In this Guru Portfolio interview with Mint, Veliath shares his personal finance journey, and how achieving financial independence has changed what financial planning means to him.
How did you get started in the stock markets?
I have been curious to know about brands and companies since my college days. The fact that some large corporations own most of the assets and the impact their products have on our lives has always fascinated me. I used to read a lot about brands, companies and wealth back then. So, after my graduation, I boarded a train to Mumbai as it was the place to be for anyone interested in the stock markets. Fortunately, I got a job at Kotak Securities under Uday Bhai (Uday Kotak) and started my career in the BSE ring as a floor trader during the ‘open outry’ trading days.
When did serious investing start?
It must have been in the late 1990s. I was fortunate to be paired with Chandrakant Bhai (Chandrakant Sampath) to execute his trades during his ring days. He is the one who taught me about value investing and I am deeply indebted to him for that.
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What inspired you to start your own investment management firm?
I did not enjoy living in a crowded city like Mumbai and wanted to return to the peace of my hometown. So, in 1999, I finally decided to leave Parag S Parikh and come back to Kerala. There was a vibrant investment community and many investors started reaching out to me for advice on equity investing. So I started looking for a formal forum and I was advised that PMS is the way. In 2003, we got the PMS license and Equity Intelligence was born.
Can you take us through your plans?
Equity is our strength. We invest only in listed public stocks. We keep things very simple and focused and believe that all sensible investing is value investing. Coming to the plans, we offer only one value investing strategy in both PMS and AIF – the only difference is in the investment format right now. The strategy remains the same in both.
How are you investing now as far as your personal portfolio is concerned?
I always invest 100% in equities other than my house and farm where I live.
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How often do you review your asset allocation?
Not Applicable. 100% equity allocation is suitable for us and we expect our clients to trust us with only that part of their savings which is for equity.
How much of your personal investment has been allocated to your firm’s plans?
none. There may be some overlapping stocks, but my personal investments are in riskier bets, including some penny stocks. We tend to be more conservative when it comes to customer money, especially after our poor performance during the small and mid-cap recession of 2018.
You are popularly known as small-cap jar. Why is your portfolio concentrated in the small-cap category?
I am always excited about opportunities for small companies in a country like India. Development is not an option, it is mandatory for them. Also, it is among these smaller companies that you can find the multi-bagger. Interestingly, even billion-dollar market cap companies are classified as small-cap in India.
Can you share some small-cap picks that turned out to be multibaggers for you?
Hindware Homes, Tata Alexi, CDSL, PDS, Raymond, Gati and West Coast have been some of the multi-baggers. The recent historic financial reforms in India are driving positive structural changes in our economy and creating a transformative environment for most companies. Some small and medium businesses may not survive, but many efficient companies with relevant products/services and managed by smart people can grow well and reward the shareholders. It is important for multi-baggers to spot such changes in small-caps early.
One strategy that worked for your portfolio over the past year and one that didn’t?
As I mentioned earlier, we follow only value investing strategy. In stock-wise, Raymond and PDS, both textile stocks, and CDSL were outperformers in FY22. Fortunately, stocks like Tata Communications, J Kumar and Unichem, which were underperforming last year, have started doing well of late.
Which stocks have contributed the most to your portfolio?
In recent times, companies like Hindware, Raymond, Unichem Labs, Gati and BEML etc. have given us good returns and we continue to maintain them. CDSL and West Coast are the two stocks where we have made good profits. Also, the Tata Alexi from which we have recently moved to Tata Communications.
Do you invest in international stocks?
No, India remains a paradise for value investors, I think it will remain so for the next few decades as well. Why give up this paradise for geographical diversity? I admit we don’t have much of a list of new age tech dramas in India, but there are plenty of other opportunities
How do you choose stocks?
There are no hard and fast rules for stock-picking. I keep my eyes and ears open for any interesting hints. It could be anything—an interesting piece of news, a promoter action or sometimes even a grapefruit or a scuttlebutt. Every stock has a unique story. If I find the price attractive compared to the value proposition, I dig deeper. Having been in the market for the past three decades, I know a lot about these companies, so when someone tells me the name of a stock, its entire past comes to mind in a jiffy.
What does money mean to you?
I have seen both sides – from abject poverty in the early days to a comfortable life now. Wealth for me, in a sense, is about overcoming my hardship in the beginning, now it’s about helping others around me do the same. Whatever I can, I am doing it through my foundation and otherwise.
For how many months do you make provision for an emergency fund?
I have no emergency fund; In addition to the money I have with me to buy daily provisions.
Anyway, equities are liquid assets that pay out at T+2. However, I am different in this. I would advise others to keep 3-6 months of cost of living as an emergency fund. Also buying term insurance and health insurance will be good for your financial future.
How do you involve your spouse in family finances?
Life is short and I do not believe in financial planning. Of course, I am at liberty to say that because I have achieved financial independence. My wife is my colleague at Equity Intelligence.
How do you identify yourself as an investor?
I was lucky to be in the right place at the right time. And I was lucky not to be fooled by the randomness. I am a savvy investor who likes to keep things simple, both in investing and in general life.
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