Irfan, more popularly known as IKSmallCaps is a known and respected investor in the small and midcap space. Today, I got an opportunity to have a sit down with him for our readers.
So, without further ado,
Tell us a little abt yourself.
I am a mass media graduate, had a small stint in filming and tried my hand at direction. My short films did fairly well, earning international repute but I left the field a couple of years ago and have been active in the stock market since the last 12 years, my keen interest in investments, trading and holding shares keeps growing.
How did you start your investing journey?
That makes me go down memory lane.
I started investing the time I started earning, whatever little I did back then, started with a mere amount of forty thousand rupees while I was working in a PR agency and from whatever I made in my own production company. My family has been a part of the markets since the 1990s so I was always intrigued about how it all works and learnt a lot from them.
The first stock you bought, first loss and what did you learn from it?
That would be a difficult one to answer, but like they say it's just human to hold on to the bad more than the good.
While I don't remember the first stock I bought, I do remember the first big blow, will not like to reveal the name of that company but it was an electronics manufacturer, with ever-changing technological innovation their business got obsolete and boy!how I lost a huge chunk of my portfolio, but I guess it was a lesson that was learnt well in time that one should be careful of companies that don't upgrade themselves.
What are the basic metrics you look at a business when you are valuing or looking at it to invest?
There are different parameters for different businesses. If I am researching about a manufacturing company I would evaluate it through its Manufacturing capacity, Number of employees, It's Product Quality and Demand Supply ratio. Whereas if it's regarding Services Industry as an IT company then I would see it's Employee strength and its Products. For me, different ratios are not so important because I believe ratios come in much later but the price moves before. So the PE, ROI, ROE, ROCE don't personally excite me.
In your investing journey – one thing you did which you think you did great and one thing you regret doing?
I was researching about camphor prices online and I found that they have doubled. While Mangalam and Kanchi Kapooram were still available at attractive valuations, this helped me to add them more and ride the camphor rally.
However, I missed the Nitrobenzene rally. I was studying Sadhana Nitro when it was sub 50 levels, but couldn't enter and missed the massive bull run.
When do you sell a stock? What are the criteria according to your rationale that a stock has reached its life? When do you know it’s time to get out of stock?
I usually enter a stock when the results are bad because it is available at a rock bottom price. When the tide turns and ratios kick in, I exit the stock because by then the stock price has already multiplied.
Another indicator is when the stock is at an all-time high or 52 weeks high and we witness abnormal volumes, it's then that I exit the stock because I feel that the insiders are selling.
Any example where patience has paid off for you?
I invest in companies with 3 to 5 years perspective. Many companies have turned multi-baggers, for example, I invested in Mangalam Organics at 18 and held it till 400. There are many such instances where stocks give nil returns till a year or two and then give massive returns in a few months like Kilpest, Agritech, Waterbase and the list goes on. Some very wise words of Warren Buffett that I choose to follow
"The Stock market is a device for transferring money from the impatient to the patient"
Can you please tell us some of your favourite books?
I'm not much of a reader as books don't fascinate me, but I like reading Inspirational Case Studies about people who have made it against all odds.
What are your hobbies?
I like listening to music of different genres. Music has a calming effect on me. Apart from that, I love playing chess, watching films, penning scripts and travelling.
How do you increase your market knowledge?
I increase my market knowledge through all the vital information we have through Electronic Social and Print media, it's all a part of my regimen.
Do you see a growth in Small and Midcap space in 2020?
We all have seen value erosion in small and midcaps and now many analysts are bullish on small and midcaps, hopefully, we may see individual stocks performing depending upon the growth in their business sectors. Nonetheless, mid and small caps should perform as the disparity in valuations between them and large caps can't last for long.
What sectors are you betting on?
I am vouching on the chemical sector as of now and have faith that there will be significant opportunities compared to other industries. The chemical industry’s role as the key enabler of economic growth is well-established worldwide. The chemical industries occupy a pivotal position in meeting basic needs and improving the quality of life as well.
What are your expectations from the upcoming budget?
I am expecting that our honourable Finance Minister gives us relief from LTCG tax which will give a big boost to mid and small-cap stocks.
Who is your role model in investing?
My role model is Shankar Sharma and Warren Buffett, we share similar work ideologies and I resonate with them on investing and holding patterns and may I quote Mr Buffett
"The most important quality of an investor is temperament not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd".
Disruptions – What do you think of them and how do you evaluate if a business you are looking at as a prospective investment won’t get disrupted easily?
I had suffered losses in an electronics manufacturing company whose business got disrupted due to change in technology.
Disruption is very subjective as each sector has its own threats. If it's a manufacturing company then the business will sustain if it has the latest types of machinery at its disposal. The biggest threat is to electronics industry as technology upgrades rapidly and if you can't keep up the pace you vanish from the market.
One advice you would like to give to younger people who have just started earning/saving/investing in the financial freedom journey?
I would like to tell them one thing and that is The Stock Market is not about ratios
Try to analyse a business through its products & services, demand and supply. Do a little background check about its products in the market, so on and so forth, something so basic about demand supply that we learnt as children, holds so valuable when I look back today.
The above is for educational and informational purposes only. It is not an endorsement or a stock recommendation. The author may be holding the securities mentioned above. Do your independent and thorough research before investing.