Some musings over the last one year

Recently, I read an article by the Collaborative Fund Blogger Morgan Hausel about why everyone should write http://www.collaborativefund.com/blog/why-everyone-should-write/

In this blogpost, I take a stab at addressing the 4 questions he mentioned

What is your edge over competitors? Skills in excel, PPT, financial modelling are generic skills, however the initial edge in my view is the ability to understand accounting better than a MBA, and business better than a CA. This is cumulatively improved by  the softskills such as empathy, willingness to get your hands dirty in the trenches, and lack of ego. Successive bosses and mentors have the credit for instilling this in me. However, I am aware of the power of compounding and everyday changes, so it is a mission to become better daily amidst the information overload.

How do you react to unforeseen risk? I interpret this question to exclude insurable risks, since that would be hedged against. But for risk such as 10% market swings against your open futures positions, the stock you just entered being called out as a fraud, your much thought over positional trade failing, these are unavoidable. Hence, I try to structure the portfolio to be within my staying power. For example, I recently purchased the listed Indian private bank YESBANK, on the day before it released its annual report in which it disclosed divergence from the central bank suggested provisioning norms, for certain non-performing assets. This disclosure was not voluntary being mandated by the securities regulator SEBI, and the stock promptly corrected ~10%-15%. Thankfully, I did not have to exit at firesale prices, and could hold and exit at a profit(now the stock is 10% over that initial entry price, after having swung back 25%). So correct risk management applies. In personal life, this maxim would be not to be dependeant on just one income source, professional development etc. You don’t know which one will work.

What have you changed your mind about recently? That there are companies who can grow at double digit CAGR without reverting to terminal growth rates. This is not an excuse however to write fiction in excel and justify outlandish P/E multiples, but rather is an effort to learn from them. To the end, focus on business insight rather than news, and on knowledge with a longer half life. 

What part of your job are you not good at? I’d suppose this would entail dealing with what I consider non value added and ego massaging work, which finally does not serve any economic purpose. This is integral to any corporate job especially as you climb the ladder (notable exceptions are the owner-operator driven companies out there).