Hello Sir,
Hope you are doing well.
It's unfortunate that Rakesh Jhunjhunwala has left us too soon. However, there's always something to learn from him.
Recently, his close friend and a legend himself, Ramesh Damani did an interview with Moneycontrol and shared some interesting insights into the life and the thought process of RJ.
Below, we have shared excerpts from the interview of Mr. Damani with moneycontrol. We enjoyed reading it thoroughly and hope you enjoy it too.
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Excerpts from Mr. Ramesh Damani's interview with Moneycontrol
His wealth -
- Rakesh had come into the market with Rs 5,000, when he passed away, he had built wealth of around Rs 28,000 cr. That is a CAGR of 54% over the last 35 years!
- His big break, which moved him into the super league of investors, came in the 2003 bull market.
- In 2003, he realized the new bull market was coming and wrote the now famous article for The Economic Times, titled the ‘Coming Bull Market in India’. The index went from 4,000 to 20,000, over the next five years, his three picks at that time – Titan, CRISIL and Lupin–all became almost 100 baggers over the time.
- His initial money was made in trading. It was only 2000- 2003 that he converted to investing. So, while the initial money was made through trading, serious money was made through investing.
What's made RJ a great investor -
- The things great investors have in common are their passion for the stock market and their bullishness on India. If you consider what has happened between 1990 and 2020, we’ve lived through many crises – Kargil war, global financial crisis, COVID, etc. Through it all, they’ve always retained their bullishness.
- His uncanny ability to predict when a bull market was about to begin. I’ve seen him predict the trend in the ’89 bull market, then the bear market in 2000, 2003 and 2008. When we bottomed out at COVID, he told us in a con call with his friends, that a new bull market is beginning and now it seems astute.
- Rakesh was one of the first people to impress upon us the importance of finding a great business, and the importance of long-term investing and believing in the promoters.
- With him, what was important was the conviction with which he bought the stock. He didn’t buy 10,000 shares at $50 a share. He put money on the table, he bought 5% of a company. I don’t have the courage to do that. I’m probably a product of my middle-class upbringing, so I’m scared to lose money, but he always used to say with pride, ‘mein tho Dalal Street sadak chaap hoon. I don’t care. I came from nothing. I go with nothing’
Insights into his trading -
- He himself said that the joy and the high trading gave him was hard to replace. He was like a kid in a candy store. He just loved the thrill of building a leveraged position, talking about it in the evening or being bullish about a position against someone else’s position.
- One of the first trades he did was in Tata Power, where he realized that the cost of borrowing was less than the dividend yield. So he borrowed money, bought the shares, got the dividend, repaid the interest and the stock went up. It was a brilliantly calculated trade, which was placed on the difference between the cost of borrowing and the dividend yield.
- What distinguished him as a great trader was his ability to take losses. If your trade goes against you, you need to square up the trade and move on to the next one. A lot of traders cannot do that. Like any other competitive person, he didn’t like to lose money, but he could handle it.
Passion for markets and making money -
- Rakesh was 24x7 in the market. He’d go for his morning walk and discuss markets, he’d come to the ring to discuss markets, he would have lunch and discuss markets, he’d go for a drink and discuss markets.
- When we were at Geoffrey’s (a pub in Mumbai), which was one of his favorite haunts. That evening, after sitting around and shooting the breeze, we were leaving and he sort of stumbled and fell. We immediately picked him up, put him on a chair and one of us went to get him a glass of water and another a towel. By the time they were back, he was already on the phone talking to his broker finding out the rate for gold or Dow at that time. He didn’t miss a beat.
- He went through one crisis after another the last two to three years of his life, but he never stopped tracking the markets, whether from a hospital bed or a wheelchair or when he was in an inspection room.
- Once, we took a trip to Hong Kong, many years back. We were out gambling till late night and wound up at 2:30 or something like that. Remember Hong Kong is now two and a half hours ahead of us. So when the market opened, I think at nine o’clock, it was 11 there and we were fast asleep after a hard night of partying. But when we went to meet him, he was already up after about two hours of sleep because Tata Motors was announcing its results that day.
- He often used to tell his friends over a drink, he rarely had coffee, or over a pan, that ever since he grew up, he had only one desire, that was to earn money, to earn money, to earn money. And earn money just for the sake of earning money. Not to buy things, but he liked the idea of the zeros in his bank balance.
Story about Titan purchase -
- In 2003, his broker called him and said that he had 10 lakh shares of Titan that someone wanted to sell. ‘If you buy 10 lakh of them, the price is 40. If you buy 30 lakh, the price will be 38, and if you buy 50 lakhs, the price will be 36’.
- Rakesh understood that at Rs 40, the market cap was around Rs 300 crores. He thought, great brand name and theek hai, it’s probably worth more than that. So, he bought the first 10 lakh shares just on an instinct. Then, he started following the company.
- Over the next few years, he kept adding to his position and bought almost 5% of the company. So, he first invested, then investigated, then when he was convinced, he added to his position.
Some picks which didn't do well -
- He got some things wrong too. For example, he had a company called A2Z that didn't work out, he had a company called Bilcare that didn’t work out. But, if you look at the amount he lost in those, compared to the amount he made, you begin to understand what investing is about. He could take those losses and still compounded at 54% over 30 years. So, it’s not that great investors get everything right. They are humble enough to acknowledge that they made the mistakes, but they're smart enough to take their losses and move on.
- Once he gave up on a promoter, he sold the company, he didn't care what price he was getting out at or how long he held it, or what the promoter thought about it. He didn’t care. He would get out of it. He always took bets that he could handle (even if there was a loss).
(End)
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Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.
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