YouSaid · the spoken record

Gautam Baid

lines on the record: 55
first: 2023-10-22
most recent: 2023-10-22
sittings or episodes: 1
sources: podcast

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“So, readers can order the copy of my new book on Amazon. And if anyone wants to learn more about Stella Wealth Partners India Fund, they can visit StellaWealth India.com.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Truly passionate investor, I wouldn't want to live life any other way. And I feel that I feel very fortunate and blessed that I've discovered my passion in life and I truly love what I do every day.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“This is a topic which I'm very passionate about today, and investing success is very challenging over a long time period. It is essential to have great enthusiasm for the intellectual process of investing in order to sustain in this field for a long period of time. Because without the inner strength of our passion for investing to carry us during the periodic phases of pain and suffering, it is unlikely that we will be able to survive in this field for long. Personally speaking, stock market investing remains the most fascinating analytical sport I've ever come across and it is my lens to understanding the world because of investing, I feel more connected to the world around me to be a truly passionate investor means that you're always thinking about the future and the direction of the world. And as a result, you're always enthusiastically observing everything around you. And investing isn't just a process of wealth creation play. It is a source of great happiness and sheer intellectual delight for the”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“What is important is the cost of that growth. So be very wary of lenders who are chasing hyper growth or trying to grow at a very rapid clip by just giving away money indiscriminately. Focus on the asset quality or the quality of the loan book. And the more granular, the more number of accounts that you have instead of being concentrated in a few large accounts, the better you will be as a bank or a”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Lending businesses, the jockey is much more important than the horse, it's all about management, management, and management. And one that has been tested across at least a couple of cycles, the market rightly pays up for management quality in this particular industry and for investors in a lending business, it is all about trust. Trust is a vital ingredient for valuations in a lending business because at the end of the day, as an investor, you cannot really look into each and every loan that they give out. And in an opaque business such as lending, Your primary bet is trust in the management. So management factor is the most important when investing in a highly leveraged business like lending. This is also what Warren Buffett has advocated in the past when he invested in many leading banks in the US. Management is what he looks for. That is the foremost important factor in his mind when investing in banks and lenders. And what you want to focus on in lending is growth is very easy to come by because you're giving away money.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Account value scratched like that. So you have to be practical about it, take a very objective view about these things and try to follow philosophy which allows you to have a long-term track record and with good study rates of return over time. The SAGR should be healthy and you should try to minimize volatility to the maximum extent you can.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Do not like. Clients do not like even if it's a portfolio of 25 petty stocks, if any single stock blows up 18, 90%, even though the overall portfolio impact is muted, clients do not like any single stock blowing up like that. And if the market, if the relevant benchmark index is falling 30-40% and your fund is down 50% or more, that is also something which clients do not like. Clients basically want you to fall slight. If you can fall slightly less than your benchmark during market sell-offs and rise more than the benchmark during market recovery over the long term, you'll end up with a healthy CAGR and this is how you build a sustainable long-term investment business. This is again a very important point for all emerging fund managers to take care of because now we may be comfortable with volatility. We may be comfortable with 40-50 plus drawdowns for us it is like child's play now. But clients for whom this is not the primary profession. They get scared and they then want to withdraw their capital at the worst possible time when they see their”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“The management matters the most in retaining long term wealth. This is again one of the single biggest learning for me in my career that just focus on quality of the business and quality of the management because this is what's going to allow you to stay the course, to have the courage to buy more, doing market corrections and bear markets. And it will also help minimize drawdowns to the maximum extent because there's always a demand for high quality equities in any stock market. So buyers after the bear market is over. the first round of buying comes in the high quality stocks only so not only does it provide you healthy returns over time it also helps minimize drawdowns and you know the point about drawdowns even though we value investors do not equate volatility with risk the point about drawdowns is become significant when you're putting large amounts of capital to work especially when you're running a asset management business or a fund management business and this worked as a fund manager at a mutual fund before so i know there are two things which clients”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“This is a very, very important question, Clay, that as an investor, how can you be best prepared to survive the periodic severe bear market corrections and the future bear markets in your lifetime? Ensure that you have tennis balls or high quality stocks in your portfolio and not eggs or junk quality bad stocks, which will splatter after hitting the floor. Many individuals make large paper fortunes in bull markets, but eventually lose all of it when the bear market ultimately arrives. During the bear market crash, both quality and junk stocks fall. Quality eventually bounces back to all-time highs after the recovery, whereas the junk stocks never recover or lie low for many, many years. And how much you're able to recover after the recovery, how much you're able to retain, after the recovery from a bear market is far more important than how much paper profit you make during a bull market and quality of the business and quality.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Is going to happen because you have a scenario where trillions of dollars of debt is being taken and interest rates are going up at the same time. So some big financial accident is around the corner. We already saw the initial teaser of the teaser of this in March when Signature Bank, First Republic Bank, and a few other banks basically collapsed. So I think you will see a lot of regional bank failures over the next few years because of this high interested environment. Because what's going to happen is a lot of people are going to basically go opt for the large larger safer banks because they perceive them to be safer and there will be a deposit flight away from the regional banks and they are they are also very heavily exposed to the commercial real estate market and we all know that commercial real estate market is in a big mess. I think regional banks are going to be the very big pain point for the US stock markets over the next few years.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Talked about this in my book as well that as long as interest rates go up in an orderly manner, stock prices can go up at the same time as well. So by middle of 2007, the Fed funds rate was 5.25%. It was only after many years of tightening that we finally had the subprime crisis and the stock might crash in 2018 and 9. But for many years between 2003 to 2007, we had a multi-year bull market because interest rates went up in an orderly fashion. But this time around, because interest rates have gone from zero to 5% in just a matter of one year, the pace, it's the pace of increase which matters to the market, not the absolute increase, but the sharpness of the increase because interest rates have gone up so fast in such a short, short span of time at a time when global debt has crossed 100 trillion dollars and US federal debt has crossed 33 trillion dollars and it cannot fathom or imagine a scenario in the future when something”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“To help the markets recover, but their hands are basically tied by the very steeply entrenched inflation, which does not look like going back to 2%, which the Feds target anytime soon. I think we are going to have for longer regime or quite a few years down the line. I think if you look at the Federalisms.plot, they forecast that they don't see the inflation going back to 2%.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“But now that money market funds are giving you more than 5% and the Federal Reserve is clinging on to this higher for longer narrative, that's likely to act as a headwind for equities over the medium term. So what may happen here is the markets may become range bound. Markets may go into a long-term time correction, but individual bottom-up stock pickers will be very handsomely rewarded. I think this is the time to really for active management to shine and to make a very strong comeback after almost more than a decade of underperformance. So this is what my view is. And as far as the federal reserve is concerned, I think they have very less headroom today to cut rates to very low levels. In late 2018, driven by the stock market sell-off, Jerome Powell made a statement in January 2019 that, okay, I get your message. I will not be that restrictive anymore. Then he started cutting rates by the middle of the year. But this time around, even though the federalism may want.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“It's very interesting that you ask me this question because there's yesterday night before going to bed. I was reading Howard Mark's latest memo, which is titled Further Thoughts on the Biggest Free Chain. So last year in December, he published a memo called Biggest, a very big sea change in the markets. And just yesterday night, a new memo came out titled Further Thoughts on Sea Change. So in that Howard Marx is trying to bring out this very point that we are the era of zero interest rates is over and now we investors will have to work harder to make good returns from equities because now equities as an asset class faces a very strong challenge from a very viable alternative fixed income which was not an alternative for the last 13 years since 2008 in 2008 the federal reserve cut interest rates all the way to zero and for the next 13 years till 2021 and it basically stayed near that levels right so money making was relatively pretty easy except for a brief period in between because of COVID”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Very true. So any stock which became a thousand baggage or a 10,000 bagger or a hundred bagger hit an all time high, hundreds and thousands of times in its journey, right? So unless you buy a stock at an all-time high, how will you make money? So obvious. Seems very obvious in hindsight, right? And in fact, I'll give you one more example here. So any stock, any stock in the world, which has compounded it 18 to 20 percent for the last 20, 30 years was by definition undervalued at all points of time throughout those 30 years and while it was hitting all-time highs this is why I always tend to talk about focusing on underlying value and not focusing on the stock price and this is what differentiates value investors from momentum price chasers.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Management is saying because you may get clues from what the management is trying to say in that latest or most recent earnings conference call. And most of the time you'll observe that the stocks which are going up do not even have any current earnings to speak of. They are currently loss making or because of the industry down cycle. But we get to realize only in hindsight that the market, in fact, was a very smart discounting machine. So just try your best to do some scuttle, but try to connect with industry sources to get a sense of what's happening on the ground because by the time it's reflected in the reported numbers, by that time the stock prices would have run up. So you have to do the work. Pay attention to the market, pay attention to what the market is trying to tell you and then start the work at your end.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Sure. So, as an active and highly engaged investor, over time, you develop what is known as a feel for the market. So what do I mean by that? If a group of stocks from a single industry are all going up rapidly for a few successive days in a row, then that is a strong signal to you being given by the market that the underlying fortunes of that industry may be turning around and should be investigated further. In fact, this is one of the best ways to identify inflection points in any given sector or industry. This is just the starting point for research. This is not a necessary condition that you will find that the industry has turned around, but it should make you sit up and take notice. I'll tell you what I do in such cases. The moment I see a particular industry stocks from a single industry is suddenly going up together as a group for a few days in a row from very depressed levels. I immediately download the latest earnings conference called transcripts of the leading companies in that sector and try to read between the lines about what the”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“When you partner with very capable managements and you tend to keep getting negative surprises when you partner with fraudulent managements. Again, the power of management in long-term wealth creation just cannot be overemphasized. It is so, so important. And it's again something, it's a soft factor, but it's something which again you get to appreciate only with the passage of time and with experience. This is why I've talked about the importance of management so much in my new book at multiple places. You'll see I'm repeating the same point again and again because this principle is getting reinforced in my mind again and again throughout the bear market picked up steam because I was noticing that the average or below average management, their companies were struggling a lot whereas the strong capable managements they capitalized on the bear market and the depressed industry sent industry conditions to capture market share away from their competitors and this market share capture during recessions and bear markets is a source of great value creation for shareholders over time over the”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“This is a very important quote actually. And it's true that different stocks require different degrees of patience. Be very patient with able management teams operating in structural growth industries. And if you can find such companies in the small cap or mid-cap space with a large addressable market opportunity and having sector leadership, then be the most patient with such investments. It's very, very important because then you have struck the gold mine very, very important. You know, there are certain embedded optionalities in a business which the market cannot price upfront for managements that can scale. Businesses led by dynamic management tend to keep springing positive surprises by pivoting into adjacent areas within their industry and they keep expanding their terminal value something which is quite difficult to model in an Excel spreadsheet. So this is why you tend to keep getting positive surprises.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“True, but this is again what makes Warren Buffett the greatest of all time, right? He bought Apple that had already not reached cult status more than a trillion dollars of market cap and yet he made the biggest amount of money of his entire investment career. In Apple itself, he did not do price anchoring. He was focused on finding value. He bought Apple stock and it was out of favor. But Buffett had the vision to visualize Apple as a consumer brand company, branded consumer company, not as a hardware company. He was able to look at the high switching cost and the strong customer loyalty for the product and he focused on the qualitative attributes which mattered and not the prevailing market sentiment. And this is again the hallmark of a great investor. It is your independent thinking to take a view which is different from that of consensus because if you take the same view as that of the consensus, then how can you outperform?”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Agree, and in the book, I've also mentioned this bear market made me realize why psychologically I'm not really suited for very, very sharp volatility of 70% on the way up and the way down. I think for me, minimizing volatility by building a very robust portfolio, prudently diversified portfolio, I think that is what really suits my temperament. So this is again something which you have to go through the grind and the experience to actually discover your own investing style.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“On the second last page of the book, you may recall that unlike 2018 and 19 when I felt nervous and actions and anxious on many occasions during market sell-offs, this time I know that I'm in the safe hands of quality and that my portfolio's recovery, eventual recovery is a matter of when, not if. So investing in quality empowers you to stay the course. I think that's another single biggest advantage of being a high quality equity focused investor.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“So there are 40 points here. You must not average down much on highly leveraged business models like banking. You must not average down much in operationally leveraged or operationally leveraged models like commodities. You must not average down in businesses which are facing technical or technological obsolescence. You absolutely must not average down in highly levered business models involving fraud. You can average down or you should average down in stocks of structural growth businesses with a large size of opportunity and having sector leadership. And this is the single biggest advantage of investing in quality because when you invest in quality, it empowers you and it enables you to view every market correction as a buying opportunity. And this is what helped me stay the course during March 2020.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“And just accept that this is a general norm for equity markets that you will get these periodic phases of fear and pain once every decade. But you have to take the pain if you want to enjoy the long-term gain. There's no way getting around it.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“More than 20% over those 17 long years when the market gives zero. And that is the hallmark of a true stock pickle. It's very easy to make money and there is euphoria all around. Liquidity is very wholesome and bull market sentiment is prevalent. But the true test of a good investor is how much you're able to protect yourself and your clients during a bear market and whether you're able to generate alpha during range bond markets. We have to humbly accept the fact that during bear markets when everything falls, you know, even our portfolio will fall. In the book about my experiences in March 2020, so by February 2020, I had already transitioned to becoming a very high quality focused investor, focusing on high quality equities only. And yet, when March 2020 came, my portfolio fell 30, 35% in a single month along with the index. Because in a month when Apple, Google, Microsoft are falling 13-35%.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“That's really it. That's the best we can do. And this, you know, I've tried this enough in the last 16 years of investing, tried to trade in and out and based on market sentiment or what I expect the market to do without realizing that the best stocks, the biggest winners in the market clay, they tend to make their biggest moves. No, doing flat or range bond markets. And this is, again, something which you learn only from experience, that these big winners, what they do is they go up sharply doing range bond market when the market is doing nothing. basically you know like in india for example like the past also and in the us as well we have had many range bond markets like i'll give you some numbers here just to illustrate this point very important so between 31st december 1964 and 31st december 1981 the dowjung's industrial average in us went from 874 to 875 a single point move it meant up by one point in 17 years yet warren buffet compounded his capital at”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“It just lasted a few weeks, but not for a few months. And by June 2020, after the first three months after the bear market ended, it was now clear to me that, okay, now I think we can reasonably say that the bear market has ended. And there are three telltale signs for a new bull market to begin. Low starting valuations, which are based on depressed corporate earnings with strong capacity to recover or grow and loosening liquidity from very tight levels. And the three ingredients for a bear market to begin are high valuations on peak corporate earnings based on inflated margins and tightening liquidity from very loose levels. So basically this is exactly what happened in late 2021 when these three phenomena played out. That is when you had that 15 month long difficult bear market in US tech. So this is how this broad parameters may help you, but to be honest,”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Then again, I've written in my book, including myself. You know, I mean, I expected, okay, now the bear market will finally end. This has to be. Now the pain has to stop. But again, our hopes were dashed and again the bear market resumed. So three separate bear market rallies, basically just sucked us in back in and just made us complacent again that, okay, the bad times is over, but the bear market is not over till the last bull gives up. And by 23rd March 2020, I can assure you almost everyone in the world had almost given up. By the end of it all, like I writing my book, investors were posting philosophical messages about life. That's the meaning of life in general on WhatsApp groups. That was just how responded everyone was. You'll get to know the exact bottom, only nine sites. In this case, the global markets, including India bottomed on 23rd, March 2020. But generally, a new bull market kicks off with a few consecutive months of hugely positive market breath. This is what was missing during those three bear market rallies.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“So, where markets are very treacherous and very painful, there's a reason for that because there are so many false starts which gave rise to false hope among investors that the bear market is finally coming to an end. If you closely observe in my book, you'll notice that I've mentioned that during February 2019 when there was a big hope among investors that the bear market is finally coming to an end because of the strikes by the Indian Army in Pakistan. Many people thought that, okay, now this will bolster the current political dispensations chances to come back with a full majority and therefore there was a brief rally. And then the investors hopes got dashed shortly thereafter. Then in May 2019, when the Modi government came to power again with a full majority, again, there was a very sharp bear market rally and people were expecting the bear market to end. Again, our hopes got dashed after that. And then in September 2019, when we had that historic corporate tax cut in India,”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“They're also accessing a lot of financial services through digital medium, like mobile apps and the like. And financialization of savings does not only include the stock market, it also includes various aspects of financial services like wealth management, insurance and asset management and estate planning. So as this is an area on which I'm very bullish and I'm expressing this bullishness through a few holdings in my India fund as well. They're holding some of the leading wealth managers of listed wealth managers of India in our fund. And I think this industry is poised to grow at a very healthy clip for a very long period of time over the next decade.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Just access to brokerage account, it also means access to banking accounts driven by a prime minister's Jandan Yojna in the last few years, there's been a surge in financial inclusion in the country and a lot of people are also opening bank accounts”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Local fund managers of private funds, they are just waiting on the sidelines with so much liquidity to buy these stocks. So this is again why if you invest in good quality stocks in India, the drawdowns are basically limited and minimized to the maximum extent possible.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“And to understand why this happening, why is there such a big surge in financialization of savings, we need to look at history. So I look at the history of US, Japan, and China. When those countries GDP doubled from $3 trillion to $6 trillion, so their stock markets did not just double. Their stock markets tripled or even quadrupled. And why did that happen? It's because when a nation transitions from a low per capita income country to a middle income per capita country, the basic spending on items like food does not go up much. But these categories of branded discretionary consumption and financialization of savings. These two categories simply explode. Today, India is at 3.4 trillion dollars of GDP and in the last few years, we are already seeing this trend of financialization of”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“So, I invest only in the Indian stock market. So I'll speak in the Indian market context. How do I go about judging liquidity? So I look at the trend in the monthly domestic investor in foreign investor flows. And that gives me a pretty good idea about where liquidity is headed. So for a long time, foreign investors used to dominate the flows in the Indian equity market. But today, it is the domestic institutional investors or the domestic investors who are basically controlling the narrative now and who have taken the mantle of leadership. And it is the individual investor who's powering the current ongoing bull market in India and monthly investments in equity mutual funds in India for the month of September crossed $2 billion for the first time ever. And just to give you some context, this monthly investment in domestic equity mutual funds in India was less than half a billion dollars six years ago. So in just six years, the monthly flows from individual investors has more than quarter.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Between 1990 and 2018, during those 28 years, only 1%, only 1% of all listed equities accounted for 90% of the wealth creation or market cap creation in India. Just think about that. Just 1% out of 4,000 listed companies, which means that if you found, if you were lucky enough to identify one or two out of those 40 stocks in that 30-year period, you should have held on to it to really change your life as an investor. It's very easy to identify a winning stock, but it's not easy to hold on to it. So once you have found a great company growing at a healthy clip and it continues to grow at a healthy clip and it's maintaining its competitive advantage, hold on to it.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“I would like to share two pieces of statistics here. Just because this is such an important topic that very few people talk about the importance of holding on, I want to share two statistics here with your audience so that they understand just why it is so, so critical and important to hold on to your winners for dear life. Between 1926 and 2018 in the US market, only 4% of all listed equities accounted for 100% of the wealth creation. Now again, in those 92 years, only 4% of all listed equities in this country accounted for 100% of the wealth creation, which means that once you have found the goose that lays the golden eggs, don't kill the goose. Hold on to it for DI because 96% will fail or not really work out. It's only those 4%. So when you find one of them, if you're lucky enough to find one of them in your lifetime, make them count. So that's the first statistic from the US market. Now I'll share. And this powered law is not just applicable in the US market, it's applicable to markets around the world, including India. In India,”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Last year, it's up 18% in the first 12 months. And when I was doing a portfolio attribution analysis to see which stocks contributed the most, surprising to me that four stocks out of the initial 23 stocks accounted for more than 80% of the overall return of the fund in the first 12 months, the other 19 stocks hardly contributed. And this is again the power of compounding at play convexity on the upside. You let the winners run. Let them become big winners because investing is a probabilistic activity. You're going to be wrong a lot of the time. But as long as you make your winners count and don't blow up in any of the other picks, you'll do very, very well at an aggregate portfolio level. Very powerful principle, positive asymmetry, and just reinforces the power of holding on to your winners.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“So, the actual answer is 17.6%. So at the end of year 10, even though stock two went to 0.01, almost went to 0, at an aggregate portfolio level, you still ended up making 17.6%. And this finding was an URICA moment for me because this is where the real power of compounding lies. The real power of compounding lies in its ability to empower you and enable you to be wrong. 50% of the time and still make very handsome returns over time because there is no limit to the upside. But the bottom, the downside is tapped at zero, right? So basically this is the true moment for me because what this made me realize is that if you can simply hold on to your winners for the long run, the overall portfolio return will be taken care of. And I'll give you an alive example from my own India fund, which I've been running for the last 12 months. So our India Fund went live on 3rd October.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Well, this was one of the biggest Eureka moments in my investing journey, and I'm sure this is also going to be a big Eureka moment for many listeners to And the first stock goes up at 26% in year one and becomes 126. And the second stock decreases by 26% in year one and becomes 74%. So net net at the end of year one, you have made zero return, right? What do you think would happen by the end of year 10 if every year stock one goes up by 26% and stock two decreases by 26%? What do you think would happen at the end of year 10? What would be your CAGR? You basically made zero at the end of year one. Any idea what would be your CAGR at the end of year 10?”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Adversely impacted by any competitive development or any technological advancement, then you have to take action accordingly.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“It pays to have a long term view, but a long term view must be combined with an investment process which is willing to continually question the core investment thesis and investors should exercise active patience, that is diligently verifying their original investment thesis on a regular basis and doing nothing until something materially negative or adverse emerges. All too often, investors become very complacent and stop questioning their holdings when the stock prices are going up. They resume analyzing in detail only when the stock prices start falling. But don't do that. Don't analyze your holdings only when their stock presses fall just because the prices of the stocks in your portfolio are going up doesn't mean that there is nothing wrong taking place in the underlying business. So be very vigilant. Things are changing at a very rapid clip because of technology around the world. And we always need to focus on terminal value because that is where 70 to 80 percent of the intrinsic value of any business resides. So the terminal value is getting”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Them, but I've seen over time in the markets, Klay, that for these high quality growth stocks, they start off from a cheap valuation, then they become reasonably valued, then they become expensively valued, then they become very expensive, and then finally they become absolutely overvalued. But you have to create wealth. In the true sense, you have to hold on for that entire duration during the high growth phase of a company because the market in those cases keeps discounting earnings many years out. And that is how you get valuation relating. And that is how you get life-changing multivaggers in the stock market.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Pay true. I mean, just look at what happened last day with not a stock recommendation, but just look at what happened with Google. The moment Microsoft took a chicken chat GPT and Google's bar did not really do well in the beginning, Google's stock press fell down to $80. And today it is $140. Did the intrinsic value of Google change by hundreds of billions of dollars in a matter of six months? No, right? But we just get so lost in the information overload that we panic and sell our high quality blue chip stocks. That is not how long-term wealth is created. Buffet became Buffet because he was able to compound his money at a healthy clip for more than six to seven decades. That is what made him buffet. So I'm not saying that you have to cling on to a single stock for the long run, but at least remain invested inside the market with a good portfolio over the long run. Only consider selling the high quality stocks when they become absolutely overvalued. For example, 150, 200p multiples, if they start trading at those kind of multiples, then consider selling.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“To just hold on during the periodic time corrections and the stock price sell offs during market falls, but you'll make a pretty good CAGR if you can simply hold on because in order to have a 10 bagger or a 20-bagger, you need to hold on to a 10 bagger or 20-wagger. But during phases of euphoria, which in the urge to make quicker money, we just sell our family silver and buy junk quality stocks. That is not what is really helpful for investing.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“From entropy multiples to duration of the competitive advantage period. Buying a stock is not that difficult in today's information age. Holding on to it amid all the noise in the digital age, that is what is more difficult. And if you want to hold on to a stock for the long run, you have to focus on two key things which I've talked about in my book as well. Whether the company is growing revenues at a healthy clip and whether the original competitive advantage which you bought the business for is that still in place as long as these two things are in place, just stay put because the competitive advantage of the business will allow it to earn returns on capital above the cost of capital. And for such kind of businesses, the maximum delta, the maximum rate of change, the maximum intrinsic value creation takes place when they focus on improving revenue growth. So for companies with higher returns on capital, which are enabled in turn by their competitive advantage, as long as revenue growth is healthy and double digits or more, just stay put, you'll do very well over the long run.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“So, for businesses that will grow their earnings even at a moderate pace, but for a very long period of time, the optically high price-to-earning multiples that determine many value investors is in reality pretty low. This means that if you buy a strongly motivated business at what appears to be a full price based on current year earnings, you will still end up compounding your money at a higher rate than the discount rate you used to arrive at the fair value for the business and the longer the competitive advantage period for a business, the more the business is likely to be worth than what many market participants think. Durability of the moat is the key factor here. So the market tends to underappreciate companies that have really strong modes because their durability allows the company's runway to last much more longer than what many people expect. So for long-term investing, the focus needs to”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“I absolutely agree with you, and you know, successful in investing is all about having people agree with you later because the alignment between price and value can be greatly distorted in the short run by technical and psychological factors. But as Benjamin Graham has taught us, in the short run, the market is a voting machine, but in the long run, it's a weighing machine. So, and ironically, in order to generate alpha, investors do need the markets to be efficient eventually because the markets need to realize that they have made a mistake in valuing a company and then the market needs to correct it. Otherwise, mispricings would persist forever and in such a market, no one could reliably outperform. So you're absolutely right that, you know, in the short run, price does drive perception, but that is what allows value investors to exploit Mr. Market to our advantage because he's a manic depressive. He either becomes overly exuberant or he becomes overly depressive.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Prices generally go up only during the last stage of a bull market. You also see a plethora of IPOs from a single sector coming during the peak of the frenzy in that particular sector during the end of that sectoral bull market. And finally and most importantly, you'll often see new metrics of valuation suddenly popping up during the final stage of a ephoric bull market. So in the case of the late 1990s, it was number of eyeballs or clicks on the internet. And similarly in 2021 during the meme stock, A4EA, you had some new metrics coming out. So if new metrics evaluation start being discussed, that this is a new era. This time it's different. It's never different. The principles laid down by Graham in the intelligent investor have stood this test of time and those three key principles are what we need to always focus on as value investors.”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Most effective way for me personally speaking is a few WhatsApp groups of investing which I'm part of. So when investors start discussing only the junk quality stocks like deep cyclicals, microcaps, loss making companies, and when there is widespread euphoria or these kind of stocks, that is when basically I get to know that, okay, right now it is completely risk on and investors are throwing caution to the wins and they're just focusing on trying to make money as fast as possible. And it is this urge to make quick money. and make money as fast as possible when there's greed in the air and you can literally sense it that you know people are just not exercising caution they're not focusing on quality they're not focusing on the past track record it's all future projection based it's everyone is just investing on the future instead of actually looking at the past what the company has done even bigger way to judge sentiment in such cases is when you see a big surge in stock prices of holding companies because you know holding companies stock”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT
“Second is the quality of investor portfolios. So as a bull market matures, many investors move their portfolios from high quality stocks, having steady growth and high returns on equity to stocks having higher revenue growth, but inferior return ratios and poor management qualities. And then they move on to commodities and cyclicals. Then they move on to turnarounds which are currently loss making. Then they move to micro caps with limited history of operations. And then finally, they move to highly leveraged companies with projections of rapid revenue growth. At this point, the bull market usually tops out and at the end of the euphoric phase, most investor portfolios have only junk stocks left in them. During the subsequent bear market, which follows, both quality and junk stocks fall. Quality eventually recovers back fully, whereas the junk stocks lie low for many years. And it is only after going through the pain of a couple of such cycles that as an investor,”
2023-10-22 · We Study Billionaires · TIP583: Preparing for the Bear Market to Come w/ Gautam Baid · IDENTIFIED FROM THE TRANSCRIPT