Thread by @stockifi_Invest

A Mega-Thread on Chandrakant Sampat

The Legendary Veteran Value Investor of India

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1) Chandrakant Sampat known to many as the Warren Buffett of India is regarded as a veteran stock market value investor.

2) He was a first-generation investor who was influenced by economist Peter Drucker.

3) At the young age of 26 after quitting his family business in 1955 he entered the Indian markets at a time when all one needed was “a checkbook and a pen.”

4) Back then in the 1950s, the Bombay Stock Exchange, though just an association of brokers, was a functional bourse.

5) He began betting on companies such as Hindustan Unilever, Indian Shaving Products (now Gillette India) in the 1970s before they became favorites.

6) He used to spend several evenings at the Hindu Gymkhana often seeking insights especially when the markets used to be bearish.

7) He is known to have spent decades honing the art of evaluating the actions, not the intent, of corporate houses.

8) He had one piece of advice for investors: look for companies with the least capital expenditure, where the return on capital employed should not be below 25%.

9) He had two main parameters in mind while looking to invest in a company. Minimum capital expenditure, at least a 25 % RoCE.

10) He stayed invested in companies like Gillette for so long that after the dividends and bonus, his average cost came to a few paise in many cases.

11) He used to emphasize that Capital allocation is the most important part of a business.

12) Ultimately it is the use of capital and innovation that give one the value of the company and not the markets.

13) His take on the significance of Innovation:

“If we achieve profit at the cost of not innovating, they are not profit. We are destroying capital. Rather, if we continue to improve the productivity of all key resources we are going to be profitable not today but tomorrow.

14) He drew attention to the industry trend that how modern-day mutual fund managers are rewarded on the basis of their performance and not on the basis of value.

15) He had mentioned " How it triggers them to chase momentum and not value. Chasing momentum is like gambling.

16) You must remember that a history of good dividends is more valuable than how quickly the share price has gone up in the last few months."

17) He had also raised warnings on the credit card culture of youth where there are only accrued costs not incurred.

18) For him physical fitness was one of the top priorities. He was a regular jogger and extremely health-conscious human.

19) Moreover, he followed a very simple diet. “I have not eaten sugar, fatty foods, or salts in the last 50 years" he had said.

20) He was openly repulsive of the educational system and was often cited as saying “knowledge is that which liberates and not captivates”.

21) That was a translation of one of the shlokas from The Bhagwad Geeta, much of which he knew verbatim.

22) He used to always talk about the significance of frugality

"In my view, frugality can beat all inflation. I still don't own a car, I don't have a mobile. Ours is now an economy based on waste. If you change that, other factors will correct themselves."

23) "It's human nature to follow the herd; when the Sensex hits an all-time high, even those who have no idea of a shares storm the market. During a bear phase, there's invariably a stampede to exit." He had added.

24) “I don't believe in valuations. I follow a migrationary path for the companies I invest in. Take Gillette for example. Twin blades constitute a mere 10% of the Indian market.

25) Bangladesh has 33% penetration. If India catches up with Bangladesh, Gillette will be an Rs.15,000 crores company having a net profit of Rs.2200 crores. At 40 times discounting, that is Rs.27,000 per share.

26) That is the migration path that a valuation cannot show. In 1979, Hindustan Unilever was an Rs.140 crore company. In 2013, its sales were Rs.27,000 crores. Again, only a migrational thought process would have shown that and not a valuation.”

27) Towards the latter part of his investment journey, he became bearish on the stock market and kept most of his wealth in cash or cash equivalents.

28) He had stayed away from investing in the stock market as he grew critical of the policies followed by global central banks.

29) His pessimism was also due to the state of the Indian economy and thus, the fate of the corporate sector.

30) He was worried about India’s rising fiscal deficit and felt that there was a scarcity of investment options as many companies had negative EVA (economic value added)

31) Even in his later years he used to travel by public transport (despite owning cars) and refused to use a mobile phone.

32) He died at the beginning of 2015 aged 86.

33) He proposed the de-bureaucratization of the whole process of Foreign Direct Investments (FDIs) with a condition that multinationals seeking entry into this country must get themselves listed on the Indian bourses.

34) He believed in keeping only 8-10 great companies in his portfolio, he never covered more than ten companies in his investment portfolio.

35) In Diversification many companies will go wrong and very few will come right, he used to say.

36) He is said to have inspired and mentored many marquee Indian investors including Late Parag Parikh and Mr. Radhakishan Damani.

37) “If you listened to him, the only thing you would get is wisdom,” Parag Parikh said.

38) “He was disciplined, not just about investing but all aspects of life. Whatever I am is because of him, he was my inspiration to enter the stock markets.” added Parag Parikh.

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