“I think in self-analysis, you want to be comfortable, and the market gives you money when you are uncomfortable.” – Mr. Ramesh Damani
Let’s uncover the priceless investing wisdom from the legendary and highly respected veteran investor, Mr. Ramesh Damani
Mr. Ramesh Damani started as a broker at BSE and then became successful investor, picking up great companies at cheap valuations and on the cusp of big structural changes.
He played a pivotal role in popularizing equity culture in India with his renowned show, “Wizards of Dalal Street.” Through captivating interviews with stock market legends like Rakesh Jhunjhunwala, Durgesh Shah, Kalparaj Dharamshi, and Utpal Sheth, he brought their investment philosophies to the forefront. These insights have since been revered and studied as essential lessons in the world of investing.
Mr. Ramesh Damani has not only amassed significant wealth in the stock market but has also inspired generations of new investors with his insights and expertise.
1. On buying stocks that you understand:
If you find something that is truly a great idea and so cheap, and you think you understand something about business that even the management does not understand, then you need to back up the truck and buy.
Further, when the stock goes up, a smart investor will keep adding at various points, while an average investor may not.
2. When to Make Outsized Bets:
One has to make an outsized bet only when they have great company. A great company doesn’t happen overnight – they happen once in every two to three years, or at the end of every bear market. That’s when you have to scoop it up.
3. Position Sizing:
The trick in position sizing is to let those stocks run, because in a bull market, they can go a long way. Don’t cut your winners just because they have increased more than a certain percentage of your portfolio.
When I get some winners, I hold on to them for dear life. If I think that the bull market is getting over, I will trim my position, because I know every stock will fall.
4. Buying During Bear Market:
Capitalism works not in four seasons, but in two seasons (bullish and bearish). There is nothing like a permanent bull market in any asset class or a permanent bear market. So, if you are in a bear market, keep the thought that at some point of time, the bear market will end, provided capitalism works.
5. When to Sell:
a) When you think that the bull market is getting over.
b) You sell when valuation becomes extreme.
The other thing is – Don’t get into a stock that, if it goes down 50%, you are scared to buy more.
6. How to Sell:
You should have disciplined approach. Give yourself a time frame that this (extreme valuation) cannot go beyond 4 or 8 weeks, and sell in a disciplined manner. You may not get the top price, but when you look back, you would have got a great price.
7. Thoughts on Leverage:
Most people can have some savings by the time they reach 30. If you can double money every three year, you are good. But if you are leveraged, a crisis like 2008 can wipe you out.
8. Thoughts on Opportunity in India:
India is in its infancy – there is a long runway of 10-20 years. Once you get into thematic sweet spot – unorganized to organized, difficult value proposition to value proposition – you find the companies in that sweet spot.
If we can find those opportunities, the time to buy is now. I don’t care about timing – you can still make 10-20x your money.
9. Advice to young investors:
Work as hard as possible to save money. Avoid buying depreciating assets, cut down your personal expenditure, and develop some base capital – Rs. 10/20 lacs.
Then you have to find businesses that double every three years. If you successfully do that over the next 20-30 years, you will be rich.
Source: Masterclass With Super-Investors
We hope you enjoyed delving into a mere 0.01% of the wisdom shared by this legendary figure.
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