists, brokerages, analysts and research houses should realize that anyone coming to India is doing no favor to us. They are coming here for their returns and the opportunity that India presents. We do not need anyone’s mark of approval to discover ourselves. Indians have already discovered themselves. It is now the turn of the world to discover India.

Now to the question, what stocks will Buffett buy in India? Insurance, Banks, Consumers the list is limited and conceivable but what may be good for Buffett may not be good for the average Indian investor. Why?

Firstly the Warren through his company Berkshire would intend to invest at least US $ 5 billion in India if that investment is to make any (meaningful) difference to his overall returns.

With that kind of a corpus he would look at the top 100 names a few that come to mind are the HDFC twins (after all Deepak Parekh has modeled HDFC on the lines of Berkshire), an operating company that goes into Insurance with an Indian partner. I doubt if he would buy the existing insurance companies because he has his own standards of risk, Indian TV stations are a highly fragmented property and newspapers might just be living on its edge over the next 20 years so that is ruled out, most of the world class consumer companies that exist in India are subsidiaries of their US or European parents so that is not exclusive material either, credit rating agencies less said the better.

Buffett likes buying cheap so it might just happen that he buys absolutely nothing from the secondary market and concentrates on how he can get his operating business going. That helps India in the long run but who cares about the long run these days.

Personally I feel that we should be proud that at least when it came to investing in India Indians were ahead of the man who has been amongst the top 3 in terms of individual wealth. Whether the process of discovery for Indians about their own stock market was by default (regulations prevent them from investing abroad) or by design is inconsequential.

As for Buffett he took longer to invest in India because when he could have bought a company in Israel he could have identified a few outstanding businesses in India but as they say “Better late then never”.

'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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funkyappu
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Quote funkyappu Replybullet Posted: 04/May/2010 at 5:46pm





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manish_okhade
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Quote manish_okhade Replybullet Posted: 04/May/2010 at 5:48pm
Wonderful insight on recent news of WB trip.
 
I believe he may pick up the stocks with mass appeal or consumption theme due to our big populace. He would be looking at India because probably relative growth has dried in his hometown. 
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prabhakarkudva
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Quote prabhakarkudva Replybullet Posted: 04/May/2010 at 5:53pm
Great write up,as usual. Smile

Its not just buffett,a number of other prominent individual investors like Jim Rogers et al have shied away from investing a considerable percentage of their portfolios in India.

I think the reason is that the western countries still don't trust our economy as much as they trust China and i haven't been able to figure out why.Yes China has got scale but India is not that far behind.

Our bonds were rated inferior than Greece's just up until a couple of weeks ago,for crying out loud.

Another problem is political instability.But I think what these guys are failing to see is that India is growing as fast as China irrespective of who is at the  centre.

The problem with these big investors is not over sight  but prejudice.



Take your chances and keep them in a box until a quieter time.
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Quote deepakshenoy Replybullet Posted: 04/May/2010 at 6:09pm
We are too small. We don't allow FDI in hajaar sectors and where it's allowed you still need RBIto be notified. Then we don't have capital account convertibility. Sure, these exist in China as well, but China was special for Buffett, who got out when things started getting hot.

And then we have tough takeover laws. Do 15% and you need an open offer. If the open offer fails, you're left owning some shares but not all (in the US you HAVE to sell). Then there's lack of debt markets to put/hedge money into, and you can't take the money out of the country.

Lastly the markets have only matured in the last 10 years. Maybe mostly the last five. The guy's 78, he takes that much time :)

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Quote manish_okhade Replybullet Posted: 04/May/2010 at 6:14pm
Originally posted by prabhakarkudva

Great write up,as usual. Smile

I think the reason is that the western countries still don't trust our economy as much as they trust China and i haven't been able to figure out why.

 
Answer to this is known very well i.e our accounting practises are considered doubtful by westerners. Many reknowned investors have hesitated due to this sole reason. Even investors from indian origine settled abroad are shying awa.
 
Its true or fals is debatable but media cites above reason.
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Quote funkyappu Replybullet Posted: 04/May/2010 at 6:16pm
I think these people have a mental block, when things come about India. I think the Western population hasn't been able to digest India's progress.....So, they're kind of igoring it.

Well! Its good.....because in that process, Indian investors are getting matured & educated about their own economics & stock markets.........Still a lot has to be done..........because the flight of FII capital really put our markets in tight spot. When the money'll be domestic, there'll be less of volatility & more of corporate accountability.
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Quote LearningToFly Replybullet Posted: 04/May/2010 at 6:19pm
Deepak is right. The problem is we don't allow investment in many sectors. How many sectors (retail, insurance, banking) were open till 2005. All of these sectors have limitations on investment. I think India will have to liberalize more for big investors like WB, Jim Rogers, or CALPERS.
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