Chase Value, Not Price: Raamdeo Agrawal’s Investment Approach
Investment guru Raamdeo Agrawal suggests a focused approach to investing for maximum gains.
Investment guru Raamdeo Agrawal suggests a focused approach to investing for maximum gains. And investments should be measured in terms of value, not price.
“Value is what you get and the price is what you pay,” Agrawal said in the first of BloombergQuint’s three-episode series Power of Focus. Chasing value will drive price, he said. As chairman of Motilal Oswal Asset Management Company Ltd. Agrawal has created the “QGLP” - Quality Growth Longevity and favorable Price - investment process and its ‘Buy Right, Sit Tight’ investing philosophy.
Irrespective of the price, the game is to find value. The aim should be to focus on a few companies, but one should know them well. “There are very few good/great companies. Time is friend of good companies and an equal enemy of bad companies.”
That’s where it’s important to follow Warren Buffett’s advice on the good, the great and the gruesome. Good companies like Hindustan Unilever Ltd., Asian Paints Ltd. and Nestle India Ltd. do not need capital to make money, Agrawal said.
There are about 3,500 gruesome companies in India that are not portfolio-worthy. Investors should pick fewer companies as there is no benefit of diversification beyond 15 stocks in a portfolio. And allocate not more than 10 percent of the portfolio to a single stock, he said.
The competence of the management can prove to be “the dark horse”, according to Agrawal.
Watch the full interview here.