Thursday 8 March 2012

A Collector of Gems - Views of Charles T Akre

A Collector of Gems - Views of Charles T Akre

Came across an interesting interview with Charles T Akre ... ... ...

A brief excerpt from the above interview:

 

Charles T Akre on trading in and out of stocks to catch the peaks and bottoms:

Will I be better off if I sold them at the top and bought them at the bottom? Of course! Am I able to tell when that is going to be? No. My life experience is that if the stock is at $40 and I think it is worth $25 and I sell it at $40 because I want to buy it back at $25, my experience is that it trades down to $25.05 and then goes to $300 and I don't ever get my position back. Therefore, we are always trying to make sure that we own the compounders.

 

Charles Akre may very well be a great investor, but in the Indian context, I'm forced to disagree. And disagree strongly. Perhaps if I knew about other markets, I may disagree about those markets as well.

My rationale and line of thinking:

  • Ordinary investors like you and me are likely to have a reasonably diversified portfolio and if we miss the Jilebi, we'll catch the Laddoo.
  • There is a broad range of Market PE within which the indices tend to move over a long period of time. In the Indian context, it tends to move between a PE band of 15-25 on a trailing basis. Hence, when the Index PE approaches 15, we ought to start accumulating and start getting out when the same PE reaches around 25. Just check out the Top & bottom of Harshad Mehta's time, Dot-com time, Lehman Brothers time, etc.
  • Even during the long period of consolidation in between, individual stocks tend to swing wildly within a very broad range.
    • We just need to have
      • a broad basket of shares - say, 8-10 shares
      • identify the broad range for each share within the overall index range
      • and keep going in and out of pretty much the same set of 8-10 shares
    • And ensure that we stick to our broad "Asset Allocation" at all points of time.

Listen to all the masters, learn their "style of operations", "line of thinking", etc. Finally arrive at your own individual strategy that suits you. And execute that strategy meticulously.

Happy investing!

Regards,

N


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