The advice of gurus can never be underrated. This is what Sankaran Naren, ED & CIO, ICICI Prudential AMC shared with Value Research about how his understanding of the stock market is shaped largely by the teachings and experiences of stalwarts including James Montier, Howard Marks, Michael Mauboussin and Dr Atul Gawande.
As Naren said how each of these gurus’ unique investing styles define the processes he follows today. Each guru had introduced this market veteran to certain concepts that shaped his thinking about the stock market and its working.
Risk-taking is intrinsic to stock picking. Naren explains how James Montier had helped him develop the mind of a contrarian investor. Keeping a contrarian approach to investing includes understanding what the customer thinks about a particular stock, evaluating its intrinsic value and being aware of the risks involved. Howard Marks explained to him the reasons behind the various cycles responsible for stock pricing. While most people analyse the reason behind stock pricing post its movement in a certain direction, Naren was exposed to the pre-mortem of an investment idea holds more value than its post-mortem by Michael Mauboussin.
How many times do we assess a stock’s details only to realize that we had overlooked some necessary details in a hurry? Here comes the need for having a checklist in place that Dr Atul Gawande explained. The market mostly runs on human emotions and, hence, you must have a checklist in place that minimises the scope of mistakes and reinforces beliefs in focusing on a company’s fundamentals than following the herd mentality.
Naren does not follow any Indian market stalwarts fearing the inherent biases of operating in the Indian stock market may impede his understanding of how and why stocks move. This stock market expert also cites how Indian biases may compound his own personal biases regarding the market.
The stock market has its fair share of experiences, good or bad, big or small. Experts insist that most people fail because they panic and fail to interpret the cues that the market gives. More than focusing on the stock’s fundamentals and holding the same with conviction, they tend to sell off in a hurry fearing further fall. Another big blunder is the tendency to catch the falling knife. This means that many people rush to buy stocks when they are at their 52-week lowest while not understanding why the prices of a particular stock may have fallen.