The One Percent Almanack

Wit and Wisdom on Investing, Business, and Life

Ethical Analyst: Conflict of Interest

Reputation is difficult to build but easy to lose. How we hope people in the investment industry respect this for a fact. Sadly, most don’t!

“We’ve given you so much information on our business. Now what can you do for us?” I was stumped to hear this from the CFO of a “reputed” mid-size Indian IT services company when I went to meet him sometime in 2009. I had received several such requests from lower rank managers of other companies in the past, but to expect this from a CFO was like too much!

This harmless-sounding question – “What can you do for us” – means a lot when you are stock market analyst who is preparing to write a report on a company. When a top manager asks an analyst as to what he can do for the former’s company, he is indirectly nudging the latter to write a positive report (a ‘Buy’ recommendation) on the stock. Yeah, that’s true!
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Corporate Governance: How Companies Screw Investors

When a CEO combines his ego and willingness to put precious capital on the line to grow his company bigger, faster, it can create disaster for investors.

All of humanity’s problems stem from man’s inability to sit quietly in a room alone.” ~ Blaise Pascal

You must have heard the fairy tale where a spoiled princess reluctantly befriends a toad, who magically transforms into a handsome prince triggered by the princess kissing it.

Well, those were the older times. Today’s capitalistic society has been witness to a large number of spoiled princesses trying the same trick on a large number of toads, only to realize that the tale of them turning into princes they had heard of was just that…a fairy tale.

If you are confused why I am writing about the tale of the toad and princess, let me get straight to the point now.

If there’s one quick way a lot of companies and their CEOs have destroyed a lot of shareholders’ wealth in the past, it is through mergers and acquisitions (M&A).

So in the world of M&A, the spoiled princess is the company that is looking to acquire another company, and the toad is that other company that’s waiting to be acquired.

Now, despite 50 years of evidence demonstrating that most acquisitions don’t create value for the acquiring company’s shareholders, corporate managers continue to make more deals, and bigger deals, every year.
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InvestorInsights: Ankur Jain

A young and smart value investor Ankur Jain shares his insights on the process of sensible, long-term investing.

In this issue, we profile Ankur Jain, a value investor and investment advisor based out of Gurgaon. Ankur is a Textile Engineer from NIT, Jalandhar, and MBA from MDI, Gurgaon. He is also a Berkshire Hathaway fan. The study of textile engineering has helped him understand why most textile operations are inferior businesses as experienced and taught by Mr. Buffett

Ankur invests long term money in businesses which have a demonstrated track record of consistent earnings. He is curious about businesses and love the process of analyzing them. He dives deep into a business while reading about it and comes out once he is convinced about its beauty or the absence of it.

Apart from investing, Ankur finds himself charged up watching mysteries, playing monopoly and visiting heritage monuments. You can write to him at ankurjain2100@gmail.com.

In this interview, Ankur shares his thoughts on his investing process and philosophy and also a lot of valuable lessons for new investors.

 

Safal Niveshak (SN): Could you tell us a little about your background, how you got interested in investing?

Ankur Jain (AJ): The earliest influences were my relatives. A few of my relatives are in conventional businesses. I often visited their shops and other places of business etc. I was particularly fascinated by the form of writing accounts which used to be a red book called the bahi-khata. It was interesting and great fun to see how businesses were run and accounts were written.
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BookWorm: Mosaic: Perspectives on Investing

Great perspectives on investing from the wonderful investor and multidisciplinary thinker, Mohnish Pabrai.

I am sure the author of this book needs no introduction, but for the benefit of people who don’t know much about him, I am going to start with an interesting trivia. How much would you pay to have lunch with Warren Buffett? How about Rs 4 crore?

Don’t be surprised because that’s the amount Mohnish Pabrai (along with his friend Guy Spier) paid to have a private lunch with Warren Buffett in 2006.

Mohnish manages US$ 850+ million US based fund called Pabrai Funds and is a hardcore Buffett disciple. He has written another popular book called The Dhandho Investor.. However, the book I am talking about here is a rare one.

Mohnish has built 3 successful businesses in the last 25 years, including a technology company, a Buffett style hedge fund and a very successful philanthropic organization called Dakshana Foundation, which educates talented underprivileged children to qualify for IITs. With this kind of experience, I am sure he has some interesting insights for us.

In the previous issue of VIA, we had shared the link to Dakshana’s annual report. If you haven’t read it yet, I would suggest please don’t miss it.
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Behaviouronomics: Do Something Bias

Always being in the thick of action can be dangerous to your long term investment returns. The habit is difficult to overcome, but you must definitely make a start. Read more to find out.

Have you noticed that there are some people who are so restless that they find it impossible to sit at one place quietly? They have very short attention span and can’t stay with one activity for long. In medical science this abnormality is known as ADHD (Attention Deficit Hyperactivity Disorder).

Now before you brush aside ADHD as something which isn’t relevant to you, allow me to hold your attention for one more second. Here is an interesting fact – Evolution has installed the seeds of ADHD in every human brain.

Some people have very severe symptoms of ADHD and they may need medical treatment. But for the rest of us this disorder manifests very subtly in our day to day decision making.

Famous scientist Blaise Pascal figured something very deep when he said, “All of humanity’s problems stem from man’s inability to sit quietly in a room alone.”

In an attempt to be efficient and productive, we force ourselves to always stay busy with some task or other. But sometimes too much activity is counterproductive. In behavioural finance, it’s called Do-Something Bias.

A wise man once said, “There is no bigger waste of time than doing something efficiently which shouldn’t be done at the first place.”

Do-something bias is not only wasteful but can harm you in the long term.
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