Fusion – The Global Tofay

Fusion - The Global Tofay Global Today

What is the ultimate investment and how do you go about finding it?

I am influenced by Taoism and stoicism, which basically teaches you to enjoy the process. Recently I read the book Zen and the art of archery. In it the famous teacher teaches the student the art of archery. The student does not get to the process, is trying hard and is practicing day after day. One day the student is fed up and accidently provokes the teacher. The teacher does not respond and calls his student in the evening. The student arrives in the room and tells the student to set the target and he does it.

The teacher tells the student to switch the light of and in complete darkness. He takes the aim and he strikes the target and then again he strikes the target on the exact same place where the arrow had hit before.

The teacher tells the student it was his years of practice which let him hit the first shot but the second shot was not his doing. He told the student I did not do it, It did. “It does it”.

When you practice an art and after you have practiced the art passionately, rigorously and patiently. The artist becomes the art. He becomes so involved with the art. He looses his ego, himself and becomes the art. There is no difference between the artist and the art now. He does not take the shot for the crowd, he does not care about the claps, he does not care for the target even, all he cares for is the process and the process takes care of everything.

Now to the original question. The key to great investments is not alpha beta and gamma theories. The most under researched area of investments is small and mid cap. How to place the bet in them?

Find companies which earn really high returns on capital employed and can scale. Now the next question to ask how much to for it? There is no direct answer to this question. Its more art than science. But what works for me I will tell you that. There is a price at which you know you cannot loose money in it. For example a company earning 30% Roce for the last 5 years and has say market cap of 500 crores and earns 250 crore net profit and you go and check the balance sheet and the company has current investments worth 200 crore and has virtually no debt.

Now the next question. What is the time horizon? Now this is what differentiates men from the boys. If you can remain patient you can earn a lot of money. The investment might go down by say 50% and even then you know that is just the quote, market does not realize the value but it will eventually. Now say it goes by say 50 % and if you can remain rational not get too excited.

Now the question comes the hardest of them all. When to sell?

Guess that is the hardest of all . Just looking at the price would not tell you everything. How strong is the brand of the company. If you know the product is sticky or not. It is non tangible sort of a thing. Can go on and on on this subject. At what pe it becomes ridiculous and market is clearly getting too far ahead. You would know about it trust me. To come to this stage you will have to read a lot of market history and how far does the market over value. It will come with time.


Leave a Reply

Your email address will not be published. Required fields are marked *