Gautam Baid: The Making of a Value Investor: What a Bear Market Taught Me About Investing

Gautam Baid, CFA is the Managing Partner of Stellar Wealth Partners India Fund. He invests in listed Indian equities with a long-term, fundamental, and value-oriented approach.

Gautam is the author of the international best-seller on value investing, The Joys of Compounding. In 2018 and 2019, he was profiled in Morningstar’s Learn from the Masters series.

This is Gautam’s second appearance on Talking Billions. I have to congratulate him on the new book — The Making of a Value Investor, that we are discussing today, but also on having held the top ten position among the most downloaded Talking Billions episodes in the last 12 months, a remarkable feat.

Talking Billions is a hundred downloads away from a major milestone - 50,000 downloads. If you are listening this week, you are among the loyal listeners who will help us get there. Thank you all for listening to all 77 episodes. I really appreciate it.

Today, we talk about authenticity and vulnerability and how they can help us grow as investors. Gautam reminds me how it’s important to focus on processes and principles rather than outcomes, as the market is probabilistic and unpredictable. My guest discusses the mental and emotional resilience needed when investing through the market’s ups and downs. We take on the definition of a quality business. Stay tuned until the end, when Gautam shares how being wrong is a natural part of investing and offers some advice on embracing uncertainty.

It was another lovely conversation with a friend and a fellow value investor, I trust you’ll enjoy it as much as I did.

Summary

In this conversation, Gautam Baid discusses his book 'The Making of a Value Investor' and shares personal lessons learned from difficult market periods. He emphasizes the importance of authenticity and vulnerability in investing and the need to focus on process and principles. Baid also discusses the evolution of his investing style and the lessons he learned from bear markets. He highlights the importance of mental and emotional resilience in dealing with drawdowns and the need to understand the characteristics of quality businesses.

Baid also explores the performance of small caps vs. large caps and the differences between quality and momentum investing. Finally, he discusses the challenges of navigating innovation and the importance of a long-term holding period. In this conversation, Gautam Baid discusses various aspects of long-term investing and the importance of staying focused on one's personal approach. He emphasizes the difficulty of holding on to long-term investments during periods of volatility and the need to identify businesses worth waiting for.

Baid suggests that a 2-3 year investment view is more feasible in today's fast-changing environment and highlights the importance of active patience and verifying investment theses. He also discusses the competitive advantage of brands, switching costs, network effects, and company culture. Baid emphasizes the significance of choosing the best clients rather than the biggest ones and the power of kindness and goodwill in the investment industry. Finally, he acknowledges that even with thorough research, investors will still be wrong at times and need to embrace uncertainty.

Takeaways

1. Authenticity and vulnerability are important in investing, allowing for valuable feedback and self-improvement.

2. Focus on process and principles rather than outcomes, as the market is probabilistic and unpredictable.

3. Mental and emotional resilience is crucial in dealing with drawdowns and market volatility.

4. Understanding the characteristics of quality businesses, such as high return on capital and competitive advantage, is essential for long-term success. Holding on to long-term investments during periods of volatility can be challenging, but identifying businesses worth waiting for can help navigate the ups and downs.

5. A 2-3 year investment view is more feasible in today's fast-changing environment, allowing for a focus on businesses with good growth visibility.

6. Active patience is key in investing, with a focus on verifying investment theses and making adjustments as needed.

7. The bond between customers and brands, as well as factors like switching costs, network effects, and company culture, can contribute to a business's competitive advantage.

8. Choosing the best clients, rather than the biggest ones, is important for investment firms, as it ensures alignment with long-term goals and reduces potential headaches.

9. Avoiding distractions and staying true to one's personal approach is crucial in navigating the investment landscape.

10. Being wrong is a natural part of investing, and embracing uncertainty is necessary for long-term success.

https://stellarwealthindia.com/

https://www.amazon.com/gp/aw/d/9356994285/ref=tmm_pap_swatch_0?ie=UTF8&dib_tag=AUTHOR&dib=eyJ2IjoiMSJ9.Tm3Zgypzd6o2rIOspjkSzdBfPCD3SCiyABUtHeJbgNkbDH7N3KbvtEDtygUmdSUN.xyw4KF8Dlgp3fHD6Hd5TLVKwjGN73ovWxXqYfBQ3oVU&qid=&sr=

Chapters:

• 00:05:27 Introduction and Background

• 00:06:03 The Genesis of the Book

• 00:07:06 Sharing Personal and Vulnerable Lessons

• 00:08:53 Evolution of Investing Style

• 00:09:30 Lessons from the Bear Market

• 00:10:28 Focus on Process and Principles

• 00:11:55 Survival and Humility in Investing

• 00:13:57 Mental and Emotional Resilience in Drawdowns

• 00:14:44 Learning from Financial Market History

• 00:16:47 Lessons from the Bear Market

• 00:19:19 Performance of Small Caps vs. Large Caps

• 00:24:11 Identifying Quality Stocks and Businesses

• 00:28:09 Navigating Innovation and Holding Periods

• 00:32:43 The Difficulty of Holding on to Long-Term Investments

• 00:33:43 Identifying Businesses Worth Waiting For

• 00:34:59 The Feasibility of a 2-3 Year Investment View

• 00:36:28 Balancing Short-Term Performance and Long-Term Potential

• 00:37:50 The Shortening Runways for Businesses

• 00:39:22 The Importance of Active Patience and Verifying Investment Theses

• 00:41:03 The Bond Between Customers and Brands

• 00:43:51 The Competitive Advantage of Brands, Switching Costs, Network Effects, and Company Culture

• 00:45:53 The Passion and Love for Investing

• 00:46:53 Missionaries vs. Mercenaries in Business Management

• 00:47:53 Choosing the Best Check, Not the Biggest Check

• 00:51:34 The Power of Kindness and Goodwill

• 00:52:52 Avoiding Short-Term Minded Clients

• 00:56:48 Avoiding Distractions and Focusing on Personal Approach

• 00:59:50 Being Wrong and Embracing Uncertainty ​

NOT INVESTMENT ADVICE.

Podcast Program – Disclosure Statement

Blue Infinitas Capital, LLC is a registered investment adviser and the opinions expressed by the Firm’s employees and podcast guests on this show are their own and do not reflect the opinions of Blue Infinitas Capital, LLC. All statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such. Any statements or opinions are subject to change without notice.

Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and unless otherwise stated, are not guaranteed. 

Information expressed does not take into account your specific situation or objectives, and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment adviser to determine whether any information presented may be suitable for their specific situation.  Past performance is not indicative of future performance.