What can investors learn from the God of Cricket? - The 5 Minute WrapUp by Equitymaster
Investing in India - 5 Minute WrapUp by Equitymaster

What can investors learn from the God of Cricket? 

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In this issue:
» The 2QFY14 result season is here with Infy's results...
» Need for greater promoter accountability in India
» Future American generations will inherit huge debts
» The new Fed Chief will continue Bernanke's reckless legacy
» ...and more!

The news and social media are abuzz with just one name since yesterday. It's none other than the iconic cricketing genius Sachin Tendulkar. After 24 years of a phenomenal sporting career, the master-blaster is finally set to lay down his bat after playing his 200th Test Match. In a country where cricket is religion and Sachin is God, his retirement indeed marks the end of a legendary era.

But it would be extremely unfortunate if we squander this historic moment in reverence and nostalgia alone. We think the best way to pay our sincere respect to the legendary man would be to take home some inspiration from him.

It would be demeaning to think of Sachin's talent as just a result of great technical skills. It is that, plus a lot, lot more... It is the character and temperament of the man that makes him what he is. And this is why we feel that there is a lot that investors can learn from this God of Cricket.

So here are some key lessons that we think can make you a very successful investor.

Passion, Focus, Self-discipline and Practice

The starting lines of Sachin's retirement letter to BCCI read thus: "All my life, I have had a dream of playing cricket for India. I have been living this dream every day for the last 24 years. It's hard for me to imagine a life without playing cricket because it's all I have ever done since I was 11 years old."

It shows his immense passion and single-minded focus on his goals. Besides, Sachin is known for his self-discipline and rigorous practice regimes.


Anyone who has seen Sachin play would agree that he would be the last man to get ruffled under adverse circumstances. He was neither the man to give in to provocation, nor the one to cow down under pressure. It is this brilliant temperament that his seen him through such an illustrious career.

Lifelong learning machine

Other than Sachin's brilliance as a cricketer, what is really remarkable is the consistency and longevity of his career. Yes, he has had his shares of low spells. But he has always managed to bounce back stronger and better. It is no wonder he holds so many major records to his name. What has made this possible? The answer is Sachin has been a lifelong learning machine. Despite his seniority and expertise, he has kept on learning and improvising to do even better. We believe that if investors can imbibe these key qualities of Sachin, they can have great success with investing. Be focussed and disciplined. Don't lose your cool due to short term market volatility. Keep learning from your mistakes.

Cricket and investing may be different games. But the success recipe for both is pretty much the same.

What is that one quality that you, as an investor, can learn from Sachin Tendulkar? Let us know your comments or post them on our Facebook page / Google+ page

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01:30  Chart of the day
One of the most critical factors of production in an economy is land. As such, transparent and fair land acquisition laws are important to ensure smooth and just land acquisitions. But India's land acquisition laws were antiquated and vague. But with the government recently passing the historic Land Acquisition Bill, this is likely to change. However, the bill has been severely criticised by Indian corporates as it is likely to raise land acquisition cost significantly. Many also believe that the multiple layers of approvals would further increase the project cycle and impede business.

But as per an article in The Economic Times, these concerns may be exaggerated. Some leading financial institutions cite that a major advantage of the new Bill is that it has added clarity of process. And unlike what corporates fear, land acquisition will now become time-bound. However, concerns about bureaucratic hurdles and the mandatory social impact assessment do remain.

Today's chart shows sectoral break of BSE-Sensex companies with the highest share of land holding as a percentage of Gross Block. The higher share of land in gross block does not necessarily mean that these sectors are the biggest consumers of land. It means that the relative share of other capital assets such as plant and machinery is lower.

What is the share of land in Gross Block for major sectors?
Data source: The Economic Times

The quarterly result season is back and IT major Infosys Ltd kick started it with a bang. The company has reported a 15.1% quarter-on-quarter (QoQ) growth in net revenues and a 1.4% QoQ rise in net profits. In US dollar terms, the revenues grew by 3.8% QoQ while the net profits declined by 8.4% QoQ. This essentially means that the growth in profits that we see in rupee terms could essentially be attributed to the depreciation in the rupee. But as usual, the stock markets are not questioning the decline in US dollar terms. They seem to be only interested in the growth that we see in rupee terms. As such the stock of the company is one of the best performers today.

The question investors need to ask is whether this exuberance is justified? Given that most of the growth in net profits was attributable to the depreciation in rupee; is such a growth sustainable? The thing that will drive long term growth is not rupee depreciation or short term currency movements. It would be volumes, pricing and deal wins. Fortunately on the volume and deal front, the company has seen healthy growth. This would help drive better fortunes in the long term. In our opinion, this long term picture is what investors should concentrate on. That is the only recipe for building long term wealth. Not reading too much into short term spikes and falls based on quarterly results.

Critical decision making tasks lie with promoters. Hence, top management is responsible for the business in totality. But the irony of corporate India is such that shareholder activism to uproot incompetent promoters is nil. In fact, most promoters run their businesses like dictators. They completely forget that shareholders are equal owners in the company and have a say in critical business matters. However, most promoters take shareholders for granted and run businesses like oligarchs. Take the case of Infosys for that matter. After the exit of Mr Murthy, it was being run by founder promoters. And the performance post Mr Murthy's exit is nothing to cheer about. Attrition increased and it lost out to rivals. Such an instance would have put any professional CEO on guard. However, since it was being run by founder promoter Mr Shibulal, the performance assessment aspect was completely ignored. Similar was the case with Kingfisher Airlines. Despite making losses since long, no shareholder raised his voice against the management of the company. It was run the way it was being run in the past.

Now compare this to what is happening in other markets. Recently, some shareholders of Microsoft are lobbying to oust Bill Gates. Their argument is that since Gates is pre-occupied with philanthropy work, he is unable to devote anytime to the company. Can this ever happen in India? Till date, have any minority shareholders taken any step to oust a CEO whose performance has been questioned? The fact is that unless shareholder activism picks up, the answer to this question will never be in affirmative.

Which Indian companies deserve a change in top management? We know it is questions like these that concern you these days. And your trusted source for views and opinions, The 5 Minute WrapUp, too has unfortunately not helped by staying silent on such questions. We understand that, in addition to broad views on global stock markets, you might also be looking forward to our views on few unexpected movement in stocks. And that is why we are taking steps to make The 5 Minute WrapUp more relevant to you. Watch this space for more details in the coming weeks!

So, the logjam with respect to the debt deal in the US continues as strongly as ever. Last heard, no side seemed like ceding any territory to the other. However, amidst this brouhaha, has one ever wondered what could be an ideal deal between the two warring parties? A commentator over at reason.com has made an effort to outline the same. He believes that the deal should be as dirty as possible. In other words, it should come with really strong pre-conditions. None bigger than the fact that the US Government gives a timeline about bringing down the debt limit to 60% of its GDP.

This is really important we believe. For the key reason the US Government finds itself in a low growth environment is its high debt levels. High debt levels amount to higher interest payments and thus there's that much less money available for current or future consumption. What more, a country can very well shift the burden of debt repayments from one generation to another. This, thus, amounts to our future generations being less well off than its predecessors. And no one would want to see such a world. Thus, the earlier the US Government comes to agreement on some sort of debt reduction plans, the better it is we believe.

The Indian markets expected the new RBI governor to be very different from his predecessor. But it was left hugely disappointed when Dr Rajan proved that he is from the same mould as Dr Subbarao. For those like us who support the RBI's conservative stance, it was a huge relief.

It now seems, though, that it is our turn to feel disappointed. The US Fed chiefs in the past have not been our favourite central bank governors. We believe that Ben Bernanke and more importantly his predecessor Alan Greenspan have been the architects of the current financial crisis. So we were sincerely hoping for a central banker in the US who would think differently. Someone who would be willing to take the challenges head on and accept near term pain for long term stability. But that is not to be. As per Economist, Mr Obama's choice for the US Fed chief is unlikely to make any difference to the Fed's stance. Ms Janet Yellen, it seems, is as keen to keep interest rates near zero as was Bernanke. Ms Yellen believes that unemployment is a bigger problem than inflation. So those fearing that the QE may see its end soon, can rest assured that cheap liquidity is here to stay.

In the meanwhile, Indian stock markets have extended their gains and are trading strong. At the time of writing, the benchmark BSE Sensex was up by 207 points (1.02%). IT and Banking stocks were the biggest winners. Most of the Asian stock markets were trading higher led by Japan and Singapore. The European markets opened on a positive note.

04:50  Today's investing mantra
"In terms of simple profitability, an average investor could have done just as well [as his company Berkshire Hathaway] by investing in the stock market if they bought during the panic period."- Warren Buffett

Editor's note: Kindly note that there will be no weekend issue of The 5 Minute Wrapup on Saturday, 12th October 2013.
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1 Responses to "What can investors learn from the God of Cricket?"

p v k sathya

Oct 11, 2013

sachin is beyond doubt a great cricketer. The one thing to learn, is enjoy your success for the moment and keep a log of reasons of your failures and work on them till you succeed...

Like (2)
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