Chandrakant Sampat: India’s Leading Investment Guru
Nov 02 2014 02:19 PM , Mayukhi Chakravarty , No Comments
- One of the most successful investors the country has seen, Sampath has been investing in the Indian equity markets for more than 40 years, ever since he quit his family business in 1955 to carve out his own destiny.
- Chandrakant Sampath advocates value investing and long term investing as the 2 cornerstones of wealth creation.
- Chandrakant Sampath advices investors to keep their expenses low, invest in just six to eight companies and have faith in the power of compounding.
Not only does Chandrakant Sampath make a lasting and powerful impression as a master investor, Sampath also makes a mark as a man of unflinching and rigorous discipline. An out and out fitness freak, the octogenarian investor’s fitness regime includes yoga exercises, iron pumping and jogging. Moreover, he follows a very simple diet. “I have not eaten sugar, fatty foods or salts in the last 50 years! I just have my salads, bananas and sprouts” he says. However, being a Gujarati, he does not miss the good old Gujarati food. Sampath is also an avid reader who can quote verbatim from the Bhagwad Geeta and believes in the ideologies of the greatest management theorist of all time, Peter F. Drucker. His Worli apartment building in stocked with a great number of books and his favorite past time unsurprisingly, is reading.
One of the most successful investors the country has seen, Sampath has been investing in the Indian equity markets for more than 40 years, ever since he quit his family business in 1955 to carve out his own destiny. He has made a colossal fortune from years of careful investing in companies like HUL and Nestle. “Markets and mistakes are the best education. The conventional education just closes the mind”, he feels. A rebel in certain ways, Chandrakanth Sampath condemns the conventional social system which he feels restricts the mind. It is obvious that his clutter-breaking thought process and his knowledgeable bent of mind comes from extensive reading.
Like other stock market gurus like Warren Buffet and Rakesh Jhunjhunwala, Sampath also believes in the wonders of value investing. He is also firm in his statement that he has little advice for traders as he himself advocates and practices long term investing. One key reason for his impressive success rate is that he studies the fundamentals of a company clearly before making a decision. Ssampath, in all confidence and candor, lists some golden principles which help him make great investment decisions which keep him miles ahead of his peers.
His strategy simply is to buy a stock if:
- The stock has traded for 36 months (IPOs pls excuse)
- If todays price is less than the least price in the last 36 calendar months.
- Price is less than 2/3rd of Book Value.
- Debt/Equity less than one.
His software background and his Perl (Practical Extraction and Reporting Language) skills enable him to make such brilliant assessments. His skill sets apart from his vast sea of knowledge is what gives him an edge over other investors. In accordance with Peter F. Drucker, every company is measured on a rigorous scale of productivity and innovation before forming a part of his portfolio. And any stock that falls short of his expectations and fails to perform is unceremoniously removed from his portfolio. Sampath’s emotional detachment and objectivity play a crucial role in his success.
He is inclined to invest in businesses with sustainable cash flows, which he calls as ‘The Inevitables’. His favorite quote, “No one is resource poor. We are all imagination-poor. We have no courage to dream” – Professor C. K. Prahlad. The star investor feels that companies need to generate more cash flows in the present age, to compensate for the risk of going out of business quickly.
Chandrakant Sampath’s investment advice:
- “Pick up good companies with good managements when their share prices are at an eight-year or 10-year low. Alternatively, if you still want to do something, buy good companies that are 40 per cent lower than their 52-week high. I will buy only those companies that are in a business that even fools can understand, have very little debt, have free cash flows or do not have much capital expenditure, which is nothing but deferred cost,”
- Invest in a business you understand, the company should have either zero or very little debt, the share should be available at a P/E ratio of 13 to 14 times the current year’s earnings and lastly, it should be available between 3.5 and four per cent yield. Investment honchos like Sir John Templeton and Peter Lynch also stress on the importance of understanding businesses and how they grow.
- Buy equity shares of good companies when they are at an 8-10 year low.
- He believes that FMCG stocks are great buys and advices picking a stock with the least capital expenditure, where the return on capital employed should not be less than 25 percent.
- Investors should keep their expenses down, invest in just six to eight companies and have faith in the power of compounding.