Developing conviction - why Tanla is still a great bet

Abraham George Market Musings

Fundamental Investor ™ 🇮🇳 @FI_InvestIndia

Who Should Work Harder? Lets Choose Wisely 😀 #FI

The above tweet caught my attention. The chart is thought-provoking and there are many lessons to learn from it. 

You may have heard of experienced investors harping about developing convictions. How do you do that? You must develop sufficient knowledge about the instrument and the sector that you want to get involved in. As is explained in the first orange quadrant, it involves a lot of hard work and research to identify the business that you want to be part of. As the saying goes, “one creates his luck by putting in a lot of hard work.” I have explained this many times before but for the benefit of the many newcomers, I will do it again. 

My testimony is an open book. I got involved in Tanla at the lowest point of my financial career. I was nearly bankrupt save some real estate properties in India and a very underperforming stock portfolio that I didn’t even care to look at. My retirement nest egg was completely wiped out. I had no regular monthly income. At 60+, I was no longer employable. Neither did I intend on working even if I did get a job offer. I was completely lost and my future looked bleak. 

But God’s grace and destiny were on my side, fortunately. My entire career was in the financial markets. All my working life, I was an institutional forex trader - from dealing and making markets to building big directional bets and positions. Not exactly a marketable skill - the experience in those instruments and environment does not easily transfer to trading for yourself.

Why not? The psychology behind trading every instrument is different. A trader or investor has to digest, discern and distinguish instrument-specific characteristics. Trading Bitcoin and a 10-year sovereign bond are completely different. I didn’t want to be a trader for the rest of my life. It demands a punishing commitment and dedication in terms of time, observation, discipline, and religious zeal in following the markets. At an age of above 60, I wanted more time to myself, spend more time with grandkids, nature, charitable causes, following sports, contemplating philosophy and spirituality. 

So, macro investing suited me best - that too the changing environment in emerging markets - particularly the Indian digital space. I worked and honed a top-down investing thesis before I zeroed in on Tanla. Though I was directed to Tanla by someone I didn’t know very well, I built confidence and conviction in the company - brick by brick. When the same person who directed me to Tanla was getting out of his holdings around Rs. 300, I pleaded with him not to sell any. That was the best I could do to return and repay the favour. His arguments to sell the scrip sounded flimsy and didn’t hold water with me. Later, he bought it back again at much higher levels. Obviously, he missed out on one of the biggest stock run-ups in recent history. 

Once I tried explaining my investment to another friend and he smugly commented, “Sam, so you are a one-trick pony.” I smiled and told him, “If you think that way, so be it. I will stay with this pony until I find a new pony in another sector.” I asked him if he were investing in a business wouldn’t he put everything into it? So much so even borrow or raise money from elsewhere? 

When Jeff Bezos invested in Amazon, he didn’t go around investing in Google and Facebook too. Now that he has so much cash flow,  he might probably be invested in Facebook or Google as a part of diversification. 

Likewise, I have also done some diversification but it is within the main theme which is Indian digital companies. Personally, I think there isn’t a better company than Tanla that I can be invested in India. 

Therefore, as per the green quadrant in the tweet image above, business and money are working hard for me. I am very relaxed despite the volatility and downside excursions. 

Now, the bottom orange quadrant: I have narrated this story previously in an online group. A gentleman reading my reports contacted me directly and wanted direct confirmation before investing in Tanla. He didn’t have much of investing literacy but had money. He wanted to piggyback on my 40-year experience in the financial markets. I only told him that most of my investments are in Tanla. When the price was around Rs. 50/55, I think he bought around 500,000 shares of Tanla. It was a few weeks before the first buyback at 81 and he hardly so any major drawdown. One fine morning, he called me and said that he wanted to invite me for his housewarming. He had bought a house for 3 crore rupees or so by cashing out his Tanla investments. He was willing to pay for a business class Sydney to Mumbai return ticket. While I was pleasantly surprised, I politely declined the offer saying that I will surely visit him when I am back in India. Then he showed me something that blew my mind. It was a picture of Lord Krishna, Lord Ganesh, and a black and white picture of my WhatsApp photo. I was really shocked. It was his wife’s contention that a total stranger had come into their lives as Goddess Lakshmi and blessed them. I am no one to question anyone’s beliefs but I am content that I have been a channel of blessing to their financial fortune. I think he was totally out of the position around Rs. 250 and never contacted me again.

He was lucky in many ways. Immediately after he bought, he saw momentum in Tanla and made some quick money and he was out of the whole thing even quicker. But, he did not develop a longer-term conviction. If so, he would have held on to some parts of it. If he had experienced drawdowns or sideways market, he would have been busy talking to a lot more people than me, having sleepless nights, panic/anxiety attacks, and indecision on whether to book a loss and get out or stay patiently. 

There is a big lesson here: even if you get an idea from someone else, you have to develop conviction and knowledge more by independent thinking. Please do not go by any of the brokers’ writings and TV anchors. All they focus is on price and that’s all they talk about. Do watch them, read them, but develop an understanding beyond their analysis. Just think about it - the TV anchor has 7000 stocks to talk about. Tanla is just one of them. Do you think he or she knows any better? 

DISCLAIMER

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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund. Currently, he is setting up a hedge fund where foreign citizens can invest in Indian growth stocks like Tanla operating in hyper-growth markets like CPaaS.