RJ is dead. Long live RJ.
I met Rakesh Jhunjhunwala for the first time exactly two days short of 21 years ago, on August 17, 2001.
It was a Friday. I remember that date for a reason I’ll tell you in a bit. I was a cub reporter at Business Standard, writing for their investment supplement called The Smart Investor. Markets were reeling under the aftermath of the dotcom crash. Earnings yield in India were significantly higher than the bond yield at the time. I was working on developing this idea into a story, and called on Jhunjhunwala’s landline. He was not someone easily approachable for the media in those days. He answered and said, “Yes, Ma’am”, in his inimitable style. I explained my story idea and he replied, “Come to my office.” I asked when. He said, now. I rushed to the first floor of Vittaldas Chamber.
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It was a bare room, partitioned into two halves by a PVC panel. As I walked in, I passed a couple of desks with men staring into their desktops and looking mildly tense. I reached Jhunjhunwala’s cubicle and waited by the flimsy partition for a few minutes. The Big Bull was on the phone, chewing paan and talking at the same time. He did not acknowledge my presence. I waited at the corner quietly. After a few minutes, he gestured to me to sit, I did and the phone conversation continued for another 10-15 minutes. After hanging up, he first shot me a barrage of questions–what’s your name, where did you grow up, which school did you go to, and finally, “tell me, what do you want?” I explained again. All this while he is looking at his screen and screaming instructions to his boys at the trading terminals, and not looking my way.
Then he took a printout and handed it to me. He said, read it. I said, I will. He insisted I read it right then. I took a few minutes to run through the piece. It was an article Warren Buffett had written for Fortune magazine on the effect of interest rates on equity prices. It was an email sent by his friend Kalpraj Dharamsi the previous evening (that’s why I will never forget the date). He was hooked to his screen, even when he handed this out to me.
It’s a priceless piece, and the most fundamental lesson in investing. At that time, I probably did not appreciate the profoundness in that piece of writing. When I interviewed Warren Buffett for the first time in 2014, guess what my first question was. It was his thoughts on equity valuations in the context of the abysmally low interest rates. Buffett’s answer was equity valuations would seem incredibly cheap if the rates were to sustain at such low levels but that is not what he thought could be the case. That year Buffett was sitting on $100 billion of cash. It’s another matter that rates have remained fairly low for a long, long time, and equities have surged especially post-pandemic primarily driven by low rates. Even today, the debate around equity valuations hinges on where the interest rate will be in the short-, medium- and long-term.
Master of rhetoric
Post that initial meeting with Jhunjhunwala, I had become a mini celebrity in my small circle of friends and reporters. I met “Bhaiya” several times in his office and every single time, I would return with mixed feelings. For one, he would always be glued to the screen and make no eye contact while speaking, which made me feel distinctly uncomfortable. Second, his style of answering was asking rhetorical questions and then waiting for your answer, even if that took long in coming. Third, he could silence you by raising his voice to a high pitch if there was a counter question. The first few times, I was too scared to talk. But, with time, I figured that he was open to counter-questions, he was open for debate, he was vociferous with his arguments but that did not mean that he would not listen to the other side. It was up to one to muster the courage to voice one’s views. You had to be prepared. His rhetorical statements helped me learn, because I went back to dig deeper and find the answers.
Every time I asked him to talk about stocks and sectors he fancied, he would say, I work for one client – Rekha Jhunjhunwala. He always talked about the big picture, rarely the specifics. He was astute in investing, yes, but seldom does one appreciate the extent of risk he took in making those bets. Leaving aside the couple of times his trading bets could have taken him down, even his storied investment in Titan was made when the company was in considerable debt. What set him apart was his ability to take those bold calls, or take those leaps of faith, and back his conviction. That audacity worked in his favour.
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He called risk the four-letter word in investing! Investing is risk taking, if anything, RJ maintained. “All risk taking is associated with two human emotions, that is fear and greed – greed of profits and fear of losses. The ability to strike the right balance between fear and greed is the most vital determinant of profitable risk taking,” he said in one of the interviews I had done. Then he went on to cite a memorable quote, “In markets, it sometimes feels like being undersexed in a harem and over-sexed in a desert”, and to elaborate on it: “Good investors should feel under-sexed when there is depression and over-sexed when there is irrational exuberance.”
Art, more than science
A CA by qualification, RJ understood investing was not just about getting the math right. It was actually a lot more of an art. “The prediction of EPS is mainly science and partly art. But prediction of PER is an art, with very little science. It is a chemistry that can be mastered only by experience. Like cooking and sex, it cannot be taught, but it has to be learnt. I learnt that understanding/predicting PEs is the most difficult of all and the most critical factor to successful investing,” he told me in that interview. Several of his long-term bets right from Karur Vysya Bank to Titan and Crisil multiplied not just because of their earnings growth but also because of a remarkable growth in earnings-multiple that contributed to the rapid compounding over time.
RJ also believed the single biggest error in the investment business is failure to distinguish between knowledge of a company’s fundamentals and the expectations implied by the stock price. “I have learnt that in investing decisions all factors are numerators but the denominator is only one which is price/value, for it is ultimately the price or value at which you buy/sell shares which determines not only your profit/gains but also the 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 value/price you are buying’,” he said.. It’s unsurprising that, in his last interview, he said that his favourite bets in the market are public sector banks, public sector banks, public sector banks.
As a person, he lived life king size but had a child-like appreciation for the smaller victories. I recall another anecdote from 2005. It was one of my team-mates' birthday at The Smart Investor, and the entire team landed up at Geoffrey's. It was RJ’s favourite watering hole for a long time. He was there almost every evening. And Geoffrey’s had set the channel default to CNBC to indulge him. There were five of us, and I heard someone call out my name loudly. It was RJ. He walked up to our table, and asked, “Ma’am, can I join you for a drink.” I said, “of course.” My team was ecstatic, we are boozing with the Amitabh Bachchan of stock markets. (Rakesh would detest my saying so – he detested people calling or comparing him to anyone else)
It was more than three hours of high entertainment and emotion. For several days after that we kept talking about him in the office. And yes, he picked the tab much against my protest.
Biggest lesson
Rakesh had a mercurial temperament, but he was warm. He was brash, but respectful. He was candid but unpretentious. He could silence people with his loud voice and assertions, but he had an ear for reason. He was super helpful. Gregarious. Magnanimous. Courageous. He was his own man. And, he didn’t like to be compared to anyone. Least of all to be called the Warren Buffett of India. He detested the moniker. “Learn from everyone. But do your own thing. Be yourself.”
That’s probably the biggest lesson one can draw from his life: do it your way, and be yourself.
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Rakesh Jhunjhunwala has made his name a badge of honour. Maybe it is time for others to wear with pride a moniker fashioned after it. The adulation for RJ is not only because of his long-running, extraordinary trackrecord in investing but also because he did this without compromising his dignity. Otherwise, in stock markets, high fliers have often turned out to be dubious or at least to have tarnished their reputation at one point or the other. RJ made earning through investing respectable and, at a time when equities have taken off, he has become a role model to many Indians. His passionate pitch that “I am bullish on India” transfixes all who listen to him, mainly because that is something all of us like to believe -- our own great future. His conviction in the future of India never wavered. That’s why while his death leaves a big void in the stock market, his spirit will be alive forever.
RJ is gone, long live RJ.
