Interview with Safal Niveshak

Posted on by fundooprofessor

Safal Niveshak (Successful Investor) was founded by Vishal Khandelwal, who is a friend on facebook. Out of curiosity, in June 2012, I ended up on this page of his site and liked his methodology enough to send a message to him, complimenting him on his efforts and his clear thinking.

Vishal wrote back and soon we were exchanging messages. One thing led to another and we met at The Aman, New Delhi on 29 July for breakfast, which lasted more than 2 hours, during which Vishal asked me few questions and recorded my answers.

Later, he painstakingly transcribed the interview into four parts, which he posted on his site. Here are the links:

Part I
Part II
Part III
Part IV

Thanks Vishal.

Published by fundooprofessor

I am Distinguished Adjunct Professor at Flame University, Pune. Previosuly, I was Adjunct Professor at MDI, Gurgaon, where I taught MBA students two popular courses titled “Behavioral Finance & Business Valuation"(BFBV) and Forensic Accounting and Corporate Governance (FACG) for many years. I am also Managing Partner at ValueQuest Capital LLP— an investment advisory boutique which helps its clients invest their capital in good quality businesses.

15 thoughts on “Interview with Safal Niveshak”

  3. Thanks a lot professor. I have learnt a lot going through various articles and the lecture series posted on your blog. Would like to make a request (knowing fully that it will be very demanding on your time schedule and may not be possible, but just trying luck) that if possible please conduct a short course on Behavioral Finance and equity valuation for people like us who are not lucky enough to be studying in MDI. I have another suggestion, if conducting a course if not possible you can post video recording of your lectures in MDI.

    Thanks a lot again

  4. Long-time reader, but commenting probably for first time. So to begin with, I’d like to thank you for this excellent blog and lucid ways in which you explain the art and science behind investing.

    I’d like to second the motion proposed by Anil Kumar above. This has been on my mind for quite a few months now, but always hesitated to request. Infact hours ago, I commented same at Safal Niveshak’s blog (http://www.safalniveshak.com/value-investing-sanjay-bakshi-way-part-4/#comment-10391). Excerpts below:

    …Prof is so damn good in his answers, it no more feels like an interview – it’s almost as if we are sitting next to you listening to him live as he gives out gyaan. God, sometimes I feel if he ever conducted fulltime weekend investing course, say 6-months, or even a 1-2 month-long full on intensive crash course where one could think of a sabbatical from regular job; I’d definitely Airbnb myself out of Bombay just for that only because I dont have time/money/where I’m with my social/family commitments right now to undergo 2-yr fulltime MBA!! I just read all 4-parts together again in one sitting – and apart from obvious gyaan, there’s also an alarming sense of zen-ish peace and calm descending upon me. It makes me want to go out and sell all my short-term trading bets tomorrow!…

    Problem with learning from books is that :
    a) Self-learning can go only so far without exchange of ideas and discussions in person.
    b) Most books are US-centric and without guidance it’s easy to fall in idea pits to figure out which ideas of those books apply to Indian mkts.
    c) I am yet to find a good primer that can teach me roughly 50-70% of Accounting for Stock Valuation (as used by Indian companies) and give a good lay of the BS and P&L land – atleast enough to reject outright bad ideas and then filter the good ones by discussing with experts. So if you have any book/reading material suggestion in this regard, pls point out. I personally face a significant hurdle in evaluating ideas on this front and because I know I’m handicapped I usually let go.

    Thanks again.

  5. Thanks Professor.Its was a pleasure to read your Interview as its always been a learn exp.You have been a true Guru and appreciate your novel effort of sharing knowledge as its very hard to find people of your with such thought process.I really envy your students of having such a true source of knowledge.Please accept my sincere gratitude and honest appreciation of your articles being true source of knowledge for students like me.

    Regards,
    Vikas

  7. Exceptional thoughts, Sir. Now these are what I call multibagger-thoughts 🙂
    Since we are on this subject of how to become a good investor, I wanted to add some interesting observations. I don’t know if its relevant or not, but still I would go ahead and put it on the table.

    1) Great investors, apart from having great investing skills, have great spending discipline. They don’t tend to live lavish and king-size lives. They tend to be frugal and austere (and I’m not talking about only Buffett whose frugality is pretty much famed). When asked about living living lavishly Robert Wilson, a remarkable investor, said “One of the dumbest things you can do with money is to spend it.”
    Though there are many hedge fund managers who take home out-sized pays and buy yachts and mansions, but even among them the really successful ones shun ostentatious lives.

    2) Great investors tend to be obsessive workaholics. They eat, sleep, drink and breathe their work. John Train in his book Money Masters of Our Time makes a very bold observation. He writes that all investment geniuses have had a tough time in their childhoods : be it financial problems, family troubles or anything else. These dark times tend to haunt them and drive them to work harder and harder (maybe to get their minds off these problems).
    But whatever it is, great investors are compulsive workers, no matter what be the reason behind it – passion, problems, compulsion etc.

    3) Great investors tend to be continuous learners. I read in Snowball that Charlie Munger attributed Buffett’s extraordinary success to him being a “continuous learning machine.” Now, it may be that their methods of learning are different. For example some investors learn by reading (Munger), some by travel (Jim Roger), some by talking to market participants Peter Lynch) and so on. But they never let their learning machine rest. They never think themselves to be above the market.

    Just some food for thought.

    Mukesh Harlalka

  8. I appreciate Vishal’s passion for investing.Its great to see such passionate people dedicated to investing and trying to help out other people.

    Having been an ardent follower of Sanjay’s posts, I enjoyed this interview as much as I enjoy reading the posts in this blog.

    -Rakesh.

  10. Sir,

    I have been struggling with one question on diversification on which i would be really keen to know your views. If an investor is following a mix of graham style statistical bargains and buffet style moat investing then what would be considered a good diversification. statistical bargains could be of multiple varities like cash bargains, debt capacity bargains, debt reduction theme, raw material theme etc and each of these themes on their own require a diversification. The mix between buffet style and graham style could be dynamic but let us say that if at a given point in time i have 60% in buffet style stocks and 40% in graham style themes. the buffet style position is relatively easy to understand from diversification perpsective as there would probably be no more than 10 in that category that i will have at any point in time. but for graham style portion where each theme might require its diversification, what would be considered an optimum level of diversification. should we build diversification on each theme (e.g. 5 stocks for each theme, which may become quite unwieldy) or just diversify between say 15-20 stocks combined across various themes.

    would really be grateful to get your thoughts on this.

    regards,
    sandeep

    1. Sandeep,

      If you choose a single statistical theme – say debt-capacity bargains – you invest not in a single stock, but in a basket of stocks all of which possess the characteristics of a debt-capacity bargain. Each basket should be treated as a single stock, in my view, but if you follow this approach you really don’t need 30 baskets – just a few would do. That’s because you will get wide industry-wise diversification even if you have 5 baskets (i.e. themes) each of which consists of at least 5 names.

      It also makes sense to calculate aggregate numbers for each basket. For example, if you are buying a basket of stocks based on “earnings yield at least twice of AAA bond yield + high interest cover” then you should calculate the earnings yield and interest cover of the basket. This will force you to think of a basket as a single stock.

      Just treat each theme/basket as a single stock and then think like a focused investor who will invest in just a few stocks, which in your case would be “just a few baskets.”

      Hope this helps.

  11. Sir,

    many thanks for the prompt response. this is really helpful. I have one follow up question. i had been thinking on somewhat similar lines (though i used to think of 8-10 themes which made it too big to manage and i never thought of aggregating numbers of the stocks in a given theme which sounds like a very good idea). But one practical problem which i face is that many times i would find 1 or 2 stocks on a one theme and then i build partial position on that theme. this way let’s suppose i initiate a position in 5 themes with 1-2 stocks each. But then i do not find enough new stocks for these 5 themes but find 1-2 attractive stocks in a different theme. I then struggle to decide whether i keep cash idle till i find more stocks under same theme or should i initiate position in new theme, which could then make excessive diversification between themes but insufficient diversification within same theme. For example, for large unpopular company i may be able to find only 1-2 very good options and then nothing might come for a while. I just wanted to understand if i am being inefficient in not being able to find 5 stocks at a time for each theme or is it normal problem that most investors would face and if so how do i deal with it.

    Apologies if i have over complicated my question.

    kind regards,
    sandeep

  12. Sir,
    Very good interview with full of Wisdom. your interview can guide newcommer or ametuer investor like me to dive in deep stock market to search pearl in ocean. Thanks a lot

    Regards
    Anil Jain

  13. Dear Sir,

    I have gone through the lecture series on BFBV which you have posted on your site. Just one query. Do you think its fair to use perpetuity model for companies which are highly cyclical and some time their revenue totally dependent on orders on hand or assets under management eg. 1) Private equity funds like IL&FS invest managers 2) Construction companies like L&T etc 3) Equity brokers and investment management firm like Motilal Oswal and Geojit BNP paribas securities. etc. (I know you do not prefer to pass company specific comments and I am not seeking any company specific comments but quoted these companies just for examples.)

    The way I am doing the valuation of these companies is to assume that revenue will decline another 20-30% from current levels and stay there for next three years and then apply a growth of 5% p.a for next three years and then use the perpetuity model.

    Finally thanks a lot for posting your lecture series. Even after completing CFA, I felt as if I never had any education in investment after going through your lecture. Thanks in advance for your help.

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