Harvest your bargains and move on, says Raamdeo Agrawal

Raamdeo Agrawal, Motilal Oswal Financial Services

You have to harvest your bargains and move on, said Raamdeo Agrawal, Chairman & Co-Founder of Motilal Oswal Financial Services, at PMSBazaar’s Alternative Investment Summit.

He explained that particularly in a country like India, where economic dynamics are cyclical, and where laws keep changing, it is unlikely that great companies will remain great for a "very, very long time".

So Agrawal believes “we need to correct as we go along”. For the ace investor, growth is a key principle in investing.

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Agrawal is of the view that high growth is not possible for an extremely long period of time. Even a high-growth company, after three-four years of 35-40 percent growth," gets tired", he said at the event.

He elaborated, “I thought if a company is growing, it's doing well. It's a consumer company. And all the analyst companies, they are guiding for a continued 25 percent growth, I have to accept it. But what happens is external environment changes, and suddenly the growth collapses”. Because of this collapse, the stock which run expanded to for say, 80 PE from 20 PE, also collapses, he added.

“And now your holding is so big, that when you go to sell the stock, actually, you're destroying the value yourself”.

The Executive Director of ASK Group, Bharat Shah, who is one of the most renowned investors in India, said that ultimately, in any investment or in any opportunity, if it does "wonderfully well" for a long time, it lulls you into a sense of "complacency".

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“Therefore, it is not a question of intellect or recognising the changes, it is a mental block or the sense of settled complacency that you reach, whereby you lower your guard and you probably start ignoring things fraying at the edges or you start ignoring some of the warning signs”.

“The greatest returns are made from compounding,” Shah added.