Tuesday, April 1, 2014

Cloning as an investment strategy

The idea of cloning other good value investors is a great one - and I learn't of this word from reading articles about Mohnish Pabrai. Mohnish Pabrai, for those new to value investing, is a very good source of learning and I highly recommend reading his book - “The Dhandho Investor: The Low – Risk Value Method to High Returns”.

Cloning as Pabrai describes it is getting good ideas from other people you respect, trust, or think have the right ideas. The point is not to just blindly copy but to understand why those people are invested in these securities. Once you have analyzed it yourself you can then go ahead and take your call on it. Typically you can read about big value investors from the annual reports, SAST disclosures on BSE and through the media.



The advantage is that you save time screening for good ideas. Given the vast universe of listed entities it becomes extremely challenging to study everything. Even if you are in a position hire a big team, careful value investing requires that you study each and every detail yourself, and it is simply not possible to do so for all the 50K+ listed companies globally. Even just in India there are 5K+ listed companies and studying all of them if you studied one company a day would take 13 years and 9 months! Mind you studying one company a day working full time is also a huge challenge and is a pace that is likely to lead to mistakes.


There is no bravado in having only original ideas. The point of value investing is understand the details and making your own rational decisions based on the facts about the underlying value of the security or the business. 


It is important to note that taking solace that other good and detail oriented investors are also invested does not justify losing money on someone else's idea. Cloning is only an idea source - it cannot replacing studying the securities.


Unfortunately for me I don't know who the most successful value investors are in India. If you have an idea of who the consistent performers are please comment on this post but a good place to start is the moneycontrol.com WHAT STOCKS DO THEY HOLD? page.

The most talked about investors online are:

  • Dolly Khanna
  • Rakesh Jhunjhunwala
  • Atyant capital
  • Prof. Sanjay Bakshi - Tactica capital management (apparently) and ValueQuest - both these search words dont throw up holdings on money control. You can check out his blog at fundooprofessor.wordpress.com
  • Safal Niveshak blog
  • Parag Parikh (PPFAS Mutual Fund)
  • Chetan Parikh (Jeetay Investments)
Please let me know who else can be followed online.