indian value micro cap investorThere is no weekly link-fest today, I apologize but I am doing something special today which I hope I will be given permission to post on the site tomorrow. I have a special interview though for today.

Just a few announcements:

I have a few unique articles that will be posted over the week and some more resource pages.

Due to time constraints with my job and wife (I do the blogging on the side for fun not for money; I have been reaching out for less interviews).

I no longer pre-announce interviews because sometimes they fall through; but I also conducted/will be conducting interviews and will be posting with:

1. This is my first non-value investor. She is a top performing emerging market credit portfolio manager. She has insane 10 year returns (especially risk adjusted, I do not like most risk measurements but sharpe is one that I look at. She outperformed over past ten years with a sharpe ratio of three). Although she is not a value investor, she invests based on fundamentals, and has a really interesting personal story. The interview is being edited now by her team, it is over 25 pages! No more hints, besides the fact that she manages a lot of money and works for one of the top bond funds (not PIMCO). I will also hopefully be interviewing the CEO at a later date.

2. I will be interviewing a top value hedge fund manager with several billion aum. He is a name everyone in the value investing world knows, and has a very Buffett-esque type of investing style, does very few media events. No more hints or it will give it away.

3. I MIGHT be interviewing one of the most successful and famous value investors.

That is all for now stay tuned. Here is Amitabh’s very impressive bio and some highlights from our interview:

Amitabh Singhi is Managing Director at Surefin Investments, an India based portfolio management and investment advisory company. Since inception in mid-2001 the fund has returned 27.9% annualized, net of all fees to investors (as of 2011). Mr. Singhi graduated with a B.S. in Economics from the Wharton School at the University of Pennsylvania, with concentrations in Finance and Management. Amitabh was one of the speakers at the last Value Investing Congress in New York.

Amitabh was kind enough to meet me for lunch in Manhattan and talk about value investing in India. He was also kind enough to pay the bill! The interview was conducted on March 31st2011; it is in a very informal and in conversational format. I started recording our conversation somewhere in the middle of our talk.

 

On the diversity of India, I was pretty astonished:

You had said I think that there were 150,000 dialects?!

Language in India changes slightly every 150 miles so there are many different versions.

We speak most languages. We have every religion in the world. And everyone is allowed to practice his or her faith. There are socialists, capitalists, and people in between. There are communists, completely right wing and left wing, we have it all!

On his process:

2. Finding a business that is relatively clean is important. So the business should not be hinged on some sort of special favor to the business, some kind of irregular monopoly (if it’s legal it’s fine), it has to be something that is sustainable because of the merit of the shop or the people itself. So, in India there is corruption taint in many things. So we start to filter that entirely out,
Then, the last 10 year numbers should be good. It should be a well-run business on the numbers. I think what happens in a bullish phase like now, is that people stop worrying about what the guy is actually doing on the ground, but they start worrying more about how the guy is going to deliver; which is the grand essential point. Forget about what he’s going to do, and look what he’s done. That you already know. So, we spend a lot of time looking at what he’s done and it becomes clear to me. And if the numbers aren’t clear, then I’m not interested. The guy can do what he wants. It’s somebody else’s money to be had, but it’s not my money.
So once all of those check out, then we start “Scuttlebutting”. So in most situations we will make some calls and really do some spy work (which I love). I have done all sorts of things from interviewing ex-employees to a lot of things. And none of it is to get inside information, because we stay away from inside information, obviously. I am trying to verify a number; I want to know about the competitor, I want to generally know from where does this guy make all of his money? And sometimes you become surprised.

On books about India:

I have not found a great book on Indian value investing yet. If you want to understand how the country developed, there is a book called “India After Gandhi” by Ramachandra Guha. It’s a phenomenal summary of the country. This guy has won tons of awards, a New York Times best seller, this and that. So if you really want to learn about a country once and for all, this is the book. It just shows you the complexity of what India is. You will get this a lot; India just has a lot of facets. If you talk to somebody from the south, you will see a different facet, same with the north, east, and west. We have regional, political, linguistic, caste-based, economic and ideological divides. I mean it’s even more diverse than the US; much more so. So that complexity builds into the businesses. Then there is “In Spite of the Gods,” by Edward Luce and also “India Unbound” by Gurucharan Das.

Amitabh is very bullish on America, here is his thoughts on the matter:

This country is great. I love the USA. This is where I would live if I didn’t have a home in India. It’s got the ability to allocate the right job for the right person in a free moving economy. It’s got the potential to keep unlocking. It’s not anywhere else in the world. It’s stupid to write them off.  India is a thousand dollar per capita country and yet America has made India believe that it’s going to conquer America in 30 years, 40 years because of GDP growth. It’s stupidity. It’s amazing how the US has gone to the underdog mindset and said, “Oh we won’t be able to fight China or India” If you’re a young guy, then Obama tells you that you are fighting with the Chinese for your jobs. It’s the underdog mindset. Per capita GDP in the US is $47,000 a year. In India its $1,200 and in China it’s $4,000. Who are we kidding? I don’t believe those stupid reports that claim in 2050 India will overtake the USA in terms of total GDP. Goldman could write

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