Swanand Kelkar - Former Managing Director, Morgan Stanley

Raj  00:00

Hello, listeners. My name is Raj Singhal and welcome to another episode of 'Breaking Investment Stereotypes'. This episode is brought to you by multiple.co, where we believe that investing is an ignored life skill. Our mission is to create a platform where people can come learn, share and collaborate through the right tools. Ultimately, we want your hard-earned money to work for you. Here at Breaking Investment Stereotypes, my job is to deconstruct world-class investors, portfolio managers and deep dive into their investing journey. Personally, professionally or both. I want to give a little guidance on how to use the show. None of the following should be taken as investment advice. Please see multipie.co/disclosures for more information. My guest today is Swanand Kelkar. Swanand was the managing director at Morgan Stanley based in Mumbai till May 2021. He was part of the global markets emerging team where he oversaw a public equities portfolio worth $3 billion. He joined Morgan Stanley as an analyst in 2007 and rose through the ranks to become managing director in 2017. The funds advised by Swanand had the top desired performance between 2014 and 2017. The India SICAV fund was nominated for and won the best fund award citywide, ranking in 2017. Before Morgan Stanley Swanand worked with Fidelity International and HSBC Asset Management. He graduated in commerce from the University of Mumbai and is a chartered accountant. His love for equities and investment made him follow up his accountant qualification with an MBA from IIM-Ahmedabad, one of the top business schools. Swanand is a guest writer for Mint, Bloomberg, and Open magazine, writing on investments, markets, and Indian macro and also appeared as an expert on Bloomberg TV, CNBC, and ET now. He writes a monthly column for Bloomberg-Quint. In 2020 Swanand took a one-year sabbatical from his corporate job. During that year, he became a qualified yoga teacher certified by World Yoga Alliance, published short stories, trained at the Gary Kirsten Cricket Academy in Cape Town, and learned how to cook a five-course meal. So without further adieu, please welcome Swanand Kelkar  Hey, Swanand. Welcome to the show. 

Swanand  02:17

Thank you, Raj. Thanks for having me. 

Raj  02:19

Always. You know, Swanand, it's been a very interesting life journey so far, especially the whole sabbatical. And it's very rare for young people like you, and yet your age and stage of career to do that. And I'm sure you know, a lot of people must have asked you about it. And you've written a whole chronicle around that. But you know, we would like to hear more about that. And also just your life in general.

Swanand  02:42

Such a broad question, I think that it can consume the entire hour, but I'm gonna...

Raj  02:46

All yours. 

Swanand  02:48

I'll start in reverse. We'll talk about the sabbatical. Since that's the question you asked. So I took a sabbatical starting February 2020, what timing! For a year. I came back to Morgan Stanley, in fact, in 2021. So that was the year when I was out of my corporate job. The idea was to explore certain skills, certain things that I've always wanted to but the pushes and pulls of a corporate job, and just life in general, keep you from exploring those things. I won't call it a bucket list, but something that I've always wanted to do before you know, you are physically unable to do it. I turned 40 recently, so I said, this is a great time to kind of introspect, look back and at the same time, look forward in terms of what you want to do. And that's where this idea of a sabbatical came from. I wanted it to be a structured one. I decided that I'm going to learn seven, eight things that I wanted to. Originally started with a plan of 12, but kind of COVID put a spanner in the works. So I said, I want to learn seven, eight things. I structured a learning plan around it a month, month, and a half for each. I worked with the teacher for all of them. So it started with yoga. I learned how to dance a bit. I learned how to cook, I learned how to play. I mean, I trained for a month and a bit at the Gary Christian cricket Academy. I worked on my fitness because that was an area that I wanted to work on. Yeah, so all those things put together were, I would say the most impactful year of my life. Before that, I have been with Morgan Stanley. I joined in the early 2007s as an analyst, and I spent 14 years there. I look at the Indian public equities in the asset management business, which is put very simply, it's a mutual fund, but the only difference is that the investors are foreigners. They are foreign institutional investors and not Indian investors. So that's the only difference but we invest in equity markets, just like any mutual fund would do. I graduated IIM-A in 2005. I'm a chartered accountant and reading this backward now. I am a chartered accountant I qualified in 2002. That's been the life journey been on the buy-side all through my post-grad career since 2005. 

Raj  05:05

That's awesome. So we'll pick some of the aspects of your sabbatical from hereon. I read in your Chronicle, you said that you were not expecting to go from this whole Gangadhar to Shakti man. And this is what you picked up from this chatroom on TV in eight weeks. But how far into that you became a Shaktiman in this whole process.

Swanand  05:25

So I think the one realization was that somebody goes from Gangadhar to Shaktiman only in a story, only in a fictional tale. In real life, nobody goes from Gangadhar to Shaktiman. In real life, you go from Gangadhar to becoming a better Gangadhar. Shaktiman is a full stop, right? Shaktiman is somebody who's become a superhero. There is nothing further to do, something man has achieved all that he wants to. But Gangadhar is still trying to improve on yesterday. But at no point, is he saying that this is done right. So I don't think in real life you become attractive and read as an investor, we differ in learning a new skill. I think if you ask Warren Buffett, who's the presiding deity of all investors, I don't think he will say he's Shaktiman. he will say he is a better Gangadhar than yesterday. So I use that in the context of the fact that a lot of people embark on any learning or any improvement or any productivity journey hoping for miraculous results in very short periods. They're expecting to go from Gangadhar to Shaktiman in one year. but the sabbatical has reinforced my thinking that in real life, nobody becomes Shaktiman.

Raj  06:36

I've been a strong believer that in life, there is no destination. It's all about the journey. So till the time you enjoy this whole process of improving every day as Gangadhar, that's what life is all about. Another interesting thing I picked up from your Chronicle is about sending these no-agenda meetings to some of your friends and network. Curious to know about such interesting meetings.

Swanand  07:12

I'll give you a context of what I was trying to do. Before I went on sabbatical, I decided that for almost two and a half months, I went on a personal project of digital minimalism. It was inspired by a book by the same name. Digital minimalism wherein you minimize your use of technology, to only the stuff that you care about. So I deleted a ton of apps, I deleted Instagram, YouTube, Facebook, etc. What was created was a large amount of time in my life. I ended up creating almost two and a half hours in my life by deleting all those things. And I said, What do I do with these two and a half-hour that I have created? '' Can I go to sleep? And that's great. Instead of sleeping seven and a half hours, I can sleep for 10. But I said what is the best use of this time that is suddenly available? And I said I'm going to write to a few people. Some of them I know, some of them I know off. I was just seeking a meeting saying that this is what I like about you, I've been impressed, can we just meet? So I just extracted the subject line request for a no-agenda meeting. And you'll be surprised. I mean, I had a great hit rate on asking for these meetings, and the number of people who said yes, come over, let's chat. I don't want to take anything out of it as a predetermined agenda. So I met a lot of people. And I wrote down some of my meeting notes. Some of them are insightful. When you're meeting somebody without an agenda, you kind of get to see that real person. If you're meeting as an investor, you're meeting a corporation, both of you are putting on a facade. The investor wants to ensure that the corporate is telling you everything and the corporate wants to ensure that they're putting their best foot forward. But here you're just two people meeting. Those meetings are insightful because you get to know the person and what their core beliefs are. I had meetings with some senior industry leaders, some investors that I like and respect. One of the columns that I recently wrote for Bloomberg Quint, about out-behaving. That column came out of a conversation with Rashesh Shah, which happened in 2017. So that's almost a four-year-old conversation, which was part of these no agenda meetings, and the way he said it, it's kind of remained with me for four years. It was there in the back of my head. And even after four years, I could write it as a column in almost two hours. So some of those meetings were very impactful to learn a lot from people whose experiences are not just from the financial field or investors. I met people from diverse backgrounds, and it was very educational. I would love to do it again. I just need to structure my life a bit better. And firewall those times. And hopefully, as physical meetings improve, I think I'll have the opportunity to do it. 

Raj  09:59

That's interesting. Let's talk about the whole investing journey which you're going through. You've been part of Morgan Stanley for such a long period. I'm sure, you know, I've been a macro trader all my life. You have to contemplate macro versus micro. I mean, I only saw the whole macro thing but as an equity investor probably there's a lot more about macro versus micro. And this whole macro is becoming very interesting nowadays with a lot of people talking about whether inflation is bad, especially in the US context or developed market context. What do you think, you know, as a retail investor? Do they need to bother about macro? 

Swanand  10:35

I can answer this in two parts. I'll tell you as an institutional investor, how I used macro. The way I used to do it is our investing time horizon. So when we initiate a position in a company, our typical starting point horizons are 18 to 24 months. We are holding a stock or writing a rationale for that stock within 18 to 24 months of visibility. Which does not mean that we are selling the stock per force in two years. But that is your starting point visibility that you have in terms of the business fundamentals or even the macro fundamentals. So as investors, we start with that time frame. And the way I have tried to use macro is to use a set of extremely high-frequency indicators, be it commercial vehicle sales, be it airline traffic, be it port loading, or credit growth. We had created a dashboard and had to look at a whole host of macroeconomic high-frequency macroeconomic indicators just to see what is the internals of the economy? What areas of the economy are picking up steam? What areas of the economy are losing steam? And if they're losing steam, why are they losing steam? If are they likely to come back? What if this is structural. So it effectively became a starting point for questions for me just looking at instead of high-frequency indicators, and these are now very easily available even if RBI refers to them and maintains a dashboard of these high-frequency indicators. So that was the most critical macro input into my investing process. And it was input in the sense- it used to nudge me towards sectors, saying this is something which seems to be picking up. This is something that seems to be cooling off. Can we explore this a bit further? So that was how I used to primarily use macro. I used to never care about what the next inflation print is going to be. But what I used to care about is to understand what macroeconomic regime we are in? So when I say macroeconomic regime, what do you mean? For an equity investor or growth equity investor, I think what matters is- what are the macroeconomic drivers of growth? I mean, that's the main thing that you're focusing on. And to give you an example, I think a lot of people who say that we are pure micro guys, we don't care about what's happening in the macro. But if I can give you an example - If you remember the first decade of this Millennium from 2000 to 2010, it was all about Larsen and Toubro that from 2003 till 2009 Larson had this fabulous run, it was talking about some 6-7x and HUL was flat, right, a lot of people have forgotten the fact that it was called the Unilever’s lost decade. And the basic underlying macro reason at the broadest level was the fact that the economy was driven by the supply side, the economy was being driven by capital expenditure, it was being driven by the creation of new capacities. And consumption as a driver was much more subdued. So it was an economy, which was more an investment-led economy. And consumption was much more subdued. And that sort of the stock price returns for some of these stocks. Come to 2009 and you had this one big mega fiscal stimulus after the financial meltdown and these drivers reversed. If you look at the 2010 to 2020 decade, it's a lost decade for LnT. Whereas Hindustan Unilever is now up multi-fold, which is because the fiscal stimulus, which was a more consumer-oriented fiscal stimulus, they put money into the hands of the consumer, they went out and bought stuff, right. I'm just giving a very broad example, if you just made this macro regime shift call to good aim, you could move from Larson to Lever on time, and I probably feel that that might be reversing again. I mean, Lever is already an underperformer. It's kind of flattish. And lastly, showing some signs of life. So those drivers of the economy might be changing one more time. So as a macro investor, if you can figure out that, okay, I feel the next five years, this is going to be the predominant driver of growth, I think then you can orient your stock picking in that direction, right. But there is no getting out of stock picking. My favorite analogy for this is the macro regime is like the pitch on which you play with it, right. But at the end of the day, you still have to make runs. So you will have a bouncy wicket, you will have a spinning wicket, once a while you play at Chepauk and some other time at Perth. You will play it and maybe play in England where the ball is swinging but you need to know the context in which the stock picking is happening. But at the end of the day it is the runs that you need to make. The context of the stock-picking will help you prefer certain shots over others. But that's all there is to it just by reading the pitch well. You're not going to make runs.

Raj  14:56

I think you mentioned that one of your biggest mistakes was making pure macro calls. So maybe you want to talk a little bit more about that. But secondly, I think you interestingly mentioned whether this decade is again, shifting around this whole, you know, consumer versus capex, I guess. And if your thought is more developed on that, probably, let's talk more detail on that. So let's pick, let's talk about both those aspects.

Swanand  15:18

So let me pick up the pure macro thing. Let me give you a live example. It's a taper tantrum, not a live example. actual example. That's a taper tantrum that happened in August 2013. Right. Remember, the Fed talked about tapering for the first time, and India having a high current account and a high fiscal deficit went through a period of big dislocation, a macro dislocation. And by November, December 2013, things have started to stabilize. Let's say you are a pure India, macro watcher, and you had the foresight to make the call that this seems to be the bottom for Indian and I want to buy India, right as a macro view on the country that things have had a freefall, but they're now stabilizing. And from here on, I feel things will gradually start to improve. And you let's say you bought, without doing much research yourself. What macro people do is try and end up buying the largest bank in the country because a bank is a levered macro play, you would have bought, let's say, either an SBI or an ICICI Bank. They would have done nothing for you for the next two and a half years, not because your macro call went wrong, but because you did not do enough legwork on the specific issues that the banks were facing or the leadership issues or there was a lag effect of credit quality and those kinds of things. So I think I made a pure macro call once on a financial stock saying that okay, things seem to be bottoming, things seem to be reversing, and I need to buy the largest bank out there. I don't care too much about what's happening within the specifics of the management. It is the NIMs improving what is happening to Cost Ratios, what has happened to create a cost, etc. and that didn't work out too well. So I think you need to be able to do both, you need to be able to assess what the macro setting is, and then be able to do enough work on the stock itself, to ensure that there is no loss in translation and that your macro call is correctly reflected in the stock as well. So yeah, so that was the first part where I made a pure macro call and probably didn't go right. Now the second part, your question. The supply change in any economy is a step function or supply chain for any new thing is like you have a supply for a certain time, then you have new supply coming, and then it stabilizes, whereas the demand is kind of a smoother function. And if you understand this broad dynamic at a multiple-decade level, you will get a sense of when to move from the demand drivers to the supply drive. In classic commodity terms, commodity prices are high right now. And they are likely to remain high for the next year or a couple of years, producers will now create capacity, that capacity will come on stream for the next four or five years by which time demand might start weakening, you will have an overcapacity problem demand will then steadily grow by which time the real price overheat and the cycle will repeat itself. So I think that is what will happen, one thing to look at is the utilization levels, which is where demand and supply and across a whole host of tough industries. And that gives you a sense of where to shift from one part to the other. So I'm not saying this is happening tomorrow, but if I were a betting man and I had to bet, I would say this is Larson again.

Raj  18:32

Okay, that's very interesting. The other thing, you run a portfolio for Morgan Stanley and Morgan Stanley is a big International House. So I'm sure you know, that was part of the emerging market team. And you'd have seen other emerging markets as part of the overall investing team as well. But India has always been very high on valuation as compared to many other emerging markets, including China as well. And again, I recently saw some data that you know, India has received a larger proportion of emerging market inflows, probably some of that could be what is happening in China as well. What's your thought on this whole India premium, which has been there for decades?

Swanand  19:10

So I think India premium versus MSCI EM (emerging markets). It's a purely mathematical element. A lot of emerging markets are very commodity-heavy, financials heavy index. So if you look at places like Russia, Brazil almost 50-70% of the indices are either financial or material stocks, which is oil, copper, iron ore, those kinds of things. Now, by definition, these industries tend to be loopy, right? So when you're comparing a composite that is heavy on energy, material,l financials versus composite, which is heavy on tech, versus heavy on the consumer, they're naturally going to find one is more expensive than the other just because of the sheer composition of the basics. So that is something that we have always talked about in India, saying that we need to adjust for the index composition when we compare just the headline ratio of one market versus the other. The other thing about India is just that it's a diversity of stocks and sectors. And we did this analysis, I think two, three years ago, and India then, (that number is now expanded) at 350 companies with a market cap over a billion dollars. which is a fairly large number of companies, even for institutional investors. There was only the US, China, and maybe Germany, which had more number of listed companies with a market cap of over a billion dollars. We'll be surprised by some of the emerging markets like Russia, Brazil barely had double-digit billion dollar companies. It means that as an investor, I am going to come to India, just because the pool is big. My ability to invest across sectors in fairly large companies is fairly high here. And coupled with the fact that if you think about it in nominal GDP terms, and that's what matters for an equity investor, there are very few places where you get a combination of size and growth, right. I mean, India has grown nominal GDP double-digit, for the most of last decade, for the last couple of years, because they will do dislocations. So you get a large pool of companies, which are growing fairly fast. Naturally, they attract investor interest. I mean, that's as simple as that. And on top of that, there's sector diversity, which means that the capital, even if it is foreign portfolio capital, is much more secure. To put it bluntly, let's see, if we have a negative view on oil and commodities, it's very difficult for you to invest in Russia. Yeah, you might find one retailer there or something of that sort. But the bulk of the Russian index becomes uninvestable for you. But there's no such thing because the Indian market is not hostage to one macroeconomic factor. Let's say even in the worst of times, like 2012 and 13 when the domestic conditions were not so great, you could very well run an outward-facing portfolio in India. I mean, pharma and tech companies as the bulk of your portfolio, more exporters and benefited from currency weakness. So I think that is the thing that draws more and more investors to India. The only thing I'll say about it is that it is probably one of the few markets apart from maybe the US where you get stock market compounders. What I mean by compounders, is that they keep giving you returns consistently over long periods. If you see more cyclical markets, like let's say the tech hardware cycle is a cycle right. And markets in Korea, Taiwan, which are more exposed to the hardware cycle, can give Point to Point returns, which are better rated in India, but will have a deep cyclicality within that, right, so you need to be able to capture that 18 month period correctly to make the bulk of the return versus let's say an HDFC Bank which you can sit on for two digits, right. So as an investor, I am more attracted towards the latter, right, which are more secular compounding stories, rather than having to time a cyclical thing, which is where again, India gets a lot of this money. When you look at a lot of the foreign institutional investor portfolios that have been there for a long time, the portfolio churn has hardly been anything. I remember that when I joined Morgan Stanley in 2007, we used to own HDFC Bank, which we still own in May 2021. So I can't I can't think about any other market within our portfolio, which is our stock which has been there all 50 things come and go out. So I think that is some of the exact numbers I haven't looked at how much the premium is as it expanded. It's from but I think India as a market will always remain at a premium. 

Raj  23:32

It's really interesting to talk about these whole compounders. We got a few of the other guys before you on this podcast, including Soraubh Mukherjea who talks about this whole compounder thing. But they were probably like 50 stocks . There may be 350 stocks, which are about a billion-dollar, but again, the pool becomes smaller. And if you look for the compounders. So how do you look through that? One is a larger pool, but within that, there are only a small set of players who are probably long-term.

Swanand  23:57

So the thing that happens is for a minute, just assume that you are not a domestic investor, you are somebody who can allocate money across markets, who can allocate money across emerging markets. What that means is you need 10 stocks in India, you don't need more than 10 stocks, because you are going to have an emerging market portfolio, which is about, let's say 100 trucks, India has weighed in MSCI at about 10%. Or even if you want to look at the weight and figure out how much money you want to put there, you need 10 stocks, you don't need too much more than that. And those 10 compounding stocks you easily find, right? I mean, as an institutional investor, what am I trying to I'm trying to hang on to, I'm just trying to get the ball out of the park. I also want to ensure that it comes at low risks, I also want to ensure that there's not much volatility in return because, at the end of the day, it's not because I'm on a whim. It's because the people who have given me the money to manage need consistent returns. They are pension funds, who have a pension liability, which they need to meet every year. If I generate a 50% return here, I mean, there's no patting on my back. But they cannot put out to minus five because that means that the pension becomes underfunded. So that's how my risk-reward is stacked. I want to ensure a good return. But I also doubly want to ensure that the downside drawers are not too bad.

Raj  25:20

That's interesting. So you mentioned about this whole article in Bloomberg Quint about these whole three sources of superior returns out knowing, out analyzing and out behaving, you want to talk more in details, and especially I want to pick up on this whole out behaving because investing is also lot about behavior, where you know, analysis a lot of people can do but the behavior is something which is when individually nature

Swanand  25:44

No, absolutely. So, just to give you a one-line summary of that article, I said that upon a long-term basis, there are three sources of alpha and when we say alpha, it means superior return versus the market. One is out knowing you will know more than I do, just information arbitrage. The second source is out analyzing both of us have the same data, but I have looked at it with a better perspective, analyzed it better. And the third source is out behaving. Both of us have the same data. Both of us are analyzed similarly but we have behaved differently in the market. In terms of how we are, we bought or sold stocks or equities in general. And my conclusion there and it was more a heuristic than a research-driven number that investors tend to spend 80% of their time trying to out know each other. Right, we have an obsession with Khabar, we have an obsession with knowing one bit of information more than the next guy, and 80% of the time, get's spent there. Maybe 15 or percent gets spent in out analyzing. Come out, try and make cross-industry linkages, try to look at data, try to zoom out a bit and have very little effect on our behavior. But if you look at just long-term investing outcomes, the numbers are exactly the reverse: 80% of your returns on a nondominant, a long term, only 10 years and more are about out behaving, come from not losing your nerve at market bottoms. Maybe 15% comes from our analysis and only 5%. Once in a while, there's something about knowing. Just by knowing something because you read an economist article, which I didn't, and which is like a new something, which I didn't and were able to capitalize on, but very rare. So that's the summary of the article. When it comes to out behaving, I think the one important thing that investors need to know and which you should practice, even if you're putting out your 100 rupees in the market, is to be able to self analyze, I think that is one of the most critical aspects of investing. And what Daniel Kahneman says is system one and system two, you should be able to see yourself thinking the portfolio that I own, a stock that I own is down 30% today, what are the reactions that I'm going through? What are the feelings that I'm going through? What are the emotions that I'm going through? you should be able to observe it yourself. And this it's like you have two voices in your head, two different voices, you can go the conspiracy theory route. And if somebody is trying to pack this talk because they want to buy tomorrow, which is fine, this is how we have reacted, but you should be able to see that you are reacting in that way. And that's when your biases start coming out. And once you have enough data of this sort, enough action replay of your thoughts, your biases tend to come out. My bias is that I sometimes tend to equate investing or buying or selling stock with winning or losing, right, so I tend to take it personally. So let's say I have bought a stock at 300 rupees, I am extremely loath to sell it at 250. Because in my mind, it is equivalent to accepting defeat, I have accepted intellectual defeat by buying something at 300 and not being able to sell at 250. And then my tendency, thankfully I have the second mind also observing and telling me this. But I tend to find excuses. I tend to get bullheaded about saying that, no, I'm going to talk about grit. This is about just holding on to things, right. But there's a famous tension that when facts change, I change my opinion and you need to try and work on what's on the other side as well. If I've looked at a stock, I analyzed it, not bought it at let's say 300 rupees, I find it very difficult to buy it at 350. Right? Because I'm asking myself, what were you doing when this was at 300? How did you miss it? And This is again, not a very logical way of thinking, but that's my bias. That's how I tend to think about it as an intellectual win-loss rather than being flexible and open-minded about it. And that's something that I have learned about myself for the past 10-15 years. I'm working on it. I hope I'm getting better at it but I think that is out of whack now. I have been bullheaded about cyclical stocks and seen them be down 30% because I just wasn't willing to accept the writing on the wall. So yes, I'm being very candid here. But yeah, those are certain things that you need to be careful about. If you have somebody who you can talk to regularly, and if there's some person we respect, I think that friend, counselor, guide, call him or her whatever, will be able to do this much better for you. Because your personal biases creep in very deeply when you have bought or sold something. And when there is somebody else who says, "Hey, listen buddy, let me do this, it's a bit easier for you because you don't have to accept that defeat, somebody else has done it on your behalf." So I think you just need to be aware of your bias. Markets are at a euphoric level that you're making a lot of money, how are you feeling? Right? Does your risk appetite suddenly become high? When the markets are down? When your stocks are down? How are you feeling? How are you reacting? You have come across a new piece of information? At the end of the day, you can just sit back and think about how you have thought about things? And that will help you start out behaving?

Raj  30:50

That's very interesting. I think your idea about people talking to either friends, mentors, whoever they can, who can tell them about your biases, I think that's a great one to do. People are shy of talking about their mistakes generally. But it's very important. Let's dwell more on your whole investment. How do you look at your investments, your level of concentration parameters, management quality, what are the parameters you look at? What weightage do you usually give to a particular one, and then let's talk a bit more in detail?

Swanand  31:32

So we first talk about portfolio construction and then decide what stocks to buy. And so if you think about the portfolio, there are two elements in every portfolio, and there's the name of the stock and how much we do. And those are the hazards of portfolio management. My view is that I'm not somebody who likes to spray and pray, right, I mean, I like concentrated portfolios, wherein, at least I have a semblance of control over what I found, there are no blind spots in the portfolio. My rule of thumb for any smart person is anywhere between 30 to 50. stocks. 50 is at the higher end. But if you're one person running a portfolio, and you want to do a good job of running it, I don't think you should have more than 30 stocks. 30 Also, I will say, even if you have a team of analysts, where you can farm out certain sectors or certain parts, that's fine. I don't know how people manage 150-200 stock portfolios at the start resembling an index, right? There is no superior index. So I have always said that in an institutional portfolio, the max cap is 50. Stocks, I want to own less than 50 stocks. At most times, we have been able to keep that number between 30 and 40. What that means is, by definition, your stock weight is about two and a half percent average stock, which is about two and a half percent. If you own 40 stocks in the portfolio. Now you have to be able to build that conviction that you will be able to take for at least 2 or 3% if not more bet on a certain stock in the portfolio, you have to consider for liquidity you have to consider for market cap those are risk parameters. that if things go wrong, we'll be able to get out in time. But those are the broad things on portfolio construction. I have never liked 1-1.5% What are you even doing here? Let's say this stock doubles in three years, it's gonna add only 1%. If you're so confident you have done all the hard work and you think that this stock deserves a place in the portfolio, it would rather be 2.5 to 3%, if not more. So, I've always sided on having concentrated high conviction portfolios. Now, what goes into the portfolio, I believe in keeping the funnel as wide as possible. I look at some of the high-frequency indicators from a macroeconomic standpoint and those become ideal generations. I look at screens, I read something somewhere, I speak to friends. Anyway, that pool of ideas, the pool of names, you should keep it as broad as you can, you should not shut your mind out to a lot of things to keep it as broad as you can and for every aspiring analyst what I tell them is I will look for earnings growth over 15% ROI or over 15%, if not today, at least in the foreseeable future and a path towards going there. And what I should tell analysts is that if I give you a name of a stock which you haven't heard in your life before, you should in 24 hours be able to tell me whether this is worth pursuing further or has to be discarded. And so that used to be my single point KRA to any analyst saying. Okay, here is the name. You don't have time to do any analysis, collect whatever information you want to in the next 24 hours. We need to tell me whether to just jump this or do we explore this further. We don't tell you to buy or sell and when you start so you have a wide enough funnel you have a fairly fast filter where I'm able to turn these names out, which shortens the funnel very quickly. And then you start your actual analysis process, which is, what is the real competitive advantage of this company? Or the sector? What is it that you still think you will be able to write with conviction, five years, 10 years from now, as is the competitive advantage of this company? Let's say we go back to any brand, will this brand exist five years from now. And for most good brands, we can say with conviction, yeah, this brand will exist, and it will have a pool. So you start with the competitive advantages, having a distribution network, which is there today, will it exist? Will it have the same course we started there, then you try and put the context of the stock in the cycle, what's happening over the next 18 to 24 months, as I talked about earlier? And then you juxtapose that with what the market expects to happen, right? And there's a great book called Expectations Investing, about how you can read market expectations, and then try and write your rationale as to where you differ from consensus rather than saying, This is what I feel. And because that's how money is made. Money is made by betting for or against odds. WHat's an easier question to answer: how many cars will Maruti be able to sell in the next year or I think Maruti will sell x cars next year, do you think it will be x plus or x minus? So I think the second question is easier. A lot of people miss that part, the market is already giving you odds. Within the India V/S England Test match, what is the probability that England will win or India will win, to compute it bottom-up is extremely difficult, right? Now the odds will imply that the chances of India winning this Test matches 40% we just say that you think it's 40? Do you think it's 30? And that makes it an easier question, then computing the bottom of that number is 43%. Yeah, so that's a very long answer. But that's been our stock and the portfolio construction approach.

Raj  37:03

How do you look at the industries in terms of concentrating on a particular sector or do you look at across industries?

Swanand  37:12

So across sectors, I mean, there are certain sectors, which by definition, are more secular; stocks that can remain in the portfolio for a longer time. And then a cyclical stock, one of the stocks that we bought in early 2014 was Ashok Leyland, knowing fully well that this is a deeply cyclical stock because it's a commercial vehicle company. At some point in time, we will have to sell it, we have to decide at what point but this seems like something which can give you a disproportionate fast return in the next two to three years, which it did. So we don't think in specific sector dumps, but we think about what are the steady compounds in the portfolio today. HDFC Bank has discovered 15% growth, 15% ROI, it will be a core of your portfolio, it will be there. But in a test stock portfolio, you probably have the liberty to buy two or three stocks, which are not 15% ROI or 15% earnings today. But if certain things are irrational falls in place, they will be there three years from now. So this was the case with ICICI Bank three years ago when there was a CEO change and things are going south. It was one of the stocks that did not have that profile when we bought it was Apollo hospitals, right. So it was neither earnings, growth, nor ROE story then, because the classic, as I said, the classic supply side, being a step function and demand-side being a much smoother function. You set up new hospitals, your cost structure was for a toss. And by the time the hospitals start filling up, your more and more patients have more and more therapies, that's when the real money starts getting in. So you have to balance your portfolio between the secular and the cyclical. And it's up to you how you decide how much of that you want. So that's the broad portfolio construction sectors. You don't think about sectors. in absolute terms. You think about the characteristics of those sectors, and how you want to be in your portfolio.

Raj  39:07

Apart from HDFC Bank, what has been your longest investment?

Swanand  39:14

I wrote about it in the Bloomberg column. So personally, the first serious investment I made was in 2011, in a company called Cholamandalam investments. It was then a turnaround company. The book value hadn't grown for three years in a row. They were licking their wounds, from losses in personal finance, business, etc, etc. And I still want it so personally, I have held it for almost 10 years today and I bought it in August 2011. professionally as I said, HDFC Bank was one. We had Eicher Motors for a fairly long time. We bought Eicher Motors in 2009 and we held it till 2020. It did well for us for a fairly long time. Those are the two names that have been very sticky in the portfolio for the longest time.

Raj  40:05

So you recently call your know, investment journey as moving away from a khabar driven investor to one who believes in lethargy bordering on sloth. What's your thought on this whole, active versus passive investment policies but what's your thought?

Swanand  40:22

So when I said khabar because I thought this was at the age of 20 and I didn't have a job. So the wherewithal or the ability faculty call, whatever you want to understand the workings of the market. Then you tend to rely on some so-called dormant market friends who I realized are not learning at all. I tend to take tips and learn from them and try to follow them and see what they're doing until you lose your money. And that's when the realization dawns. None of the retail investors that I know or at least, who have been my peers, started by reading Intelligent Investor; very few people started out investing by doing that. You start by dirtying your hands in the pit. I think there's a much faster way to learn than learning grams net-net formula, and not knowing when and where to apply it. I've seen a lot of new investors come into the market over the last 12-24 months, and they're learning by doing which I think is much better, although the riskier way of learning. Over time I've realized, one faculty that you should have as an investor is not IQ; its temperament and the ability to self analyze, dispassionately. I mean, you have to be able to call yourself out, saying, Hey, listen, this is your thought pattern. This is what has cost the investment. It never costs. It's never analytical. It's very rarely an analytical mistake. It's mostly a behavioral mistake. So you have to be able to call that out. So that's where I kind of gravitated toward trying to figure things out. Active versus passive, I feel that if you are somebody who's not going to devote a lot of time figuring out financial markets, figuring out stocks, figuring out where to invest, or even doing basic mutual fund research, I think passive investment is the recipe. Where broadly mimicking market returns, not paying too many fees for it, you don't have the time inclination, or even the wherewithal to figure out. You are a busy spokesperson. That is what you want to do. I don't want to take too much risk, but you want equity exposure because some of it is in fixed income and some of it in the real estate world, some equity exposure but not too much. And over a long period, 5, 7,10,15, 20 years, the Indian market has returned somewhere between 10 to 15%, in nominal terms, and that is something to keep in mind. That is handy to beat fixed income returns, not on short time frames, you have to at least give it five years or more than that. And if that is the expected return from the asset class, and you're just allocating money to different asset classes, I think passive is the best way to go. If you have some more time, some more inclination, some more wherewithal, knowledge, whatever, then you can start looking at active management through an intermediary, like a mutual fund, a PMS, an AI and try to get some more market return. 10 to 15%, is what the market is offering you, you're trying for an additional 2-3% by giving money to somebody who's doing well. Then there's a way to pick: Which industry is better? How to do it? With what time frames? etc. If you're consumed by markets, and that's all you want to do, right? If markets are your bread, the market is your life, then you should be doing personal investing directly, you should commit a significant amount of your time and effort toward learning the market. Then you can invest directly in stocks and try to understand rather than doing copper or anything of that sort. This is how you should think about equity investing. In India, every individual should have some equity exposure as for fairly long periods even adjusted for volatility, it gives a better return than fixed income. 

Raj  44:19

I have always seen that everybody starts as a very active investor, then they start losing money making them passive, then they start learning and then they become a little bit more active. So I think it's a cycle that everyone goes through. It's like an S curve. Now, let's come to the recent IPOs which are fairly new for India. We are seeing Zomato's and all, which are loss-making companies having a very good market share and are expected to do well over the period. How should one access and assess such models? , especially someone who is a retail investor. 

Swanand  44:58

For the retail investor, I have seen that there are mainly two types of investors. Type One is the word IPO investor. This investor doesn't care about the name of the IPO, they only care about what the gray market premium is and what interest they will have to pay on the money that they are borrowing to invest in this IPO. If A is greater than B, they are going to invest in it. For all you know, it could be called Raj Single Private Limited, it is IPO inc. I don't care what the company does, I just want to flip it on day one, try and make some money, and be done with it. The other set of investors are people who are looking at the bigger picture i.e how the Indian market will grow. Taking the example of Zomato, Mr. Damodaran wrote a great piece on it, forgetting that he put several 41. While we can debate on the valuation, I think he has put it well, when he said that, at the end of it, this is not as much about Zomato as it is about India, it is about how you see this country developing on the various axis of mobile penetration, new users, orders per user and Zomato being able to capture the market, etc. So you have to be either a worm, that doesn't care about what the company is who says I'm going to flip this out the damn thing is just a price moment thing for me. But you have to be out at 30,000 feet, to be able to take your investments  Anywhere in the middle, if you are telling me I want to trade, I'm going to buy this based on FY23 EV/ EBITDA, I will say that you are you're fooling yourself, there is no way there is no investment or valuation textbook that will help you justify into these companies on an FY23 EV/ EBITDA. So you have to be either of these two types of people to be able to build this conversion. I'm not saying it's right or wrong. But you have to consider buying into something and forget the IPO flippers, let's not talk about them. I mean, there is no science there. But if you're going to buy into this or any investment, I would say do your research, because that's the only thing that will help you have conviction, when inevitably things will go bad. If you bought something based on hearsay, the first sign of trouble you're going to run away. And as you said, the first active investors make the most losses when we get into the market to buy something which is like really overheated and they scream at the first sight of problems. Just because something is asset-heavy or asset-light, I don't think you should bind yourself by too many of these labels, try and analyze these companies first, without looking at the numbers. And the numbers can come later, try and understand the business model, try and understand what they can become. Use some imagination as to where they can go given the India macro potential. You can debate the macro potential as well, as it is not a given. Don't get bogged down with all these loss-making investments ``I don't care for this" "Oh this is where India will go. I don't even need to look at numbers' ' don't take that extreme view to start with. Try and understand how any company makes money, not just new-age companies: What are the balance sheet characters? What are the cash flow characteristics? At what point in time do they start making money? What needs to happen for them to start making money? Then figure out whether you see that happening in the foreseeable future or not. I think that's the way to go about it rather than bucketing companies as asset-heavy, asset-light & all those things.  I'll admit even though I'm still struggling, I still don't have fully formed views on these things. While I understand the macro argument. I'm still a stickler & also a bit of a purist for valuations. I'm kind of torn between these two. I am dipping my toes & trying to develop my investment philosophy around these things. So I don't have an answer yet.

Raj  48:58

Would you like to talk a little bit more about what you mean by asset-heavy, asset-light especially in the context of where we are and where the capex has been pretty slow? A lot of has been, you know, there's will be deleveraging going on in the Indian corporates. But the commodity cycle is high, people are expected to put on more capacities and all in the coming years. How does one yeah, look at that.

Swanand  49:22

I think the best time to invest in an asset-heavy model is at the turn of the cycle. It's very simple. The logic behind it is, you already have assets in place which are utilized at a fairly low level, as things turn utilizations go up, a lot of the incremental revenue becomes your profit which makes your profit multiply. Think about it like a hotel, it has got 100 rooms, and during the COVID-19 pandemic, only five are occupied. Now, as things open up & start getting normalized we see the occupancy rise to maybe 50 or 70 or  90  all the money that comes from these rooms will all become profit because of fixed costs you're incurring for the upkeep of those hotels. If you are convinced that the occupancy is going to rise from 10 to 90, I think that is a time to invest in any kind of an asset model, it can be multiplex, hotels, manufacturing units that make certain things, cement companies, steel companies, etc. So that's how that cycle of asset-heavy v/s asset-light plays. You want to be sure that you exit at the right time because when things are going down, they go down with equal speed. After all, now you have capacity & demand is starting to wane. I would, I will look at asset-heavy models right now because it will be foolish not to bet on normalization of some sort. The framework or the thought process that I have over there is, assuming the pre COVID demand levels for a certain commodity or sector were 100. If it was a COVID beneficiary, let's assume that 100 went to 150. If it was hurt by COVID, like airlines that 100 went down to 50. But as things normalize, where do we end up versus the pre COVID numbers? Is there going to be a structural shift within this cyclical upheaval? So even after COVID normalizes some parts of the meetings and is going to become new meetings  No matter what happens, not all meetings will go back to the 100% physical. So let's say zoom started at 100 meetings before COVID. Its structural number now is 125, if not higher. I will argue the opposite for Airlines all travel is not going to come back, right even if things normalize and the pre COVID demand is 100, you will probably go back from 50 to maybe 85 -90. So the 50 to 85-90 recovery is there. You can play that recovery or Zoom going from let's say 150 to 120 will happen. But what you have to think about is where that stabilizes on a normal level, I will say that there is a permanent loss of demand, and there is a permanent gain of demand in certain sectors. So even if you're saying, asset-heavy airlines demand coming back, you need to be careful on where the last peak was versus where the next peak will be. My argument is that the next peak will be lower than the last one.

Raj  52:35

I like something you had written which said  that it's very hard to fail if you aim high enough, can you share your perspective for our listeners here on that

Swanand  52:44

So there is a better version of this quote that I wanted to use initially, but I decided against that. The quote was "If you aim for the moon, you end up hitting the street light". If you have a big aim and work hard towards it, You will achieve something, putting you in a better place than where you initially started. So I wrote that in the context of my physical fitness journey. Like every guy going through a midlife crisis, I wanted to get six-pack abs. That was the goal I started with. I said, Okay, I want to get six-pack abs so I got a trainer, I got a nutritionist. For two months I kept working towards it and at the end of two months, I didn't get six-pack abs, but I was in the best physical shape I have ever been in. In terms of weight and fat percentages, I was at the lowest weight I have been in my adult life. So I had aimed impossibly high to get abs like John Abraham, but I ended up at a reasonable place. So although I don't have six-pack abs, I think I have reached a place of physical fitness, which I hope will help me over the next few years, where I know how to work out, how to eat, right,  I know how to maintain my fitness levels, I'm in reasonable shape. So yeah, I've aimed high and I have failed in the conventional sense of what I set to achieve. But I haven't failed is what I would think.

Raj  54:19

Yes, that's interesting. I read your piece on, Generation rulers shift in consumption and debt. What are the insights you gathered on GenZ's spending, investing, and saving patterns? How is it different from the previous generations?

Swanand  54:36

Absolutely. I mean, the other thing that we talked about earlier was, what are the trends you think will be in play for the next decade? So I think an easy answer is; watch what the young people are doing. They always give you clues to what the next decade or next 15-20 years will be like. My niece has her birthday this week. She turns 18 and she's dying to get a digital wallet. You need to be 18 to have either UPI or some sort of digital wallet. She has a bank account. But now just wants two things; she wants to have a Demat account along with it. And she wants a UPI, either Google Play or something of that sort on her 18th birthday. This is very different from what I wanted for my 18th birthday. So she understands EMI and she understands to buy now and pay later. She understands debt. She may not understand the spreadsheet behind it, but she knows that this exists. And that I think is a big generational shift from your attitude towards general financialization, right. I mean, I know my parents, the most sophisticated financial investment was a fixed deposit. And nothing else. So we used to have some cash at home, some gold and jewelry, and a fixed deposit. That's it. Their entire lives, this was their investment pattern, they never took a home loan, they never took any sort of loan, they put money together, friends and family bought a house, still have that house. So it was an extremely, I would say almost primitive financial journey their entire lives. They didn't explore asset classes, not with very explored liabilities. And I think if you ask me about this generation, one big thing that I see is just being open to this idea of finance. With finances percolating through the different socio-economic classes as well. People are very, very aware of finances. Thinking about social finances is a sign of change in times. I think if you ask me for the next 10 years, we have a starting point, which is very attractive in terms of the credit to GDP level. That's on the liability side. Even on the asset side of things. Despite the explosion in the Demat accounts, despite the explosion of the mutual fund folios they're still scratching the surface. I don't think we have deepened. None of those numbers are more than 100 million. Be it income tax filers, be it Demat accounts...

Raj  57:18

About 60% of that is true...

Swanand  57:22

Even with credit cards, last I checked it was some 50 odd million and their population was 1.3bn. So, I would say that this deepens right, just more finance, both on the asset and the liability side of your life, more products, it just deepens across. So at the top is a creamy layer, there is wealth management. Then there is a plain vanilla mutual fund, kind of a product. Then you go to slightly simpler products for the younger population for small savings and things like that. So I think I'm not going to restrict it to banks or GDP but I think wherever finance is in a way it's touching lives. And that can be investing, that can be insurance, that can be different asset classes, intermediaries, and things like that. I think I would look at all of these and the technology that enables and makes this easier. I would look at it because there is a tremendous headway to grow and attempt tremendous space for you to grow just because the starting points will move. And the fact that there is an attitudinal push towards this. That is no longer a four-letter word. It's no longer taboo. So there's an old saying in Marathi movies, my mom used to frequently quote "A rupee of debt should prick your foot like a thorn, right?" It has to be that embarrassing, uncomfortable, humiliating, call it what you want. But it is to be avoided at all costs, you should never have any sort of debt, which is a very extreme way of operating. I'm not saying that you will lever yourself to the hilt and go bust. I'm not saying the pendulum should swing the other way. But the country, as I said, and the country of size 1.3 billion, $3 billion of GDP, went 10%. The pendulum moving is a huge shift. Right? It will take, I mean, your excesses will happen, things will happen on the other side, and there's a piece I wrote in 2017 where I saw two shops adjacent to each other. One had a holding saying "Loan pe Phone" which means that you can buy a phone with an EMI by taking a loan, and there was a shop next door that would say, "Phone pe loan" which means that you can get a loan on a phone call. You don't have to go anywhere. So there was a phone payload I learned before. And those two kinds of things made me think that what is this where I grew up in an age where all grocers used to have something outside their shop saying, "Aaj nagad, kal udhar"? And today we are having seminars on buy now pay later. So I'm so it's a huge shift and I've seen both. So it's less than 25-30 years. So this attitudinal shift if I speak to the elders in the family, they're still like, this is going to end in tears. But yeah, but I see the younger people, apart from my niece with the demat account, she's also asking for an add-on credit card, which is not going to happen by the way.

Raj  1:00:47

People who are investing in public markets, any actionable ideas for them, from this trend?

Swanand  1:01:02

So I will refrain from mentioning specific stocks. But what I will say is this, watch the young people and think about categories as Demographically challenged, right.  So I gave examples like gold is a demographically challenged category. Young people no longer want to buy a lot of gold. They're not fascinated by it. They don't see it as a store of value. At least for the most part. Young people are fascinated by crypto, by digital currencies. Right? wrong? How will this end, let's not get there. But this is demographically advantaged and challenged. You will see this in various walks of life in different categories. This thought started when I ended up attending over the same weekend a Marathi play and a Marathi stand-up comedy show at the same venue, at the same time. One was on a Friday and the other on a Saturday. Same ticket pricing. For the Marathi play, I was one of the youngest guys in the audience. It was a classic old play, which was being remade with a new cast. And for the stand-up comedy show, I was by far the oldest member of the audience, right. So I instantly thought that there is a category that is demographically challenged, which is the play, and it is a category that is demographically advantaged, which is stand-up. And that's kind of started the thought process and other categories which are like this. And then things started coming and not just related to financial markets. I mean, if you go to a temple today, you will struggle to find black hair. So I think religion is demographically challenged. But if you go to a spirituality slash wellness slash meditation camp, you will hardly find any gray because that is demographically advantaged. So I think if you use that framework, you will start seeing a lot of things. When it comes to the penetration of finance, I didn't just look at the technology side of it as well. And how it is making things easier. Just see regulation. Now it is making things easier for you to open a bank account in less than 15 minutes. So I would say look at the enablers on that side. Looking for disintermediation, I would still say there is a lot of innovation that is creating friction between the consumer financial services and the provider of the financial services. Look for opportunities for disintermediation. That will happen a lot. Already happening with the mutual fund brokerages, for instance, already happening with a lot of other people, wherever there are middlemen. So those are the broad areas you should look at.

Raj  1:03:57

Religion and politicians have a knack for surviving for 1000s of years. So they'll figure out a way of where the trend is and where the market is. We recently wrote an article on tech in China, how do you look at what's happening there?

Swanand  1:04:18

So I'm not a China expert. I don't know what is happening or what are the motivations for what is happening there. But the one thing that I can say is that as an investor this scares me. If the entire existence of companies can be changed with the stroke of a pen. As an investor, I worry. There's going to work in the back of my mind. At the same time, there is this very rosy narrative being painted that the money that is being channeled is all going to come to India. If you're selling Chinese tech stock, you have forced me to buy Zomato. That's not true. So it's difficult to get an FII inflow number, it is very difficult to label the intentions behind it. Nobody's going to tell you that, hey, I sold China yesterday. And with that money, while I bought Indian, you can see some changes happening. But I think let's not trick ourselves into the complacency that the money now has no other place to go. Because China, the tech sector, or especially the high flying tech companies are no longer investor favorites. That's a very arrogant way of thinking.  So what has happened amongst investors' minds is, you're still worried about how this plays out. It's scary for any investor; your entire investment case is turned on its head with one paper that comes out, and there is no mechanism to challenge it.

Raj  1:06:01

Yeah, I've written earlier on Twitter that, you know, never get too bullish on India because of the politicians, and never get too bearish on India because of the resilience of people. So just be there in the middle.

Swanand  1:06:15

I'd like to quote my former boss Vijay Sharma, "India has a knack of disappointing both the optimist and the pessimist." So I think if you keep that in your mind I think it will serve you really well.

Raj  1:06:31

Our show is called breaking investment stereotypes. Any investment stereotypes that you want to break or want to talk about?

Swanand  1:06:45

In investing, there is this tendency to come across or to portray yourself as a know-it-all. And one of the most difficult but yet important things to say while you are investing is 'I don't know'. Buffett calls it differently, 'a circle of competence'. But if you can say 'I don't know', I think that itself puts you ahead of probably 90% of investors. So if you ask this China question to anybody, today, who's in the investing field, and do this as a social experiment, I'm sure nine people out of 10 will tell you something. Or maybe to put it differently, you can try this as a Twitter poll. Just ask a simple question: Is Zomato overvalued? Put three options- Yes, no, I don't know. And 'I don't know', will be less than 10%. So I think having to have a view on everything is just impossible and stifling. I would say it is injurious to your financial health. I will say the one myth that everyone who comes on TV knows everything about everything. They don't. I think 'I don't know' is something that you should practice saying and it can be cultivated as a great investing habit.

Raj  1:08:06

Let's talk about your personal life as well. You have many interests outside investing. But I think something close to you, you mentioned that you did in your sabbatical as well. You went to Gary Kirsten to learn more about cricket. I guess you're a spin bowler, right? And second, I also want to pick up on this whole Vipassana experience, because that is something I wanted to do. And I've never done it. So I would like to talk about both of them.

Swanand  1:08:40

When I told people I'm going to Vipassana, a bunch of people asked me what's wrong and I think there's nothing wrong. I mean, here is another myth? The myth is that you go to vipassana only when you're looking for some sort of spiritual enlightenment or you're working through some upheaval in your life? I said no I don't have any of those issues. I'm not going there to solve a problem. My basic logic to do that was that I was trying to establish a meditation practice for myself, I was trying to say that I want to do 30 minutes of some sort of meditation every day, as close to every day as I can. And the thinking there was that if I run a marathon once, running a 5k daily will not be a problem. That was the thinking. I wasn't looking for any enlightenment, any deep insights, nothing. I had just come out of this digital minimalism. This sounded like taking it one step forward. I found the experience to be amazing. I don't want to give spoilers here for people who will be doing vipassana going forward. Suffice to say that continued with some of the practices. I'm a strong believer and subscriber of this. But again, as I said, go into this with the right expectations. Don't expect to become Shaktiman. This is not a Bodhi tree, under which you sit and suddenly at the end of 10 days, you will have a halo over your head. A lot of people lookout for that, and then they get disappointed. If you have some sort of an introspective inward part to your personality, I would say this is something that you will enjoy. And the second part will be on cricket. Probably the best month of my sabbatical. I wasn't sure if I'll be able to make it to South Africa. But thankfully, things fell in place. And I could go flying to Cape Town, they were in the middle of their second wave. And there was a partial lockdown. But the cricket facilities were open. For a limited number of people. It was, yeah, it was a terrific experience and a lot of life experiences to draw from. The one thing that surprised me is that at the academy, they did not mean to try to make fundamental changes to who I was as a cricketer. So they didn't try to teach me entirely new things, which I haven't ever done in my life. The approach there was: you are what you are and nobody has the perfect technique. Whatever skill and talent you have from playing for the last 25-30 years, we'll polish that and ensure and make the most bang for the buck from me. So if let's say I've never played, and this is going to get a bit technical. But if I didn't learn to play the sweet shot.  But I have played the cut all my life. And we spent three sessions on how to play and place the cut shot better. And how to get the most bang for the buck from playing the cut shot. I never bowled a googly. But the two or three variations that I used to play, we kept honing them. So I think the one thing which I realized is that there is nothing called perfect. That's what  I heard on the first day, cricket is not a perfect game, don't try to make it one. So on the first day itself, I played a cover drive, which was like, away from the body, although I muddled it reasonably well, but I played it away from the body. I was shaking my head in disappointment and the coach was like that's a great shot, why are you shaking your head in disappointment. So I think that just changed. The way the Indian coaches, especially when I was growing up, was all about being very textbook-ish, right? This was very refreshing. So he said, 'do you think Steve Smith has the perfect technique or Jaspreet Bumrah's bowling action is textbook-ish? It's not, but it's probably the most effective bowler across formats today. Those are some of the things that were interesting and great fun. If you put me on a cricket field, I can be there for eight hours and not even bother about what time it is.

Raj  1:13:28

What are Gary's insights on the Indian team? Did you meet him?

Swanand  1:13:38

Yes, I did but not a lot of time though. His insights with the team are that at that level you don't need coaching, you need a friend, you need someone to talk to. That comes back to what I was saying earlier. Once you have been an investor for a long period you don't need a spreadsheet. You need a friend. You need to talk to someone about what you're doing and what you're thinking. You don't need somebody to tell you the formula for DCF. I think Gary picked that well. And he said, 'I tried to become a friend, rather than a coach. I tried to become a sort of a safe place for people to talk about what they're going through, what's in their mind, etc.' I think that's extremely insightful. A coach's natural tendency is to teach but he should also be able to know when not to teach. When just listening. I found that to be very insightful.

Raj  1:14:55

Any book recommendations you want to give to our listeners?

Swanand  1:14:59

So I'm assuming that you have people who are personally invested in finance. So I'll tell you the most impactful books that I read throughout my career, which are related to investing in finance. So the first book that got me very intrigued in markets was a book called Random Walk Down Wall Street. It's written by a guy called Burton Malkiel. It's a history of financial markets. I mean, starting from the South Sea bubble, and the tulip bulb mania in Holland, and things like that. So I got fascinated by this animal called markets. I mean, how can people pay those kinds of crazy monies for essentially a plant? Which is not even scarce? Right? And, how can people pay money for an IPO whose prospect says that the company's business is so confidential that it can't be mentioned? So I was like, these are all real-life when these are real documents. And that got me interested,  about what the whole market is all about. I read through not cover to cover, but I've read through, obviously, Benjamin Graham,  Buffett's use letters are rich with information. I read Howard Marks whenever I get time to. Another very impactful book as I said, is Daniel Kahneman Thinking Fast and Slow. It's not strictly an investment book. But whatever my views today about thinking are, are based on that. Please listen to an audible book called Zebra and A Lion Country by Ralph Menger, who was the Dean of small-cap investing. I think, in the 70s. It was a very earthy book. It's a practitioner's book. It's not very theoretical. He says, think about a man walking his dog from Central Park to Fifth Avenue. People focus on where the dog is going, and the dog is not going to walk in a straight line, the dog is going to be all over the place. But the key to focus is the man because the man holds the dog's leash, and the dog will eventually go where the man is going. And he says that his fundamentals and stock prices, the stock prices will keep darting in all directions, right? And all of us are focused on the dog. But a dog in the short term doing random things, what you need to focus is on the man. I think that is a great analogy of how to think about prices and fundamentals and businesses. That kind of stuck with me. That's an interesting book. I don't read books of theories. I read books written by practitioners. I had the good fortune of meeting Anthony Bolton, celebrated fidelity fund manager. His book, I think Investing Against The Tide is the practitioner's guide to what an institutional investor should do. It is not about any gyaan. It's very implementable. So I gravitate towards those kinds of books rather than just the theories or big insights about markets.

Raj  1:19:10

This is the question we ask everyone. I know you're fairly young still. But what advice Will you give to your 20-year-olds self?

Swanand  1:19:21

I would say ask more questions. Because as a 20-year-old, you have a lot of received wisdom. I mean things that have been told to you either by your parents or by your seniors, or by people who you can kind of look up to, and you have been told that this is the way to do things. This is the way to live your life. This is the way our careers progress. So you have a lot of received wisdom, but you don't have so much organic wisdom, something that you have figured out for yourself, something that you have realized by doing things, and the best way to bridge the gap between received and organic users to ask questions. 20 years old is meant to ask questions. And I think a lot of 20-year-olds don't use that opportunity. Maybe because of embarrassment or somebody will say I'm stupid. So I will question all received wisdom. That doesn't mean that all received wisdom is wrong. But don't take it as received, just because somebody in a position of authority is telling you, so to ask more questions, and ideally, a lot of it should be why.

Raj  1:20:41

It's interesting. And that's a great place to end our conversation. I enjoyed our conversation one, so thanks a lot for coming in.

Swanand  1:20:51

Terrific. Thanks. Thanks, Raj. Thanks for this opportunity. I enjoyed this as well.