Rajeev Thakkar, Chief Investment Officer, PPFAS Mutual Fund, is not a new name in the mutual fund industry. Thakkar has been witnessing the highs and lows of the market since 1994. His experience and skills of using unique trading ideas have made Thakkar's name synonymous with good returns. Here are some investing lessons by Thakkar, as shared by him in an interview with Value Research last year:
The first obvious lesson is the detrimental effect of leverage. Some of the best investment companies have used leverage and found themselves on the verge of bankruptcy. It doesn't matter how good an investment thesis is if it can't be held through volatile times.
Blind faith can be dangerous
Many companies of the bygone era no longer exist in today’s times, hence, it is important to observe the behaviour of a newly listed company you don't know much about for a few years before deciding to bet on it.
Promoters’ quality matters
Among the numerous companies that launched their businesses almost simultaneously in the same industry, only few were extremely successful. With most factors such as economic cycles, policies and regulations and competitive intensity being the same, the one thing that distinguished winners from losers was the management.
Nature of business and quality
Nature of business and quality matter. You may come across a business group that is doing exceptionally well in one area but is failing miserably in another. Often it is due to nature of business and how you handle it. Then, there are many businesses failing in one sector known for destroying wealth while others are flourishing in another sector known for creating wealth. For example, most listed FMCG companies are known for giving good returns while airlines often lose shareholders' money. While there are exceptions, investing in wealth-creating sectors is advisable.