The Hindu Business Line : `Speculation never makes money'

Ask why you are investing in this company and you won't go wrong. But if you put in Rs 1 lakh and say I want Rs 1.5 lakh, it won't happen. — MR PANKAJ GOSAR, CMD, PEARL OYSTER INVESTMENT CONSULTANT

He hails from Amalner, Maharashtra, where Wipro set up its first plant; many families own Wipro shares even today. Pankaj Gosar, CMD of Mumbai-based Pearl Oyster Investment Consultant, has not only dabbled in Wipro shares, more so in 2000 when the scrip touched a dizzy Rs 9,000, but is also a third-generation Wipro distributor in Amalner.

Gosar's grandfather and father held Wipro shares right from 1947. "Sometime in the 1980s, a Rs 100 face-value Wipro share was selling at a discount, at Rs 80, and there were no buyers! In 1986, when they went into computer hardware, people wondered why an oil-making company should get into computers that were so costly and why would anyone buy computers," he says.

In the earlier years, Wipro shares rarely traded; "to buy or sell 50 shares, you had to wait for two-three days." Mr Gosar's grandfather had 50 shares, and reaped a rich dividend on bonuses and stock splits. They did sell it when the price touched Rs 9,000, "but not the quantity we should have, because you feel greedy thinking it will go up further."

He sold from Rs 4,000 to Rs 9,000 but did not make much money, because when the price fell back to Rs 3,000-4,000 levels, "I thought what was Rs 9,000 is now available at Rs 4,000, so let me buy. And when it went down from Rs 4,000 to Rs 800, what money we had made selling it at Rs 9,000 was lost. But then, that is the mark of the market; if you don't enter or exit at the right time, you will lose."

Money in speculation?

The Wipro experience taught Mr Gosar that the market gave opportunities to make money "if you hold a fundamentally good company like Wipro." But he initially made the mistake of thinking ki sattey mei paisa banta hei (there is money in speculation). I have a 13-year career in the market, but 10 years of it went in the belief that speculation makes money. I now know I was absolutely wrong; however brilliant you may be you can't make money in speculation."

In the earlier years, Mr Gosar speculated in Wipro, Reliance Industries, SBI and HLL, but was caught on the wrong foot all the time. "I learnt that a speculator never makes money because he can't know what is happening in a counter. Take Reliance, it is so huge that you can't know where it'll go. If the size of the company is small, you can monitor it."

In the last two years, he has started handling client portfolios, and has 14 on board, including two from Amalner. "I don't keep anything in these portfolios about which I have no information or knowledge that I can share with my client. I only keep shares where there is absolute clarity." While earlier he made money in IT companies such as Wipro, Infosys and Mastek, right now his focus is on real-estate, "which saw a boom in the 18 months."

Mr Gosar believes the real-estate story will be linked to rental income "which is not the case now." The "rent story" in a stock gets unlocked when the company owns land, develops it and rents it out. "We discovered Ruby Mills (now merged with Phoenix) and had bought it from Rs 191-291, today its price is Rs 500 and our expectation is that it will touch Rs 1,000. It has land worth Rs 400 crore — Mr Mukesh Ambani had made it that offer — and there is scope for that to double. Also, it hasn't missed giving dividend in a single year."

The average return Mr Gosar has given over the last two years is 45 per cent, "as the market was good. But of the 12 shares we selected, only two have given us appreciation."

Mr Gosar's clients are in the 40-50 age group, come from diverse backgrounds, and they also trade on their own. "They understand the market, so I don't have to educate them, but I have to explain to them why I have bought a particular stock in their portfolio."

Trade, only if you have experience

Mr Gosar's advice to the young and the uninitiated investors is that if they have Rs 1 lakh to invest, half should go into a mutual fund that is selected carefully.

Next, Rs 25,000 can be invested directly into stocks, but "they should seek information and advice on what the stock market is all about, look at a company's fundamentals, products, performance, the impact of its products in the market and then invest. As long as you don't have the capacity to invest on your own independently, take the MF route."

The remaining Rs 25,000 should be in cash because "the market can suddenly give you an opportunity. Particularly if you've made a mistake in your first investment, keep cash ready for another opportunity." He also recommends systematic investment — a certain amount every month.

On trading, Mr Gosar says this can be done, "but only by those who have the experience to make a success of it." Even a stock bought for the long term can be traded; "if there is a 10-20 per cent profit in the short term, trade in it, but your focus should be clear that `I have bought this for the long term.' If you don't get trading opportunities in it, it doesn't matter. But if you do, and can bring down the cost and increase profitability and still keep it for long term, so much the better. But the stock should have liquidity."

Operators help too

Mr Gosar outlines certain cardinal principles of investing from his experience: Even if you lose, don't quit, because you'll never know when the next opportunity will come. If you miss it, and then enter, you'll get caught again. Invest less, but for long term and on a consistent basis. Don't invest for two years, give up, and then return again after three years. Only if you remain invested can your losses be made up.

Select the right stock, have some information about the company. If you are a big investor and put Rs 5-25 lakh in a company, spend Rs 5,000-10,000 in learning about it, visit it if possible, follow quarterly results and track new developments. Instead of waiting for the stars to turn favourable, study the company.

When markets crash, don't get jittery. Remember the market cannot remain flat; it has to either go up or down. But ensure that if the index falls by 10 per cent, your stock falls only by 10 per cent and not more.

Remember that only those scrips with operator presence will give you profits. Without operators, even good stocks can't go up; absence of operators means absence of opportunities. But be very careful.

Don't blindly follow big investors. When a big investor takes exposure in a share, within a week, the market gets wind of it and others chase it. You can buy it, as there may still be value but you face a risk, your entry time may be his exit time and you'll get trapped!

Ask why am I investing in this company and you won't go wrong. But if you put in Rs 1 lakh and say I want Rs 1.5 lakh, it won't happen. "This is not a manufacturing plant where you put the raw material and the finished product comes out!"

Last word

To take out money from the stock market as your profit is as difficult as taking money out of somebody's pocket; only when somebody loses, you win.

Please send suggestions and queries to younginvestor@thehindu.co.in, or The Research Bureau, The Hindu Business Line, 859-860, Anna Salai, Chennai-600002.

More Stories on : Insight | Investments | Young Investor

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page