'Focus On The Business, Assess If You Want To Be A Partner For 10-20 Years'

Professor Sanjay Bakshi, a value investor, behavioural economist and adjunct professor at Flame University, Pune, gives his unique perspective on how to choose a stock, in an interview with Nidhi Sinha, editor, Outlook Money, as part of the Wealth Wizards series. He also shares his learnings from role models Warren Buffett, Charlie Munger, Benjamin Graham and others, and how being a chartered accountant, economist, investor and teacher make him into what he is today. Edited excerpts from the interview

- Nidhi Sinha

Could you tell us something about your journey and your main learnings from it?

I started practising in India in 1994, after returning from England, where I studied at the London School of Economics (LSE), which is where I caught the value investing bug.

Prior to that, I was a chartered accountant in India. (At that point) I knew accounting, but I had zero idea about business, economics or psychology. I picked these while reading the letters of Warren Buffett, who I discovered at LSE. Through those letters, I found my calling and decided that I want to be a value investor and sort of plunged into it.

I’ve been lucky in the sense that India has grown over the years, and I think a lot of growth lies ahead.

One of the learnings from my three decades of practice is that you should not interfere with the workings of compound interest, so slow down. Initially, as an investor, I used to do a lot of trading. I would buy 60-70 securities, and churn the portfolio twice or thrice or more in a single year. Now I make two to three decisions in a year, and I think even that needs to be reduced.

The reason for that is my approach to investing (in stocks) is (to treat it) like a business. That’s what I have learnt from my gurus. Stocks are not pieces of paper. They are claims on a business and you’re a partner. As a partner, say, in a commercial real estate business, you’re forced to look at it exactly the way a businessman would look—at competition, at the quality, at the potential of earnings to grow over time, at the downside risk as to what can go wrong with the building or with regulations, and so on. But you’re not looking at the price of the building, because there is no such price out there.

You talked about going slow when it comes to investing, but that’s what most of the younger generation is not doing. What’s your advice?