Warren Buffett’s investment philosophy may not make you rich, explains Samir Arora

‘I am an old guy and not just an old school guy’, said Samir Arora, founder and fund manger at Helios Capital as he began his exclusive conversation with Money9. He said he never knew he wanted to be a fund manager, only that he wanted to do finance and back in those days there were ‘no real jobs’ in finance in India. This led him to Wharton School in the US and then joined Alliance Capital as Chief Investment Officer. “I really, really, really, really, enjoy my job and investing,” he said.

Even after three decades of investing in equities, talking and discussing the ups and downs of markets on an everyday basis, one could easily sense how passionate he is about stocks and investments in equity markets.

Secret of success

When asked about whether it is any one particular investment that changed his life, he said, that it is the methodology that has worked for us and not any one particular stock performance.

“The market in rupee terms in the last 25 years has gone up 22x while my NAV has surged 300x”, he said

However, investors must note that even successful investors have seen their wealth getting eroded because of some bad decisions. Speaking about if there was any mistake in his investment journey that led him to book huge losses he said, “Many of our stocks have gone to zero”

Big mistakes

“I invested in Amitabh Bachchan Corporation Limited (ABCL) in 1998/99 and we had invested $1 million and when I left Alliance, we had marked it down to zero”

There have been many other stocks that he said had eroded 80-90% of their wealth.

‘Warren Buffett has destroyed value’

When asked why he disagrees with Warren Buffett’s style of investing, he said that he had made a presentation to show how Warren Buffett had destroyed value.

He said, “Take his top holdings, Coca-Cola, American Express, Wells Fargo and compare their returns with Berkshire Hathaway’s returns in the last 20 years, you will find that Berkshire Hathaway has done better. This means Berkshire Hathaway minus these holdings has done better.”

While these stocks have given robust returns for a period of time, when perhaps Coca-Cola outperformed and created huge wealth for him, Arora says that one must note that just because held the stock for so long, the higher returns have got diluted over time.

“Holding a stock forever is not needed. Investors must hold for long but be invested in a stock during its sweet spot”

Not up for new IPOs

Right ahead of new-age technology companies like Zomato, Paytm, Policy Bazaar, Nykaa lining up to hit the street, we wanted to know if he was excited as this has been the hottest new investment everyone was talking about.

“The problem with these new companies is that they are being sold by financial investors. I have made 100x returns on IPOs like Zee and Kotak Bank back in the 1990s but at that time these companies went to public at a very early stage. The new age IPOs are held by financial investors who will not let you in easily. Don’t see the new IPOs garnering returns as we have seen in the past,” he said.

“If today Paytm comes at $25-30 billion, it cannot even go up 5x, if it does, it will become bigger than Reliance Industries,” he added.

Advise for first-time investors

‘You cannot get rich by investing in markets, even if you can, it takes a long time”, said Arora while sharing tips for the new retail investors looking to create wealth by investing in equities.

He said that investors must know the job of investing in the right asset classes is to know you will earn higher returns than elsewhere.

“It is unrealistic to expect that a salaried person will get rich by investing in five years”, he said.

On the factors one must keep in mind while selecting stocks he said that investors must look at are whether a stock is thematic, the other important factor to note is whether the industry is competitive. One must also check the history of the company’s management and see whether the stock is trading at fair valuations.