“I like to buy things in a bad market. Additionally, don’t look current cash flow, concentrate on future cash flows — that is what I look at,” says Govind Parikh of Govind Parikh Securities. He advises investors to buy good quality stocks when the market crashes.
While sharing his investment philosophy with ace investor Ramesh Damani, on the Wizards of Dalal Street, Parikh says management integrity is very important when deciding which stock to bet on. He tells investors not to buy stocks impulsively.
According to him, selling right is more important than correct buying. He says it is necessary to keep a lot of cash. “We keep an average 10 percent cash in our portfolio,” he says.
Below is the verbatim transcript of the interview on CNBC-TV18
Damani: Let me just start with a quote from a great film, in the 1970’s The Graduate – Dustin Hoffman was told by his uncle get into plastics. What advice were you given when you graduated.
Parikh: Even before I graduated, while I was in my engineering third year my uncles – Naresh Khanwala and Kisan Ratilal Choksey, both BSE brokers, they recommended me to invest some money in shares.
So, even before completing my graduation, I was more interested in looking at the fluctuations every day.
Damani: You still went for an interview in a chemical firm, didn’t you?
Parikh: Yes I did and I failed very miserably there. Secretly, I was very happy to fail in the interview. So, I decided that I will go into the stock market and joined the Madras Stock Exchange as a stock broker.
Damani: Tell me about early days. 1980’s Chennai, Madras then, was still a backwaters for the capital markets wasn’t it?
Parikh: Yes it was. Most of the companies here were very conservative and we had a unique system of settlement in two days whereas in Mumbai the settlement used to take place in about 2-4 weeks time. So, a lot of guys used to be happy to sell the shares in Madras at a discount. So, most of the brokers were looking to buying shares in Madras and selling it in Mumbai and doing an arbitrage. However, I was more keen on seeing how the stock prices fluctuated. So, I started taking interest in — apart from investing my clients money, I started investing my own money.
Damani: You had a very interesting thought process on how you came about your MNC ideas, share that with us.
Parikh: We had subscribed for the Financial Times London newspaper and once there was an offer of getting six international reports free of cost. In those days there was no internet and there was no other way to find out about how the parent company was doing. So, we wrote to them and we got the six balance sheets.
More to follow…