In his first job as a buy side analyst, Bertie was assigned coverage of the automobile sector. This decision was based on the fact that for all his adult life Bertie had ridden some two-wheeler; Bajaj Sunny to start with, then Chetak and finally, Yamaha RX 100. Extending the same logic, another analyst was allotted consumer staples companies because he used to eat chips all day.
An enthusiastic Bertie though took this allocation logic seriously and was looking forward to bringing his user experience to bear on the equity analysis of two-wheeler companies. This dual vantage left him confused though.
Research reports used to tell him that engine displacement of a two-wheeler, which was measured in cubic centimetres (cc) was a critical feature to analyse. In fact, all industry data was segmented based on this cc measure and conventional wisdom was that the consumer aspired to higher cc bikes and companies who had a bigger share of such bikes stood to gain. As a biker, Bertie had never cared about the cc of the vehicles he had ridden—in fact he did not know the exact cc of any of his bikes.
The only thing he cared for and loved was the fact that when the traffic light turned green, his RX 100 would by far be the fastest out of the gates, with its distinctive thump amidst a F-16 like trail of smoke.
Another analysis that auto analysts seem to care a lot about but which never really bothered Bertie, the user, was total cost of ownership (TCO). To date, when buying an automobile, he has never done an excel analysis to compute the lifetime ownership cost per kilometre. As an auto analyst he has pored over these calculations.
Bertie was reminded of all this when he recently read a report observing that the upfront cost of a certain electric two-wheeler was now lower than that of a popular conventional scooter. This, the report argued, significantly tilted the TCO math in favour of the electric offering which was why investors were being urged to buy shares of the former and sell those of the latter.
A 20-year-old Bertie would have laughed at this, a 30-year-old Bertie would have taken it quite seriously but a 40-year-old Bertie is laughing at it again. Life, as they say, has come a full circle.
In the investing world, it is common to compartmentalise practitioners as followers of the growth or value style. Bertie has always found it hard to slot himself which is why when this question comes up in client meetings, he ends up giving some version of ‘cautiously optimistic’ answer.
Over lunch with a now-retired chief investment officer, Bertie mentioned this predicament of his. The ex-CIO nodded and said “Even I used to struggle with that one but now that I have time, I have given it some thought.”
Bertie was all ears.
“A better way of thinking about your investment style is to ask yourself the question if you are someone who generally believes that things will remain the same or someone who believes that they will change.” Buffett, he argued, was the patron saint of the former.
When he buys Coca-Cola, American Express or Kraft Heinz his inherent belief is that patterns of the last fifty years will largely repeat for the next fifty. Peter Thiel is probably on the other end of the spectrum. His core belief is that every status-quo is susceptible to disruption and therefore, his investment style favours the new, the exciting, the disruptive.
Bertie nodded as he tried to ask himself these question about himself.
“Your personality bleeds into your investing style, Bert,” the ex-CIO continued. “Do you go order the tried and tested dish in a restaurant or do you veer towards the unknown?” He pointed at Bertie’s well-worn Tumi office bag and then at his funky Mokobara. “Of course, this is not as binary as I make it sound,” he continued, “it is a continuum but knowing which direction the gravity of your personality type pulls you toward is important.”
Bertie continued to think about this conversation as he walked back to his office and concluded that he was more Buffett than Thiel. It was evident in the hits and misses of his investing career. Age-old businesses that were going through cyclical issues were his favourite hunting ground while the shiny new, things including Artificial Intelligence had been his blind spots.
To become more well-rounded, every Buffett, Bertie thought, needs to regularly interact with a Thiel. Whether that will influence the investment personality is unknown but Bertie is quite willing to give it a try.
Also, if you happen to see Bertie with an uncharacteristic neon bag slung across his shoulder, do not be surprised.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.