Samir Arora and the ‘Bear’ Story: Safir Anand’s book on how 2008 crisis brought bears into a bull’s office

According to Samir Arora, mistakes are part of the game and a cost of doing business, every investor has to pay this tuition fee to the market.

Samir Arora once used to collect only figures of bulls but now his office has figures of bears too, from his learning in the 2008 Global Financial Criris.

The Helios Capital's founder and fund manager, Arora had remained fully invested for much of the year, mistakenly believing that Indian markets would be insulated from the global crisis.

But, as Safir Anand's yet-to-be-published book titled "Confessions of Stock Market Wizards", says, "since then (the financial crisis) his office has figures and paintings of both bulls and bears to remind him and the team that one needs to be always open minded".

Anand's book is based on a collection of interviews of highly regarded investors and fund managers, who have generously shared with the author accounts of their mistakes and their learnings from them.

Also read: Short sellers provide valuable research, says Samir Arora; disagrees with Ajay Bagga on Hindenburg

The chapter on Arora also chronicles his flexibility in thinking, through Arora's approach to the IT sector. Anand writes how Arora was willing to change his outlook on the IT sector, going from being a kind of an "oracle" at spotting gems in this sector in the pre-2000 era to reducing the weight in this sector to near zero in the mid-2022. As the book notes, Arora ran a large overweight position in IT stocks in the 1990s, maintained a market-weight position for the next two decades and then reduced his sector weight to near zero in mid-2022 when he observed issues such as pricing concerns, slow recruitment, layoffs, valuation challenges and rising US interest rates.

Towards the close of the chapter, Anand sums up a few of Arora's learnings from his mistakes: "one, mistakes are part of the game and a cost of doing business, every investor has to pay this tuition fee to the market; two, do not make the same mistake twice; three, 'elimination investing', which is the Helios philosophy, is not about eliminating mistakes entirely but rather striving to reduce their frequency; and four, you need a diversified portfolio so that no single mistake takes you out of the game or causes seriously harm".

Is Zomato like Bharti Airtel?
In the book, Anand writes about how Arora spotted the Bharti Airtel opportunity early. Anand asked him if he had considered the price-to-earnings (P/E) ratio of Bharti Airtel when investing during its initial public offering (IPO) in 2002, when most investors were fixated on the ratio but the stock was the top holding in only one mutual fund--Arora-managed Alliance funds.
To this Arora said that he only looked at the 'size of opportunity' and comparison with China for his conviction in Bharti. According to the book, Arora has applied the same logic when investing in Zomato, which his fund entered into early. Anand writes that this made him realise that while financial metrics are an important tool, there may also be a loss-making company burning cash but creating a huge opportunity. Once it creates a business model, "there could be a monopoly kind of earnings from loss making to cash generation".

Book's focus
Anand, in the Preface of the book, wrote about the intention behind writing such a book.
He wrote that he had always wondered why while stories of success of highly regardeded investors/fund managers are in plenty those of their risk management and mistakes are scarce. He compares it to "building a body but ignoring the warning signs of trouble, until it’s too late to revive".