Just after completing my Masters in Economics in 2006 from Gokhale Institute of Politics and Economics, Pune, I joined a firm which was in equity research. My work profile was to evaluate companies on the basis of certain criteria and valuation methods. After evaluating companies we were supposed to prepare reports and give recommendations. I still remember the last statement of our reports: “Currently, Company X is trading at price P. At this price we recommend it as a Strong Buy/ Buy at x% of margin of safety.” We gave similar recommendations for ‘sell’ and ‘hold’ also.
When I joined the Company, I lacked enough knowledge on financial statements and basic terminologies. I didn’t know how the stock price behaves on different corporate announcements like bonus issue, public issue, preferential issue, ……, split, buy back, ……, merger, demerger, amalgamation, acquisition, ….., restructuring, change in accounting policy, …… and government policies. There were so many things and everything was new for me. I used to get puzzled interpreting all these jargons. Then I started building my base. I studied many books on basic finance. After few months, I was ready to take part in the race. But before I could gain momentum, I had to resign owing to personal problems. So far, I didn’t have a demat account and I didn’t invest in equities. At home, most of the time I watched CNBC TV18. I couldn’t separate myself from this area. Then I got my dad to open his demat account and started investing in equities on his behalf. Though I was an equity research analyst I depended on CNBC’s recommendations for my investment. It was August, 2007. The equity market was booming and so were my stocks. I realized some stocks moved up a little bit and then turned down. Compared to other investment options, my portfolio return was not much.
Four months later I joined The Alchemists Ark, a Pune-based consultancy firm, which was in the initial phase of diversifying its business in finance. It was launching its first financial portal ‘MoneyWorks4me.com’. The philosophy was to make a powerful valuation model for companies that would help a common man understand and sensibly invest in the equity market on his own. I liked this philosophy, as I had struggled too much initially to understand the nitty-gritties of the stock. Also, after relying on CNBC’s recommendations I did not make any substantial returns on my portfolio.
To make MoneyWorks4me successful, we read many books written on value investing mantras of Benjamin Graham and Warren Buffet, the two most successful investors in the world. Their success stories were proof of the model and they became guidelines for us. Based on their philosophies we created MoneyWorks4me.com. To simplify the model we applied Alchemists’ mind and came up with a value investing model for a common man.
After reading about Graham and Buffet, I, personally, was very impressed with these stock market gurus. In January 2009, I opened my demat account and started investing in the stock market purely based on value investing. At that time, I had many choices of fundamentally strong companies which were available at very cheap prices because of global recession, to build my portfolio. In the recent recovery my portfolio is giving a very handsome return. Now I’m true believer of value investing.