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Meet the Delhi lawyer who has a knack for picking winning stocks on D-Street

Safir Anand firmly believes that the stock market is a great teacher as long as you respect it.

Updated: Nov 10, 2017, 03.01 PM IST
Anand calls himself a ‘growth mindset’ investor and says he looks at the opportunity cost of capital before picking a company.
Anand calls himself a ‘growth mindset’ investor and says he looks at the opportunity cost of capital before picking a company.
A barrister is to the stock market what ink is to computing; right? Wrong.

This gentleman is a renowned lawyer in New Delhi, but few people know he spends a lot of time picking value stocks on Dalal Street.

And 46-year-old Safir Anand firmly believes that the stock market is a great teacher, as long as you respect it and are keen to learn from it.

He talks of investing as his passion.

But that passion has taken him quite a distance: he is known to have spotted several gems on Dalal Street, which have multiplied his wealth many times over the past few years.

Some of his friends and fellow value investors describe him as a multi-talented bull.

Safir is a diehard bull by nature, says Ayush Mittal, a Lucknow-based investor, who knows him for past four years.

Anand goes by common sense to invest in stocks and has strong observations on the economy and the corporate world.

Anand claims he was an early investor in NBCC, which has given him over 20 times return in last few years.

Among others, he names Premco Global, Motilal Oswal Financial Services and Cera Sanitaryware, stocks that have advanced nearly 20 times, 18 times and 10 times, respectively, in last three to five years.

He says Stylam, CEAT, MRF and Oriental Carbon have delivered him over 10 times returns in these years. could not independently verify Anand’s holdings at present or back then. His name does not figure in shareholding data of these companies, which means Anand holds less than 1 per cent in them.

Investment strategy
Anand calls himself a ‘growth mindset’ investor and says he looks at the opportunity cost of capital before picking a company.

“In economics, one of the first lessons I learnt was that capital is limited and has alternative uses, including satisfaction of consumption. You can do your best to find good use for its growth. As long as the search for yields and risk minimisation are in balance, you can do well,” says he.

Anand zeroes in on companies that facilitate capital growth through business expansion.

“The larger opportunity gets insured with time, and even if there are temporary setbacks to numbers or margins or the like, you can still compound,” he said.

Anand keeps hunting for gems among smallcaps and midcaps, as he finds the scalability element more attractive both in terms of upward curves in bottom line as well as top line. In many instances, even a single catalyst like a huge order or capex can change the fortune of such a company, says he.

“I am fascinated by value. Value is interpreted differently than price and each has his own value system. I also love behavioural science, and that is one big differentiator in the market,” says he.

Things to watch
Anand says before betting on a stock, the first thing he looks at is the opportunity size of the business, followed by the qualification or temperament of the management.

He zeroes in on a business model, which is unique in terms of technology, process or system, and where value is migrating from one set to a larger set.

Anand also has a different take on the traditional valuation matrix than the market community uses.

“More than price-to-earnings (P/E) ratio, I look at the market capitalisation to potential. If a company is taking leadership strides and is still small in size that may be moving from unorganised sector to organised or from an asset-heavy model to an asset-light mode or giving an edge to customers (like Apple brought in with its phones). Then I go to step two of the process to look at the credibility and governance of a company and its business model,” he says.

Anand does not pick stocks on the basis of current earnings. “I am not obsessed with current earnings, as I am not buying the past, but hoping to earn from the future and its potential,” he clarifies.

Investing lessons
This investor believes one should focus on identifying his own strength.

One of the core areas to focus on is to examine what went right and why, and what went wrong and why. Sometimes, our returns may be just a function of a market tide and one should not read too much talent in it. Similarly, there are costs of omission and commission, says Anand.

Sometimes one omits a good investment due to some flaws and at other times commissions some trade, including selling, too early or too late. It is also important to shut out all noise, as that is more abundant than ever, he warns.

The journey so far
Anand’s journey as a lawyer is more established with good credentials. He loved every part of the analysis and quest for best results from the task in hand.

The journey, so far, as an investor has been more for the passion for value and the strategic mindset that he has grown with his experience all these years.

Anand says he entered the market as an observer (student) in his college days. Then, with limited pocket money he started picking odd stocks, and then as a momentum investor, he got swayed by the IT boom and bought with the tide to eventually lost money.

More serious investing started around 2005 with his own savings. But the year 2008 was quite unkind him as was the case with most investors, but he says it also thought him immense lessons on greed and fear.

“I am proud to be a lawyer-investor. Both roles help in a multi-disciplinary approach to the task at hand; one specialises in problem solving, risk minimisation and optimisation through attack, defence or mediation while the other makes you an optimist and believer in compounding,” says he.

Definition of failure
Anand says failure is a friend, as it teaches you what success cannot. “Whenever I get anything wrong, I press the reset button within myself and try and assess a) what went wrong b) how I can improve,” says Anand.

Any setback is an opportunity to reinvent, re-energize and re-live, says he.

Investors he follows
Anand is a keep reader of global investment gurus such as Malcolm Gladwell, Dan Ariely, Richard Thaler, Daniel Kahneman, Daniel Pink, Adrian Slywotsky and Max Gunther, among others.

Back home, he follows some of the familiar names such as Samir Arora, Sanjoy Bhattacharya, Sanjay Bakshi and Raamdeo Agrawal.

“Each person teaches us something. My investment style may differ from them, as I don’t believe in coat-tailing, unless your thought process is aligned. But there is lot to learn from each one,” says he.

Recent picks
Some of his recent picks in the stock market have been players in graphite and electrodes segments, which he claims have delivered him returns beyond expectation.

The domestic stock market has been rising consistently for the past few months, which has helped lift stock prices across sectors.

Data shows graphite electrode majors Graphite India and HEG have risen up to 1,100 per cent so far this year. The fortunes of the graphite electrode sector have been on an uptrend.

Over the past few months, spot prices of graphite electrodes have seen a major spike. The key triggers have been consolidation of the graphite electrode market globally. Around 20 per cent of global graphite electrode capacity (excluding China) have been shut down in last three years, while an increase in steel production through the EAF route (outside China), an increase in global steel prices and closure of significant steel capacity in China have led to a drop in both steel and graphite electrode exports from the region.

Anand has bought some hospitality companies, as he believes some of the hotels can move from asset-heavy (ownership) models to asset-light (management) models.

“There are a few hotels in India where quality of service is par excellence and they have scalability to take on management contracts and enhance return ratios. The migration of customers to hotels is a function of both convenience and necessity, by business travel and utilities, including entertaining and celebrating and land locations are drying up. This sector has been plagued by capital inefficiencies due to asset-heavy models and seems to be sorting itself,” says he.

He has also added some pharma companies, as he feel the USFDA move has strengthened these companies for the future. Many companies have undertaken new drug discoveries or moved up from generics to specialised drugs.

There is too much pessimism there, says he. “I am a stern believer that the market doesn’t reward consensus over time.”

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