The managing partner and principal of Enceladus Capital is Mayurkumar Gadewar, who is an ardent disciple of Warren Buffett & Charlie Munger and closely follows their principles on investing and life.
Mayur lives in Singapore with his wife and their two children.
My story before 2012
“When someone with experience proposes a deal to someone with money, too often the fellow with money ends up with the experience, and the fellow with experience ends up with the money.” - Berkshire Hathaway annual letter 2006
- I have been investing in stocks since 2006 but I was a total amateur in my initial years.
- Lots of failed investments.
- Got conned by star salespeople and invested in a public housing project in Brazil. The deal terms were too good to be true, I should have known better.
- Fortunately, none of these mistakes involved amounts that were life-changing. I was young and had a long life ahead of me.
So what changed in 2012?
In the year 2012 by sheer luck, I picked up the book "The Intelligent Investor" on the airport and immediately got hooked into it. It made so much sense. It also introduced Warren Buffett and Charlie Munger to me. I read everything I could find on Buffett and Munger. It turned me on. I was fortunate to have found my true interest relatively early in life.
I decided to refocus and look at mistakes through the lens of opportunity and learning, and more importantly, I decided to learn from other people's mistakes. Confidence rises faster than ability, especially in young men. I learned the skill of changing my mind, discarding old beliefs and replacing them with new truths when I learned new things or as the new facts arose. It was hard, but necessary.
Firstly, I realized that it is difficult to find something that is really good. So, if you say 'No' ninety percent of the time, you're not missing much in the world. Avoiding the dumb things is the most important. I learned more, understood limitations, and started seeing patterns which helped me to avoid dumb things.
Secondly, taking the cue from Charlie Munger, I decided to sell the best hour in the day to myself (to improve my own mind) and the world could have the rest of my time. Slowly it increased to 5-6 hours a day. It’s amazing how it worked. That's how knowledge works. It builds up, like compound interest. I watched and deeply studied a lot of great investors. People who follow Graham, Buffett & Munger path, everyone’s done fairly well. I learned that this is as sure as you can get to become a successful investor. It helped me to compound my personal investments as well, at a very good rate of return.
Finally, I learned that investing is not easy. If investing were easy, everyone would be successful. And if everyone were successful, there would be no more opportunity to exploit. So it's never going to be easy.
Success means being very patient, but aggressive when it's time. When the odds are strongly in your favor, act decisively, and put down a big bet. The wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. Rest of the time, they don't. It's just that simple. How many insights do you need? Well, I'd argue that you don't need many in a lifetime.
Your main duty is to become as rational as you can possibly be. Rationality is a moral duty. If you have easily removable ignorance and still keep it...that’s dishonorable...to stay stupider than you have to be.
In a nutshell, avoid big mistakes, wait patiently for a good opportunity, be aggressive when it's time.
How would I behave in a market downturn?
Q: "You are so young, you have not seen a serious market correction. We are not sure how will you behave in a market crash. Only when the tide goes out do you discover who's been swimming naked."
A: I am currently 38 years old. Last time a major downturn happened it was in the year 2008-09, and I was very young at that time. I did all the mistakes a beginner investor does for e.g. I bought stocks based on stock picks from equally ignorant friends, I bought high-cost mutual funds looking at the rear-view mirror based on recent good past performance, kept piling disproportionately more and more money into equities and mutual funds as the market kept rising to its peak and sold them almost near the bottom when market showed small recovery, invested in gold almost at its peak, and bought into an airline stock which was nearing its bankruptcy!!. I was just 28 years old at that time and I was dealing with my own initial personal savings and relatively small sums of money (though significant in terms of percentage of my net worth at that time).
I got introduced to Buffett and Munger in 2012, and since then the batting average has been fantastic. The quality of the decisions have been far superior and I have managed to avoid the dumb mistakes. The market has been steadily rising and hasn't given me an opportunity to test how I will behave when there is blood on the streets. But I think about it all the time and I consider it as one of my primary responsibilities to take into account known as well as unknown risks. There has been no major 50-60% market correction, but there were a few small corrections and I have managed to keep cool and take advantage of them. In fact, as a net buyer of equities, I naturally root for lower prices. How will I behave in a major correction, I guess there is only one way to find out.
I will not sell the positions and go to cash based on some macroeconomic prediction of major market correction. I don't know how to time the market that way, and I believe no one does. I will buy great businesses at sensible prices whenever Mr. Market presents the opportunity, irrespective of whether the market is high or low. At the same time, I will keep some level of liquidity to pounce on big opportunities if the market behaves totally irrationally. If the markets go down, please expect our portfolio value to go down with it, though I would expect the portfolio to perform a bit better due to the superior quality of businesses in our portfolio.
This is what Buffett says in his 2006 annual letter on picking the right person as Berkshire's chief investment officer, "Over time, markets will do extraordinary, even bizarre, things. A single, big mistake could wipe out a long string of successes. We therefore need someone genetically programmed to recognize and avoid serious risks, including those never before encountered. Certain perils that lurk in investment strategies cannot be spotted by use of the models commonly employed today by financial institutions. Temperament is important. Independent thinking, emotional stability, and a keen understanding of both human and institutional behavior is vital to long-term investment success. I’ve seen a lot of very smart people who have lacked these virtues."
Well, I don't know how I fare in terms of the qualities Buffett mentioned. But being aware of those at an early age, strive to be as rational as possible, keep improving my mind day by day, and having the right structure in place for the firm is a very good start.
Five Qualities of Best Investment Manager
- Total Integrity.
- Long runway (like a young manager).
- Fee structure fair in both directions.
- Fluency in work and commitment to clients.
- Uncrowded investment space
We would like to add two more qualities to this list:
- The investment manager should have “Skin in the Game”. Having skin in the game automatically takes care of lots of behavioral pitfalls and strongly aligns the incentives.
- The investment manager should have done well for himself, otherwise, he has not earned his right to manage money for others. Why would you want to give your money to somebody who hasn’t accumulated anything by the time he was 40?
If ever you find one (money manager/investment advisor) with all these qualities, put money there immediately and put as much as you're allowed to put with them. - Peter Kaufman and Charlie Munger
Charlie Munger, Vice-Chairman of Berkshire Hathaway, a teacher & mentor to us, put it best, as a way of business and life, when he quoted a preacher who spoke about Charlie's grandfather's life, saying:
"None envied this man's success so fairly won and wisely used".
It is indeed our endeavor to succeed fairly, be grateful, humble and then use the success wisely, in making a positive difference to the world, because we lived.