‘The key factor in investing is that we are buying a Business and not a Stock,’ says Anish Unadkat, Chief Finance Officer, the man who is responsible for making all the strategic business decisions at the stock broking and financial firm, LKP Group. This US educated Chartered Financial Analyst and Certified Public Accountant brings his vast experience in the field of finance and framing business strategies to benefit his organization and its investors. Here he tells Mayura Shanbaug about his strategies and experiences of his work and what it takes to succeed on the stock markets. His Advice…
A little background about your company and yourself?
LKP Group was established in 1948 and ever since, it has made its mark as a prominent player in the financial services space. I have been associated with LKP since 2010 and have been in the financial services industry for over a decade now. I have worked with various reputed organizations earlier. At LKP, I chart business strategies for the group and also oversee finances.
At what point had you given a thought to making a career in the stock / financial markets?
Figures and numbers have always fascinated me. I always had a great passion for financial markets. I think the best part about the stock market is that they are constantly evolving and there is always ‘that one more lesson’ to learn. I have been following my passion for more than 10 years now.
How do you pick your trades? Do you use technical analysis, or do you employ fundamental data?
Subject to profiling, I normally advocate creation of a Core and a Satellite Portfolio. The Core Portfolio generally consists of Investments that are long term in nature with a particular style bias.
For this purpose, I employ Fundamental Analysis i.e. E-S-C (Economy-Sector-Company) analysis or Top Down approach. The Satellite Portfolio is generally short term in nature and includes Trading in stocks. For Trading, the position of the trades in the market and the timing of the trades are amongst the few important factors. Technical Analysis is helpful in such cases.
How would you describe your methodology?
As mentioned above, for the Investments that are long term in nature, I look for strong fundamentals which include earnings, dividends, cash flow, book value etc. The key factor here is that we are buying a Business and not a Stock. My idea is to determine the worth of the underlying asset and hence do not stress too much on the market volatility and day-to-day price fluctuations. These factors generally do not have an impact on the value of the business in the long run. For Trading, I take help of Technical Analysis as mentioned above.
What appeals to you about trading/Investing? The short side or the long side…
I am generally a long term investor with a buy and hold strategy. It is usually more skewed towards the long side, more so due to market restrictions.
What differentiates you from other traders/Investors?
We all try to differentiate ourselves in one way or the other to get better returns on our investments. However, I believe that a person with good investment discipline reaps better return in the long run.
What gives you that edge?
Being proactive in approach, open to accepting new ideas and following a strict investment discipline always provides the edge in uncertain times.
Is there any applicable lesson to trading/ investing?
Trading requires a high degree of discipline and risk management. Investing, on the other hand, requires a thorough analysis and good understanding of the economic as well as the industry scenario. For both, a well-diversified portfolio will always help in mitigating risks arising from market fluctuations.
How much of what you do is gut -feel?
As the market is constantly evolving, there is always basic analysis to be done for every investment. One should not invest on the premise of a wild guess. However, I believe after the required analysis is done, gut feel influences everyone’s investment decisions that are normally based on the past experiences and a simulation of any such previously occurred scenario.
Do you try to anticipate or follow market trends? What is the basis?
Anticipating a market trend is required at times when there is too much volatility across different asset classes. However, following a trend in the market is important for trading strategies and is useful to capture the larger trend of any market. Analytical tools are available that capture market data to anticipate trends.
When you put money on a trade and it goes against you, how do you decide when you're wrong? What do you do next?
If the investments are long term in nature, temporary or short term price fluctuations are generally ignored. For short term, generally all trades are subject to stop loss limits.
With a trading perspective, it is always better to avoid reversing or averaging your losing positions, as the markets have a tendency of going to extremes before the turnaround.
Any positions you ever lost sleep over? What happened...?
There have been occasions when such trades have happened, especially when the market has been volatile. Gaining personal experience in the markets has been costly, despite that, I believe the methodology used in analysis has evolved and become sharper.
What would make you wary about a trade or investment?
Corporate Governance of the company is probably the most important factor. Any doubt on Corporate Governance makes me a bit cautious.
Do you have a scenario about how the current bull/ bear market will end? Where do you see the Indian markets five years down the road?
India, the world’s second highest populated country, has been able to attract global players and extract benefits from its domestic consumption boom. The demographic profile also remains the largest driver of its consumption story. Being one of the most important emerging markets, the potential for growth is strong. The economy will always go through their bull/bear cycles, but important for us is to keep faith in the underlying growth potential of our country.
India shall continue attracting foreign investors in primary as well as secondary markets. Over the period of next five years, the Indian market is likely to outperform most of its global peers. I believe Sensex would certainly be much above today’s level, but very difficult to predict to what extent.
Of the tens of thousands of trades that you have done, which was your best trade?
There are many such trades fitting this criterion; however I think of all the trades, one thing which has always stood out is the background research and analysis that has gone into them. Importance of timing the market, especially for short term strategies, remains, however having conviction of your analysis will always lead to a successful trade on a longer term period. There is no better satisfaction when you get your calculations and expectations right and achieve the expected returns.
What makes a trader successful? Any success mantra?
I think stock markets are about beating ourselves; by means of independent thinking, taking rationale investment views as well as mastering ones emotions. If we follow these ideas, we have a high probability of being on the right path to success. It is always vital to review one’s progress and mistakes on a continuous basis. I think the key to success is overcoming one’s frailties. It is not about how hard you fall, but how well you rise from that fall that will determine a successful player.
Any final words?
The above discussion includes strategies adopted for advisory as well.
I normally advocate creation of a Core and a Satellite Portfolio. The Core Portfolio generally consists of Investments that are long term in nature with a particular style bias. For this purpose, I employ Fundamental Analysis i.e. E-S-C (Economy-Sector-Company) analysis or Top Down approach. The Satellite Portfolio is generally short term in nature and includes Trading in stocks. For Trading, the position of the trades in the market and the timing of the trades are amongst the few important factors. Technical Analysis is helpful in such cases.
For Investments that are long term in nature, I look for strong fundamentals which include earnings, dividends, cash flow, book value etc. The key factor here is that we are buying a Business and not a Stock. My idea is to determine the worth of the underlying asset and hence do not stress too much on the market volatility and day-to-day price fluctuations. These factors generally do not have an impact on the value of the business in the long run…. Trading requires a high degree of discipline and risk management.