Free Press Journal

Investment mantras: The Unusual Billionaires


The Unusual Billionaires
Saurabh Mukherjea
Penguin Books India 2016
Rs 499, pp 445

The Unusual Billionaires is an unusual book indeed, especially coming from an Indian author. While it does not deal with individual billionaires, it deals with the top companies listed in India.

Books like Good to Great, Built to Last etc., by the likes of Jim Collins have provided useful lessons for managers and investors alike on what makes for a truly outstanding company. However, these books have covered companies listed in the US. Therefore, while the books gave useful reference points on how to recognise a good company in which one should invest in and the formulae that could be used, the books were of no use for an Indian investor, especially the Indian retail investor.

Hence, a book on those lines was much needed to present the top Indian companies to Indian investors. The Unusual Billionaires does just that.

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The book has been authored by Saurabh Mukherjea, the CEO of Institutional Equities at Ambit Capital, an Indian investment bank, with help from his team of equity analysts. Naturally enough, each chapter on individual companies does read like a couple of equity research reports compiled into one book, with lots of tables and charts. In itself, it is not at all a bad thing, especially for investors since the reasons for the selection of companies like Asian Paints, Berger Paints, Marico, HDFC Bank, Axis Bank, Astral Poly and Page Industries are presented with substantial proof points of financial performance relative to other companies in the same industry.

All these research reports just seek to answer one simple question – what makes a company great? The answer is given in the form of financial terms by using certain parameters. The shortlist has been created by looking at companies listed on the stock exchanges and by analysing the companies’ performance, revenue growth of at least 10 per cent through a period of at least 10 years, return on capital employed of at least 15 per cent, with some minor tweaks to judge the performance of financial companies.

All the companies named above pass the financial tests with flying colours aided by prudent management teams. Yet, the presentation of these companies for Indian readers is only half the story.

The book does another, more important turn for the Indian reader by introducing them to the concept of the coffee can portfolio (CCP). In itself, the concept is not new, and many global investment giants, such as Warren Buffett, have suggested that the ideal holding period for a stock is forever unless there are material changes to the external environment or the management quality deteriorates substantially. The CCP concept too is from the time when shares were in paper form and it was suggested that investors buy good shares after proper study and due diligence, and put them away in a coffee can, not to touch them again. After say, about 10 years, the returns from these shares are likely to be significantly higher than if shares had been traded on a regular basis.

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The author has taken this concept and researched into stocks that he would have purchased every year in the new millennium, and the performance after a decade. For example, a basket of stocks bought in the year 2000, outperformed the stock market in the year 2010, the ones bought in 2001 had outperformed the market in 2011, and so forth. This part of the book makes for interesting reading in the companies that have retained their position in the portfolio year after year, the companies that have been added each year and the companies that have fallen by the wayside. The changes in the composition of the portfolio are reflective not only of the companies’ performance, but also the way the Indian economy has evolved over this period.

Apart from the exhaustive research that the author and his team have conducted to put this book together, the author has done a great service to the reader by reminding them of these common sense-filled investment truths. This is especially important as most retail investors have the tendency to get caught up in the shrill hysteria that the media creates in the form of bull runs, bear phases, profit booking etc. new heights and depths of the Sensex and Nifty.

Ordinary people turn into traders, thinking short-term only, riding these waves generated by the media. The book therefore is a must read for everyone interested in becoming an investor (as opposed to becoming a trader) for it gives them a crucial lesson that if one has a good boat in the form of a well-researched portfolio of just a few stocks, then one can ride the crests and troughs of the market waves and over a long period come out ahead. Constant interference and trading are in fact detrimental to the financial health of your portfolio, and by consequence your own.