I am a big fan of Druckenmiller.
In fact, I wrote about him in my yesterday’s macro report. Compared to George Soros, Druckenmiller is less known. When Soros broke the back of the Bank of England in Sep 1992 which is known as black Wednesday, the idea was given to Soros by Druckenmiller. Soros only leveraged the idea. I will remember that day very fondly as I also made some good easy money that day. There are many quotes of Druckenmiller that I remember, but one of my favorites is “If you are early in your career, and they give you a choice between a great mentor and higher pay, take the mentor every time. It’s not even close. And don’t even think of leaving that mentor until your learning curve peaks “.
I have had many mentors in life, but not that many in trading. If I can recall who was my best mentors, firstly it was my mother, secondly was my class teacher in 7th and 8th grade, thirdly it was a spiritual guide by the name of Dr. John Edmund Haggai. He is about 95 in age and not in a position to communicate much, and I hardly speak to him these days. Three years back, when I was in the US, I called and told him that I wanted to visit him at his home. He personally drove to the airport to pick me up. It was a great honor for me. I learned a lot about humility and relating to people equally irrespective of their color, race, religion, or status from him.
Though I have so many cousins and friends in the US, if ever I want to go back to the US again, it will be first to see him in person again.
He was a great mentor for me
When it came to trading, I really didn’t have many mentors. My chief dealer when I started at HSBC was a horrible trader. So my learning was always that I don’t want to be anything like him… But as I progressed, I watched other successful traders and read a lot about them. If I can give you some advice on learning about trading, read all the “market wizards“ series. Think there are five or six. I have read at least four of them. It is written by a great guy called Jack Schwager. It can help you formulate your psychology and thought process.
When I came to investing in Tanla, I was at a very low point in life. I had lost a lot of money for myself and for my investors. I was very depressed and lonely. At this point, I met a stranger who was my cousin’s close friend, who told me about Tanla. Later he became my friend, and we are now in close touch. This was in late 2017 and early 2018. I watched the stock for a few months and started understanding its history. There were a lot of negative vibes, but I started to tick each one of them. It looked very much to me as a turnaround of the company. By mid-2018, I was ready to invest.
Before that, I was holding about 30 stocks in India from many sectors
Since I didn’t have much new money to invest, I had to make some serious decisions. One fine morning I called my broker and said to sell all my 30 stocks. He was a bit alarmed, and he insisted that I hold some. I said, “I know you mean well for me, but I don’t want to hear anything. Please follow my instructions and sell them all for me. I know what I am doing “.
All proceeds of those stocks were in my account in two days. I started buying Tanla from that moment. Think my first buy was in mid-2018 around 36. I bought it all the way down to 29. I remember one day around 29 or 30 the total volume was 45,000. Out of that, I bought 25,000. So more than 50 pct volume was from me. I left a bid at 29.85, and I was given throughout the day for that price. I never did any initiative buying and so far that has been the best price I bought Tanla. Then I started increasing my buying as prices broke above 46.50 as it was a key technical level.
After that, we got the news about Blackstone partnering with Tanla through Karix. My confidence started to grow more in the company, especially when the selling price to Blackstone was above Rs 56. I bought more. Then as the board changed, and I saw some industry heavyweight names being inducted to the board, my confidence grew in the company. All this time I watched the main promoter increasing his stake in the company. That was a serious confidence booster. I could see that the company was cleaning itself to become a good outfit.
Plus I had great respect for Blackstone
My former employer had private equity investments through them, and I had attended their pitch in internal meetings. I also had the opportunity to listen to Stephen Schwarzman the CEO of Blackstone at a conference. So I knew Blackstone will set rigorous standards for them to be associated with anyone. Still, there were many other negatives that I was not clear about, but slowly they were all clearing up for me. To be honest, ever since I started investing, I was never faced with any negative news relating to Tanla. It was all a positive surprise. I will talk about the perceived negative news through another letter.
So now many of you may ask me “was it prudent on my part to put all your eggs in one basket “. For this again, I like to go back to another quote from Druckenmiller.“ The way to become rich is to put all your eggs in one basket and then watch that basket “. That’s what I did, but I am not recommending this strategy to anyone, especially for anyone closer to retirement or after retirement. If you did in your 20s, and you failed, you still have time to recover. So this is not for everyone.
But coming back to this idea of diversification and balanced portfolios, where did it originate. It all came from the sell-side of brokerage houses and investment bankers. If you are diversified, some investments will do well. All can’t go wrong. Your investment manager can always comfort you and say, “though you are losing money in Tanla, you are doing OK in bonds.” Plus, it is also protection for them from any litigation or suing from the investor.
As Warren Buffett said
“Diversification is protection against ignorance. It makes little sense if you know what you are doing. Wide diversification is only required when investors do not know what they are doing.“ But let me caution you again if you really haven’t gone through all the checklists and understood the business in and out never go for it. Try to stay mediocre and get your 15 pct return, which is good by any standards now. Again another quote from Buffet, “If you are not thinking about owning a stock for 10 years, don’t even think of owning it for 10 minutes.
Because I made that concentrated decision instead of getting a 15 pct return now I have an unrealized profit of more than 300 pct. Will I make a profit of 3000 pct from this? Who knows and why not?. It can happen.
All I need to do is manage the current position and let the market do what it should do.
Author: ©Abraham George, CEO, Founder at AllSeasonsPTL Capital Management Ltd.
