Edited excerpts of a chat with Abhishek Banerjee, smallcase manager, Founder & CEO, Lotusdew:
Which event in the history of the Indian stock market would you relate to the victory 83 cricket world cup?
According to the Western world, 1983 was the year when the Indian team was the underdog and was not expected to win the World Cup. This was one of the few times in that decade when the entire country felt proud to be called an Indian. The heroes of the team delivered what was expected and the fans were delighted, happy, and excited by their performance. In the last few years, we have witnessed many such heroic efforts by great players of the Indian Team.
I think how RBI has managed inflation compared to neighbouring countries is no short of such a heroic act. Though we don’t celebrate it enough, how covid was managed in India, how inflation is being managed in India, how GST was implemented in India – these are once-in-a-generation events like the win of 83.
The pride of being an Indian was witnessed by all Indians residing anywhere in the world. In fact, the desire for the best minds to migrate outside India is on the decline, and the reverse osmosis of talent back to India is happening every day.
Do you think, just like winning the toss at the start of the match can be one of the deciding factors for the outcome of the match, subscription numbers should also be one of the factors for selecting an IPO?
Basically, winning a toss helps a team decide which strategy to start with. Every captain has a strategy, whether he wins or loses a toss. Similarly, every management has a bear and bull case strategy for their business. The key is to perform like a good captain Virat Kohli and can adapt to the situation as it changes.A subscription is a point-in-time number, whereas a company lasts beyond IPO. It’s like asking if we should decide the married life based on how many guests turned up for the wedding. How many people came that night has little to do with how married life transpires for the couple.
What are your selection criteria for building a portfolio; do you believe in past performance or pedigree of a player? Who is your cricket Idol, and which quality of his, you would like to replicate in your portfolio/strategy?
Both are necessary. You can think of past performance as the pitch and the sportsperson as the pedigree. A person with a good pedigree can do well in a bad pitch. Similarly, a good pitch can support newcomers. Investing is a business of pricing uncertainty by measuring better than others. Hence, in the context of cricket, having a good venue is equally important as the team players. Home advantage is like a sector tailwind.
It has to be Virat Kohli. I am a fan of his courage, unscripted talent and charisma. I think a lot of that comes from quality and hence we focus on quality of board governance as one of the key criteria when selecting microcap stocks.
Do you select a specialist or an all-rounder for your portfolio/strategy and why?
It’s a great question, like a team needs all kinds of players so does a portfolio. We need heavy hitters and also good fielders. You can think of heavy hitters as high beta stocks and fielders as the stocks the rest of the portfolio depends on, when the heavy hitters don’t perform that well.
Narrate a market turnaround event that you can relate to India’s GABBA test victory in 2021.
Though it’s great entertainment, I usually don’t believe in turnarounds, as minority shareholders need a sustainable strategy. Like it, the game, skill, and luck were equally important. Hence, turnaround is not something we focus on as an investment strategy in public markets.
However, the situation is quite different in our private market portfolios. Private equity has an insider view, controls, and codirects with the management. When a reputed private equity firm steps in to affect a turnaround in publicly listed companies, that’s when we get excited. The recent one to do that was the case of Adani group of companies.
Who would like to nominate Dipti Sharma for your portfolio (a well-run company by a women business leader)
Nykaa is that company and Falguni Nayar is that player. She had all the experience to see such endeavors turn sour, yet she dared to do it. Entrepreneurship is often about courage, luck, and skill and less about mathematics. Hence, what she has done deserves such a nomination. However, I am not sure if I am doing justice to anyone by comparing such wonderful leaders from different domains.
How do you decide your investment strategy for the investors whether they should opt for a Test match or One Day or T20?
Buy an index fund to play a test match and buy stock baskets for T20 and One Day. As you watch every kind of game, be open to every kind of investment solution in your portfolio. Like a well-balanced diet for a top performer, a well-balanced allocation is important to keep your portfolio in form.
Disclaimer: https://lotusdew.smallcase.com/#disclosures