Investing or Poker: If you Don’t Practice – You don’t play

“I love to practice. I need to practice. How can I skip practice? I need it.”  – Michael Jordan

Some days ago at an Investor conference – I talked about what investors can learn from the game of poker.

One area I talked about is that in almost all skill games and sports players are on a continuous path of learning. The best Poker players are actively using course material, solvers (decision tree), and active feedback through coaching or peer review to improve their game. One of the most active methods of improving the game is taking coaching and this is also true for most sports/games be it tennis, cricket, or chess.

It’s not how good you are now; it’s how good you’re going to be that really matters

Atul Gawande – a surgeon has been actively able to apply coaching in surgery with his professor watching him doing surgery and giving feedback. The improvement was very slow but gradually helped in reducing complications in surgery. 

Don’t just be Driving; Become a Racer

Investors are always eager to learn. Learning by investors is however like driving.  Most of us once we know driving can reach locations safely and once we are good at it we stop improving. However, not many of us after years of driving can be good at off-roading or racing. Investing also most people believe after a point is habitual and fluid.  The learning is limited to reading books and attending conferences.  The same can be said for amateur poker players. They are always playing and believe as they play more, their game is improving.  However, this is far from true.

Best Poker players are constantly spending an enormous amount of time reviewing their previous plays, learning from hand reviews of themselves and others, and discussing and learning new strategies. The poker industry has a very active environment for learning and coaching.

When the student is ready the teacher shall appear

One of the corollaries of coaching in the world of investing is having mentors. Having mentors in investing is just about being lucky to have access to some great minds, it’s not a commercial setup.  It’s time the investing industry like the poker community had a strong group of people who are actively coaching or teaching investing. Please don’t confuse it with people from WhatsApp groups or weekend get-togethers to regularly give you buy/sell ideas.

Poker players employ a method of learning called deliberate practice.  This is to focus on a specific spot and just work on it.  Investing also can be broken down into specific learning areas – understanding blockchain, the impact of platform companies, etc. It can also be broken down into ground research to understand consumer behavior.  One of the fund managers spends a significant time of per month away from Mumbai in a new city regularly. 

Also investing as a task involves finding investing ideas, financial analysis, ground research, Corp governance check,  position sizing , and exiting.  Not all investors are good at all of them. Currently, some investors are outsourcing a few of these activities. Personally, I have always failed in buying large quantities , holding bad investments too long and definitely selling too early. I have done ok with selecting good companies.  I have always sold early despite reading enough about the miracle of compounding. 

Poker players actively indulge in group learning. Strategies to play a hand or a particular spot in the game are actively debated and while there may never be a consensus – it is always an evolving thought process. In poker, it is almost easy to identify the smartest poker player in a group and people will actively seek out his/her opinion. The smartest poker player always talks in possible ranges and are never certain and never result-oriented.  The same can be done in investing where stock/sector ideas are actively discussed among experts.  However, given feedback is noisy in investing world – investors generally tend to believe the person whose portfolio is doing the best in recent times to be the smartest, and therefore ideas of an underperforming investor despite being very good may be sidelined. Do remember people in the last few years started questioning Prashant Jain. Ex-CIO of HDFC MF as well.  

I hope in a few years we have dedicated investing coaches who are available to be hired  – who will actively look into your investing process or portfolio and suggest what’s the right approach. This should be a recurring task. Investing is a process that requires genuine learning and improvement and hopefully, people will stop calling business channel experts and anchors for stock advice as they know nothing about your process and your overall portfolio. 

How to Practice investing? Value Amitabh Bachchan

One way to practice investing is to start valuing unlisted companies and businesses of which no fair value is available. What’s the price you will pay to get all of Amitabh Bachchan future earnings (do assume he will restart ABCL)? What’s the value you will ascribe to Part 2&3 of Brahmashtra trilogy ? ( For the contrarians). How about valuing a fintech startup in Kenya ? Also, analyzing your own forecast 20,10, 5 years ago can give insights into improving.

The Magic of Masai Mara – Bucket list adventure

This was part of a 12 day trip. Will write about the full trip later.

Day 0: Reach Nairobi.  Get a briefing from Shashank Birla from Wilderlust expeditions –Naturalist and Photojournalist on what to expect and a brief outline of our plan for the next 4 days.

Day 1: Reaching the Camp and a short evening Game Drive.

At 0830 hours we headed to Masai Mara camp – a 4–5-hour drive from Nairobi with Shashank, Henry- our local guide and driver, and a group of 6. Had a brief stopover at the Great Rift Valley viewpoint to appreciate the rift’s vastness. Great Rift Valley is 8600 km long and spreads across Africa dividing the continent into 2 portions. We entered the Masai Mara reserve via the Sekenani gate and reached our Camp Enkorok near the Oloolaimutia gate around lunchtime. After checking into the camp, we went for our first game drive at 1600 hours (game drives are allowed only till 1830 hours). We did a short drive in the afternoon- got lucky and spotted 1 lion and 2 lionesses on day 1. The day was also our first learning of the various antelopes in the Masai Mara and we could successfully differentiate between Impalas, Thomson’s gazelles, Grants gazelle, Wildebeest, Hartebeest, Topi, and Eland by the end of the day. The most exciting for me was to learn the behavior of Impalas – where a single male heads a family or harem of 30-50 female impalas. There is a constant fight for control of the females and the loser males form a Separate group called the bachelor herd or a loser’s group. Sighting of Waterbucks and Dik-Dik was to happen later.

Day 2: Objective of sighting  Big cats and River crossing

We left our camp at 0630 hours. We were told a big herd of Wildebeests has been seen at the Mara triangle, close to the Mara River which was a 60-75 mins drive from our camp. We started by focusing on Big cats and got a wonderful sighting of a leopard coming out from a creek.  On reaching the Mara River around 11 am – we saw a big herd of Wildebeest close to the river but in no mood to cross the river. With too many Cruisers on our side – we decided to head to the Mara triangle side (45-60min drive) to get a better view. On our way to Mara river – we saw some activity close to a big herd of Cape buffalo. A calf had fallen in a creek and was not able to come out whereas the mother was standing on the edge of the creek anxiously. The mother had taken an aggressive stance and was worried about predators. After 20-30 mins of drama – the mother finally descended into the creek and guided the calf to safety. The radios then caught some chatter of a possible sighting of a cheetah and we took a detour and were lucky to sight a Cheetah with 4 cubs. After that, we reached the Mara triangle around 2 pm and had our packed lunches. On seeing inactivity in wildebeests, we positioned ourselves towards the zebras which were keen to cross. We witnessed 2 small groups of zebras crossing from a vantage point and multiple failed attempts – owing to the visible presence of crocodiles in the rivers. On the return, we saw a small group of elephants with a calf which was alert owing to a hyena presence close by. We returned to our camp by 1900 hours and were served vegetarian food on request.

River crossing of Zebras
Calf of a cape buffalo stuck in a creek

Day 3: Last day to catch river crossing

Left camp at 0630 hours with the same objective of river crossing and big cat sighting. Within 2 hours we had a wonderful sighting of a male lion with a fresh kill of a zebra. The lion then moved the remaining hunt to the safety of the bushes. After some time – we spotted a leopard in the open savannah (rare – as they stay in bushes), we could catch a 300–400m walk of the leopard to the bushes. By noon, we reached the Mara River and were surprised to see the big herds of wildebeests seen the previous day were nowhere to be seen. There was a small group of wildebeests and zebras – which were trying to cross but had 2 failed attempts. It was wonderful to see the sudden movement and lining of wildebeests and zebras. The wilderness is always unpredictable and one has to be always attentive. While trying to get a river crossing – we ended up seeing a herd of 15 elephants crossing the Mara River. After that around 1500hours, we headed back to our camp and had 2 sightings of lion pride. The total count of lions was 21 at the end of the day. We also watched a few hyenas feasting on a carcass of an elephant and a courting ritual by the ostrich.

lions pride and elephant river crossing
Zebras and Wildebeest attempts to cross

Day 4: A Cheetah hunt. What more can one expect?

Left camp at 0700 hours with our bags for a half-day game drive and then back to Nairobi. As soon we entered the reserve, we had a sighting of a cheetah in the open licking its sharp wound on its leg. Then we headed to a lioness kill sighting. Where a lioness had killed a wildebeest and finished eating half of it. The lioness then went on to drag the remaining food to the bushes around 200-300m, to the safety of the bushes. The lioness passed right next to our cruises dragging the wildebeests. Almost all of us got selfies with the lioness and the kill. We had had 28 lion sightings by then. After that, we headed back to the Sekenani gate for our exit and happened to see an active cheetah in the open savanna. Looking at the activeness of the cheetah – our guide Shashank hinted at the possibility of a hunt. There was a herd of Thomson’s gazelle close by. The cheetah went and positioned itself at a distance hiding in the grass but continuously looking at the gazelles. We waited for 30-45 mins anxiously to witness a hunt. We were not disappointed as the cheetah made a dash to the gazelles but failed in its attempt. The cheetah made slow losers walk of shame from there to the shade of bushes. My personal objective for the trip was to watch the cheetah and to get a vantage point viewing a cheetah hunt was absolute bliss. At noon – we exited the Masai Mara and reached the Nairobi hotel at 1730 hours. The return journey and dinner were all about trying to tell each other our favorite moments and making future plans for safari.

Lion with a Zebra kill

Whiles, it’s easy to decide the Success of a safari – based on actual sightings. I personally loved the entire planning and approach to a safari. Also, watching a river crossing is amazing – the failed attempts is river crossing or catching prey are equally insightful into animal behavior. We were lucky to have an Ace driver and local guide Henry – who was always ahead in terms of anticipating wildlife moves and helped us in getting most of the sights from the best possible points. Shashank has unlimited knowledge of wildlife and one has to be aware of his own limitations in absorbing the details he shares. One thing I will never forget is Shashank trying to identify the right species of eagles by the shape of their nostrils.   This trip has ignited the spark of wildlife in me and I hope I can continue doing more of these trips.

At Masai Mara – points to note:

  • I recommend using a land cruiser for the Safaris. All Safari vehicles are fitted with radios so that local guides can inform each other of sightings.
  • The weather is completely unpredictable. Wear layers as it’s chilly in the mornings and warm during noon – short showers are also frequent.
  • If you are a vegetarian, always carry a backup of theplas and khakras.  
  • Iphones are not good for wildlife photography, so enjoy the sightings or carry DSLR cameras.
  • Pre-reading a bit on migration and wildlife in Kenya will help.
  • Limited options to answer the call of nature during the safari, so eat light.

Invesco Partial exit from ZEEL- Learnings from mistakes?

“It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes.”

Warren Buffet

Invesco bought a 11% stake in Zee in August 2019 at Rs 400 – spending ~Rs4000cr apparently after the promoter’s debt problems were known and, in a bid, to help them.  It intends to Sell 7.8% in a block deal around Rs 270-290.  Invesco lost 30% odd in investment over 2.5 years – when the market was up 30%.   

Invesco wants Buyers to believe that the “Sony deal in its current form has a great potential for current shareholders “.   The purpose of the sale is to only align its exposure in line with the investment team’s portfolio construction approach.   I am not sure what was the construction approach when they bought 11% stake in August 2019 when they already had 7%+ stake.  

Invesco in the last 2.5 years – has cried foul, tried to replace MD / promoter family, approached courts, criticized the Sony deal.  So, what has changed? Well a seller has no choice but to appreciate the goods that he is selling.

Timeline of Zee – Invesco love story:

BUY – August 2019 – Invesco Oppenheimer buys 11 % stake in Zee @ Rs 400 to help promoters pay debt. (Stock jumps)

FIGHT –   Sept -2021– Invesco releases open letter Calling for EGM and change in board and MD Puneet Goenka.  (Stock jumps)

CRY – Sept 2021– Zee announces deal with Sony. Invesco says promoters to benefit from the deal. (Stock jumps)

Retaliation – Oct -2021 -ZEE claims Invesco was a front for another company.   Hinting at an Oil and gas Behemoth turned telco.  

CRY foul – Nov 2021– Invesco approaches the court against Zee and then later High court says – EGM has to be called.

Gives up and starts praising – Mar -2022 -Invesco gives up a call to remove ZEE leadership. Starts to say the Sony deal is Good.

Partial Dump ZEE- April 2022 – Invesco to sell about 7.8% stake in ZEE around Rs 270-290 (Bought at 400) despite believing Sony deal is good for the company.

Can we learn?

While we don’t know what Invesco learned from this experience with ZEE.  The bigger question is whether the investors buying the stake offered – have learned anything?

  • Can you trust the company again?
  • Can you expect ZEEL to work for minority shareholders? The Sony deal was pretty sweet for promoters only.
  • How clean are the books and how clean will they be?

I had written a series of blogs earlier – raising reasonable doubt in the past. Will recommend rereading – so that you know what you are getting into.

My blogs on Zee:

Why are Zerodha and ZOHO Ceo’s arguments on listing mistaken?

A case of Tail wagging the Dog. You always have a choice between Dmart and Reliance Power.

Recently Nithin Kamath CEO of Zerodha has tweeted the reason to Not IPO is because it burdens with unrealistic expectations and I quote “For a stock to do well, you have to outperform”.  The quote was retweeted by Sridhar Vembu – CEO of ZOHO and he quotes “I cannot run a public company with the kind of hyper-inflated valuations that are common today”.  

Companies performance expectations – decide valuation. Stock price do not decide company expectations.

The price of a stock is a function of the crowds’ expectations of the future potential of a company’s cash flows.  These expectations, in the long run, are set out the company – in terms of guidance and explaining to investors what the opportunities and risks lie ahead.  On a given day – however – As Warren buffet puts it – Mr. Market may behave like a Drunken psycho – very enthused on a few days and very depressed on others.

IRCTC stock moved up 3 x in a year -does not mean Indian govt decide to launch more trains and sell tickets to justify the stock price. It is very very foolish to think that investor expectations and stock prices – should anyway influence promoters/CEOS to change how they run a company.

Tail wagging the Dog?

The IPO problem – Valuation greed.

Nithin Kamath on 7th April had tweeted a set unconventional reason of why he was not considering an IPO on April 7th.  One of the key reasons was that – there was no need to raise money.   We don’t want to raise money because somebody is ready to give it to you.  Zerodha was profitable and debt-free. This was very well applauded and somebody was needed to point out the excesses of investments bankers and corporates. 

Having been part of IPO mandates – one of the portions of every deck or presentation is about the timing of the IPO from a greed perspective.  Investment bankers spend time explaining to the corporates why the markets are hot and especially for their sector and this is why the company needs to go for IPO now.  Also, after a very successful IPO in a sector – investment bankers reach out to other private companies in the sector explaining to them – why the sector is hot and the timing is right. Also, the Investment bankers get into a rat race of quoting the highest possible IPO price to win the mandate – building the bluest of blue case scenarios.   

We had reached out to a TATA company for an IPO and said the market is currently interested in your sector and valautions high. The TATA mgmt was quick to retort – “Do you think we list a TATA company because the market is “HOT”.

Greed of wealth sounds bad – Pursuit of wealth sounds good

The desire to earn fame and wealth and to create value drives entrepreneurs. Azim Premji has been in pursuit of wealth since very early and built a mammoth enterprise and is proud to be miserly.  Despite that today he is one of the biggest philanthrope apart from creating huge value for investors, employees, and customers. Zerodha and ZOHO can continue their pursuit of creating wealth and staying private – but don’t need to discredit other businessmen who are trying the same via the listing. It’s no businessman/promoters’ fault if the company stock is overvalued – until and unless he is misguiding. 

NYKAA or Zomato – outperform market and not investor expectations.

NYKAA Falguni Nayar would have been heavily wrong if someone in 2012 asked her about projections for Nykaa for 3 years and maybe wrong today also.  New companies like Zomato regularly change course – like exiting Fitso and global presence.  There is no compulsion to make 2-5-10 year projections – nobody is forcing you. Companies like Zomato also don’t conduct qtly investor concalls – maybe to stay away from the quarter to quarter focus.

One of India’s biggest private media conglomerates – when I pitched them for IPO (Part of my job) clearly said to me – We don’t want a 25-year-old analyst questioning our chairman on Quarterly profits and targets. We don’t live quarter to quarter.

STOCK markets don’t live Qtr. to Qtr. either

It is often blamed by businessmen/corporates that analysts and investors are short-sighted.  Well, I can speak for the investor community at large – Don’t be fooled by our questions.  Our interest is in making money and enough literature/books have been written about the compounding of wealth and benefits of long-term investment.  Warren Buffet and RK Damani have exhibited it.  We investors have been alive and kicking as long as corporates have been and we know how to make money. CEOs should stop questioning the intent of stock markets and focus on their business. Investors should stop giving targets to CEOs and focus on the returns. 

Promoters can always list at what they think is right valuation

DMart opened at 2x of the IPO price and is currently at 15x.  Does that mean ace investor RK Damani was incapable of pricing his business right?  It only means, he priced at what he thought was right.   The same goes out for NYKAA, IRCTC, or maybe GR INFRA.  Nithin Kamath can list by pricing Zerodha like Dmart or Reliance Power. That’s his choice, but don’t blame current valuations and expectations be a reason to not list. Let it be the lack of needing money. and my struggles

Rs.10K reward for anyone who can help me icici direct FNO working (problem 3).

Disclaimer:  I have been an employee of ICICI Securities and retired from their after 12 years of employment.  (80% of my work career).  I am by default a customer of icici direct for 14 years as employees of icici securities can only use icici direct for investing.  

Problem 1: The backend cares a damn about customers; the front end is not trained enough to respond to queries of changes done by the back end.  

Situation:  Being an active market investor – I park my surplus fund in liquid funds (HDFC AMC), so that I don’t miss any opportunity. these funds are generally available at 24 hours’ notice and I am doing this for the last 10+ years.  However, since last, 1 month time taken to withdraw is 5-10 days. The reason being attributed is “pending for processing at the Registrar’s end.    This is a new development as customers have to select the mode of payment.

I only use the OLD icici direct website (the new one is shitty) and the option to select the mode of payment is only on the new site.  Also, the 2 options to select the mode of investment/payment are given as – PHYSICAL FORM and DEMAT FORMAT. Now common sense will say that the better option to select is the Demat form.  BUT icici direct likes to challenge common sense- demat form will ensure delayed payout, whereas physical from actually means electronic units. Big round of applause for nomenclature selection by ICICI direct. PHYSICAL from is the new IN thing.  Now the sums I am talking about are decently large and nobody at icici direct cared to inform me or their front-end team of the changes. Also, I have learned a lesson – always use the new site – the old site may be better – but mgmt. will ensure the shift to new adding such bugs.

I needed the money to do the HNI application in Nykaa. Lost opportunity.   I had applied for redemption on 26th October and reapplied on 2nd Nov as instructed by people at icici direct. Still not got my money.

Problem 2:  The namesake business of RM and equity advisors.

When I log in to icici direct account there are 2 people who are mapped to my account.  An RM and an equity advisor.  The RM while mapped – when contacted informs me he/she is not the RM. This mapping (BIG SURPRISE) is done by icici bank.  Why the hell is icici bank – mapping customer of icici direct???  Maybe it is to make the customer feel good. While in effect he cannot actually get any priority help.  Also, with icici bank doing the mapping, icicidirect blames icici bank for the wrong mapping and icici direct absolves itself from responsibility. I cannot of course reach out to icici bank for my problems with icici direct.  I should not be reaching out to the president of India if my MTNL connection is not working.

However, what is interesting is that the RM of icici bank is aware of all my investments via icici direct and is continuously asking me to do the MF investments via icici bank. this will help him personally.  Really appreciate the enterprising nature of icici bank, but please don’t compete with icici direct, and even if you do – please remember the convenience of the customer.

The equity advisor only calls you once in 6 months to make his presence known. He is otherwise of no help. 

Problem 3: Impossible to file tax returns using a report from ICICI direct.

Now that I have left icici securities – I can trade in futures.  However, for tax purposes, it’s nearly impossible to calculate your annual F&O profits from reports provided by icici direct. This is definitely a problem for people who have unexpired options and futures at the end of the year.  

In the F&O p&L, icici direct gives you your profit based on MTM and inflows but does not adjust for premium on options bought or sold last year ( which is fine).   In the F&O section – portfolio – it is not possible to know P&L based on dates but only based on contract month.  So even if you select April to march – the trades are done for next year’s April contract in March will be missing. And they do not allow you to select based on dates. 

Just to highlight what discrepancy it can cause – as per the F&O bill I incurred a loss of 10L last year, whereas as per the F&O portfolio I incurred a profit of 12L.  the reality is that I actually did a profit of Rs 10L.  But the only way to figure out to do the right tax reporting is to download and enter everyday contract notes and bill details.  And icici direct will not oblige in providing them in excel format – even if you ask/beg to the senior mgmt.

Why am I still continuing with ICICI direct and complaining?

Well, I have shifted 95% of my transactions to Zerodha.  However, after leaving ICICI direct – in a moment of heightened brand/company loyalty, I opted for the 3L prepaid brokerage plan.  I have exhausted 80% of it. Need to exhaust the remaining before I say goodbye.