Key Takeaways from Capitalideasonline Investor Meet - 2006

I am summarizing key takeaways from Capitalideasonline Indian Investor and Fund Manager Meet, held in Mumbai on 25th Jan’06. It was a great event, with free flow of ideas, with most of the biggest Indian investors & fund managers in full attendance. The full transcript will be available on www.capitalideasonline.com.

The Rountable key points:

1. We know the price of everything, and the value of nothing. Investing is all about gauging the difference between the two.

2. In the last 10 years, Indian Market Index Sensex has only doubled (from 4000 level to 9000 levels), but many stocks have created enormous wealth. Most important is to study individual stocks, rather than track market.

3. There will be humungous opportunities in India over the next 10-15 years, market movement in 2006 per se don’t matter.

4. India is on the cusp of major change – Paraphrasing Warren Buffet’s comment on America and Bangladesh, we are present in India at the right time.

5. American market may go down in the future, but will not be out. You can bet against dollar, but not against American Economy.

6. Patience, Luck and discipline will be important to make money in the near term.

7. Indian companies have started pumping in capex in the last 2-3 years, its efficiency over the next 3-4 years is yet to be seen.

8. Saving as % of GDP has increased from 24% to 30%, yet investment in stock market is 2% of saving. Assuming even 10% goes into stock market over next couple of years, this amounts of USD 100 b and growing – more than USD 10 b on FII, USD 3.5 b of Mutual Funds, and USD 2 b of LIC. With growth in insurance sector, this money will come to stock market.

9. The three main worries in the medium term are:
- American Economy slow down
- Oil prices
- Strange situation of all asset classes at their peaks

10. India economy will get accelerated power of compounding with Rupee appreciation.

11. Indian GDP has increased from USD 300 b to USD 750 b and will increase to USD 1500 b. Thus absolute increase will be much higher.

12. Some of themes discussed :
- Indian consumption story (GDP/ per capita at inflection point)
- Capex Cycle with high ROCE
- Outsourcing across sectors (not limited to Technology)
- Rural consumption increase with increase in land and gold price
- Duopolies / Monopolies in many sectors
- Lifestyle companies with disproportionate increase in volume and value of upper end customers
- Unlisted companies in lucrative sectors getting listed with surging stock market
- Banks with Indian Economy growth
- Large Textile companies after MFA

13. Around 10-12 individual stock ideas were discussed, but I would rather wait for capitalideasonline.com to publish these.

14. Unfortunately, Rakesh Jhunjhunwala did not discuss specific ideas but gave the following comments :
- Conviction in the Indian growth story will get tested in the near future (I think means increased volatility)
- Need to Learn about entering stock in value phase and moving out in ebullience phase to get higher return (i.e. allowing momentum investing to benefit from bull market)
- Need to stick to winners rather than pure value plays
- Stick to investing decision in face of skepticism and volatility
- Return will be moderate going forward
- Need to develop own investing philosophy rather than following any investing guru

15. On a sidenote, Mr. Chandrakant Sampat told me the following investing principle:
- Keep it simple
- Invest in business you understand
- Invest in Business you can predict for next 8 – 10 years
- Company which generates FCF/ has little debt