Ep. 7 - Saurabh Mukherjea on Compounding, Wealth Creation, and Seizing the India Opportunity
Sep 3, 2021
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Saurabh Mukherjea, founder of Marcellus Investment Managers, talks about the opportunities in investing in India, finding honest promoters, and the power of investing in high-quality stocks for long-term success. He also discusses the decision-making process in investing, the challenges of succession planning, and the importance of capital allocation in investment.
India offers opportunities for wealth creation through long-term investing and identifying well-run businesses with sustainable comparative advantages.
Building relationships and people skills, along with trading less, are important lessons for success in business and investing.
Investors should approach investing like test cricket, focusing on simplicity, patience, and discipline for long-term success.
Deep dives
The Power of Long-Term Investing
The podcast episode emphasizes the importance of long-term investing and the potential for wealth creation in India. It highlights that India is currently in a period of integration and consolidation, offering opportunities for those who are mentally prepared to grab them. By identifying well-run businesses with sustainable comparative advantages, investors can position themselves for extraordinary wealth creation.
Lessons from Working Hard in Growth Years
The guest speaker, Saurabh Mukherjea, shares his personal experience of working multiple jobs during his teenage years and the valuable lessons learned. He emphasizes the importance of building relationships and people skills, stating that simply getting good grades is not enough for success. Additionally, he learned the importance of trading less to potentially make higher profits. These lessons shaped his approach to business and investing.
The Transition to India and Insights on Investing
Saurabh Mukherjea discusses his transition from the UK to India and his decision to focus on investing in the Indian market. He explains how insights gained from his experience of analyzing UK stocks helped him understand the potential for identifying businesses with sustainable comparative advantages in India. He highlights the differences and similarities in investing in the Western markets versus India, emphasizing the higher potential return on capital in India due to lower competitive intensity. He acknowledges the challenges of dealing with corporate governance and discerning the true potential of businesses in India.
Lessons from Rahul Dravid and Applying Them to Investing
The guest speaker draws parallels between investing and the career of Indian cricketer Rahul Dravid. He highlights the importance of simplicity and mental training in both fields. Like Dravid's focus on playing by the book in cricket, investors should focus on buying and holding high-quality businesses with strong fundamentals. He also emphasizes the importance of analyzing and rectifying mistakes, drawing inspiration from Dravid's ability to identify weaknesses and make necessary adjustments. The speaker encourages investors to approach investing like test cricket, embracing the patience and discipline needed for long-term success.
Objective Investing Framework
The podcast episode discusses an investing framework that prioritizes objectivity and removes subjective biases. The framework focuses on specific attributes that companies must demonstrate, such as board composition and training processes, to receive points for succession planning. By creating a granular and structured framework, emotions are minimized and decisions are based on data and objective criteria. This framework also guides position sizing, allowing for unbiased decisions based on company performance rather than market trends.
Importance of Capital Allocation and Learning from Mistakes
The episode highlights the importance of capital allocation in investing and reveals how it influenced the writing of the book 'Diamonds in the Dust'. The example of ITC demonstrates the shortcomings of the company's capital allocation practices, impacting its potential for sustained growth. This realization led to a deeper focus on capital allocation in the book and the recognition that it is as crucial as moat analysis. The episode also emphasizes the value of learning from investment mistakes, which helped refine and improve the investing process over time.
Saurabh Mukherjea is the founder and CIO of Marcellus Investment Managers and author of notable books like Coffee Can Investing and Diamonds in the Dust. In this episode, Saurabh talks about the opportunities in investing in India and the wealth creation that lies ahead for those prepared to benefit from the same.
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