Ordinary People, Extraordinary Investing
A resident of the tony Greater Kailash-2 locality in South Delhi, 56-year old Sanjiv Duggal is a successful entrepreneur engaged in the business of carpets. But there's something else about Duggal that most people don't know - he's an ace investor who has consistently created long-term wealth from the equity markets. We caught up with Duggal on a lazy Sunday morning in an effort to glean some of his investing success Mantras.
Interestingly, Duggal tells us that he's been associated with the stock markets for nearly 42 years - in his own words, "since I was still in my shorts". His father, whom Duggal fondly refers to as his "partner", was a government servant then employed with the CAG. Duggal Sr.'s interest in the equity markets was piqued when quality IPO's such as ITC and Colgate-Palmolive began hitting the market - and thus began the father-son duo's love affair with stocks.
Incredibly, Duggal has managed to deftly circumvent most of the common pitfalls that plague retail investors - for over four decades. He had only miniscule allocations to IT stocks during the tech-wreck of 2001 as he believed that these companies "didn't have many real assets", and his exposure to real estate and infra stocks before the tumult of 2008 wreaked havoc on investors, was only nominal. In an asset class where even professionals seemingly possess disturbingly short-term memories and thus repeat the same mistakes cycle after cycle, Duggal has resolutely stuck to a few core investing philosophies which have seen him navigate many a stormy market with élan.
Duggal isn't a fervent buyer who is perennially on the lookout for the next stock pick 'du jour'. By his own admission, he shies away from TV channels that peddle trading tips by the dozen. "If you're going to invest into stocks, don't do it for quick money", he advises us, adding that he doesn't trade or speculate, and never dabbles in derivatives or leveraged investments which involve borrowed money. In a similar vein, he dismissively brushes aside Bitcoin with the wave of a hand, saying that he knows "absolutely nothing" about them.
How does he take investment decisions, then? "By keeping my eyes and ears open", Duggal admits. He shares a story of how his sister's wedding in 1988 resulted in a last-minute "watch hunt" for the bride and groom. "We chanced upon a TITAN showroom, and I was impressed", says Duggal. He promptly did his homework on the company that had gone IPO a year before, and began accumulating shares of TITAN thereafter. Today, his holdings in TITAN are a "few thousand" in number, and have tripled in value in the last five years alone.
In a city where most investors swear by physical assets such as real estate and gold, Duggal goes against the grain. He wasn't an active participant in the real estate boom that enamoured the high net worth populace for the better part of the last decade, stating that real estate investments are too "unwieldy and unpredictable".
A self-confessed value investor, Duggal admits to being one of those rare individuals who subscribe to the Buffet-esque belief that the best holding period for a quality scrip is "forever". He shares a three-pronged approach to stock-picking - "good pedigree, good management, good product".
"My biggest weakness - and strength, is that I absolutely hate selling shares", he says.
In the same vein, Duggal goes on to describe an incident that took place in 1988. His father was hell-bent upon cashing out a large chunk of their ITC shares. Duggal held his ground, and a "big fight" ensued. "Words like 'over my dead body' were exchanged", he recalls, laughing. Needless to say, ITC paid off richly in the two decades that ensued. "I financed the higher studies of both my daughters from my ITC dividends", he says gratefully.
ITC isn't an isolated example. Duggal has held on to several stocks for two decades or more, as he continues to believe in their fundamentals. IFB and TVS Electronics are two examples of stocks in his portfolio that became multi-baggers after decades of patience.
A contrarian by nature, Duggal doesn't favour IPO's. "After the controller of capital issues was abolished by Manmohan Singh, IPO pricing became arbitrary", he surmises. "They leave nothing on the table now"
When quizzed on his accumulation strategy, Duggal shares that he prefers to "test the waters" instead of going in hook, line and sinker. Once he's identified a company that he'd like to build a position in, he does so in tranches, over the course of several months. "This approach safeguards me from making regrettable investments in stocks whose prices are being artificially manipulated", he says.
On his approach to rebalancing his portfolio, Duggal admits that he does so very rarely. "I prefer staying invested", he says. "My portfolio is mainly one-way traffic. If I book out of stocks, what will I do with the cash? Buy into faddish shares that are overvalued? Why would I want to do that?" Admitting that this approach can result in unsettling losses during bearish markets, Duggal says that he accepts that as part and parcel of equity market investing. "I didn't sell a single one of my shares during the crash of 2008", he says proudly. His portfolio rebounded once the markets began resurrecting themselves 18 months later.
In an asset class where most retail investors burn their fingers over the long term, Duggal's story is a breath of fresh air. He's nearly perfected the art of harnessing the power of equities by being patient, focusing on fundamentals, avoiding speculation and riding through the tough times with resolute grit. More power to him and his like!
