Assessing value: My education as an investor by Rakesh Jhunjhunwala

By Rakesh Jhunjhunwala Source: DNA Money (Direct Link to the article)
When markets are experiencing irrational exuberance (making money in the stockmarket is taken as a birth right), to be in cash, and to be overinvested when the markets are gripped by fear and extreme pessimism, is as we all know easier said then done. “In markets it sometimes feels like being undersexed in an harem and oversexed in a dessert.” I think good investors should be always feeling undersexed when there is depression and oversexed when there is irrational exuberance. It’s a fact that one cannot be a successful investor without understanding markets. Markets are the basis and temples of capitalism. I have learnt that markets are ruthless and very intelligent. A market participant should always respect markets as being the ultimate arbitrators and deciders. I believe that the markets always decide rightly and correctly over a sufficient period of time. It is amazing that in a supposedly corrupt nation like India, the three companies having amongst the highest market capitalisation are Wipro, Hindustan Lever, and Infosys - companies with the highest perceived integrity. Sometimes, the ability of markets to filter and value truly astonishes me. Last, but not the least, my experiences as an investor have altered me as a human being. I, one of the most dogmatic men, have now learnt to say, “I can always be wrong” at the end of every opinion I express. The stockmarket has humbled me. I have also learnt that good investing calls for a careful examination of all points of views and alternative scenarios. The ability to adapt and change and mitigate prejudice is crucial to success in the investing world. Discipline, just like in all walks of life, is very important in investing, too. I have learnt that in investing decisions all the factors are numerators but there is only one denominator - which is pricevalue. It is ultimately the price or value at which you buysell shares which determines not only your profits. It is also a very important aspect of the risk that you take. At a value, I am a buyer of everything, including the most hated companies. It is important “what you are buying but it is more important at what valueprice you are buying.” I thought ‘beauty’ was a difficult adjective in the English language, until I started to assess value in order to invest. In conclusion, both ‘beauty’ and ‘value’ are the most difficult adjectives in the English language. My quest of finding both beauty and value is a process of education that is just never ending - as I learn something new and educative with every passing moment. The above piece, written by Rakesh Jhunjhunwala some time back, is as relevant today as the time he had written it