The One Percent Almanack

Wit and Wisdom on Investing, Business, and Life

Investor Insights: Saurabh Mukherjea – Part 1

Saurabh Mukherjea is the founder of Marcellus Investment Managers. He is the former CEO of Ambit Capital, prior to which he co-founded Clear Capital, a London-based small-cap equity research firm.

Saurabh has written three bestselling books: Gurus of Chaos (2014), The Unusual Billionaires (2016) and Coffee Can Investing: The Low Risk Route to Stupendous Returns (2018). He is a CFA charter holder with a BSc in Economics (with First Class Honours) from the London School of Economics.

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Special Report: Peter’s Principles – Part Deux

This is the Part-2 of the Peter’s Principles series. To read Part-1 click here.

Peter Lynch managed Fidelity’s Magellan Fund from 1977 to 1990 and stacked up a CAGR of 29.2%. “Invest in what you know” is Lynch’s mantra and he is of the opinion that individual investors have the edge over the fund managers, because they can spot good investments in their day-to-day lives before any Wall Street analyst.

In the previous post, I wrote about the first seven principles. In this, I’ll skip the 8, 9 and 10th because I feel they may not be very relevant today. So let’s jump to principle number 11.
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Behaviouronomics: More Pie than Plate

Imagine you’re on the board of a fairly large company. The business has three verticals — IT services, Investment Advisory, and Organic farming. The CEO is making a presentation to the board about next year’s plan for investing additional capital in each business vertical.

After rushing through a dozen slides on broader industry trends and macroeconomics, the CEO comes to the slide which shows that the company generated a revenue of Rs. Five hundred crores in the recent financial year which translated to a bottom line of Rs. One hundred crores. A decent 20 percent profit margin.

“This year I propose that we put all our focus and investment capital for growing the Investment Advisory vertical.” argues the CEO.

“I understand that you’ve worked for several years in the finance industry,” interjected a senior board member, “and that may give you the confidence about the future prospects of money management business. But do you have any other data to support your argument especially in the context of our company’s business?”

“As a matter of fact, I do.” quips the CEO. “And I am glad you asked that, sir.” It was evident that the CEO was prepared for this question. In fact, he was saving up a special slide just for this.
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The Dagger of Debt

Archimedes — a Greek mathematician — was born in 287 BC in the seaport city of Syracuse, Sicily. Some consider him as the greatest mathematician of all time. Although he’s known for the discovery of Archimedes Principle, his often quoted for his famous saying —

Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.

While Archimedes did not invent the lever, his did extensive work on the usage of levers. Archimedes designed block-and-tackle pulley systems, allowing sailors to use the principle of leverage to lift objects that would otherwise have been too heavy to move.

A lever is a simple machine that amplifies an input force to provide a greater output force, which is said to provide leverage. There isn’t a single mechanical device in the world which doesn’t use the laws of the lever.

When people realized that leverage could magnify the effect of non-physical things too the first thing they tried it on was money. In the last few decades, the world of finance has taken Archimedes’ words literally.
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Bookworm: Revisiting The Checklist Manifesto by Atul Gawande

Continuing the trend from the last month’s bookworm, I am revisiting the book —The Checklist Manifesto by Dr. Atul Gawande — which we had covered in Mar 2015 issue of Value Investing Almanack.

Before we delve deeper, a word about Syntopical Reading.

Mortimer Adler, in his book How To Read A Book, writes that Syntopical Reading is the highest form of reading. In syntopical reading, you read multiple books (in parallel) on the same topic. The goal is not to understand everything discussed in the book, but rather to understand the subject and develop a deep fluency on that one chosen topic. This is all about identifying and filling in your knowledge gaps.

In this post, we’ll go into more details on the topic of checklists. The primary book would be Gawande’s The Checklist Manifesto and we’ll also rummage for investing related insights in Guy Spier’s book — The Education of a Value Investor.

Atul Gawande recently shot to fame when it was announced that three large US corporations — Amazon, JP Morgan, and Berkshire Hathaway — have joined hands to created a healthcare venture and appointed Gawande as the CEO.
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