The Big Picture Investing

Big Picture Investing - Mr. Harish Krishnan
IFA Galaxy 6th Knowledge Summit 10.10.2015

Summary:

Big Picture - India is a land of massive opportunities
Asset Allocation Trends - Diversify into financial assets
Time in markets - More important than timing the markets
Businesses don't operate in excel sheets - Don't be greedy
Power of Compounding - Start Young


The Next Trillion Dollar Opportunity

India GDP trend (US$ terms)
FY51-08:  7.3% CAGR
FY08-15:  7.9% CAGR

2008  1st US$ tn  68 years
2015  2nd US$ tn 7 years
2020  3rd US$ tn 6 years
2024  4th US$ tn 4 years

Indian Company Vs Global Giants
Indian companies are smaller.
Growth is faster in some Indian Companies.



Asset Allocation Trends

World private wealth / National Income ratio
varies from 200% to 700%

Factors affecting wealth creation
= Rising income and corresponding savings
= Asset Allocation

India's wealth / national income ratio is in
range of 250% = 300%.

Rough approximations on asset
ownership in India
- Agri land - US$1tn
- Urban land- US$2.5tn
- Gold - US$1tn
- Deposits - US$1tn
- Insurance/PF etc - US$0.5tn
- Equities - US$0.15tn

US Allocation:
- In 1984:
Housing 40%,
Interest-earning assets - 14%,
Equity + Reitrement - 7%

- In 2011:
Housing 20%,
Interest-earning assets - 7%,
Equity + Reitrement - 40%


Time-ing the Market

Facts about Sensex

Sensex has given a compounded return of 15.03% return
from Jan 1, 1991 to Jan 30, 2015 (almost 29 bagger in 24 years)

There are only 21 days when Sensex has hit a Six (more than 6%
daily return).

There are only 90 days when Sensex has hit a Four (more than 4%
daily return)

If you had not invested for just 53 days out of the total of 5812 days
your return from Sensex will become NIL.


Businesses don't operate in Excel Sheet but in Real World

20 Year study of Indian Companies

Out of 1000+ Indian companies (non-financial), what % of companies reported
20 year-revenue CAGR higher than nominal GDP growth rate (14%)?    27% or 290 companies

How many companies managed to grow ahead of nominal GDP growth rate every
year over the last 20 years?   Just 1!!!!

Let's relax it a bit!  How many companies managed to grow ahead of nominal GDP
growth rate in at least 15 out of 20 years?   ONLY 37!

How many Indian companies have had a minimum ROCE of at least 15% in each of
the last 20 years?   ONLY 35!

BUSINESS OPERATE IN REAL WORLD, WHICH ARE CONSTANTLY CHANGING.



Compounding

World Population Growth
From 3 to 70+ Billion (or 700+ Crores)
Approximately 5775 years or 288 generations
Any guesses on CAGR?
10%?
5%?
1%?
Answer:  CAGR of 0.03%

Time is the biggest compounding machine!
START YOUNG



Lookout for Outlook!

Once all villagers decided to pray for rain, on the day of prayer all the
perople gathered but only one boy came with an umbrella.  THAT'S FAITH.

When you throw a baby in the air, she laughs because she knows you
will catch her.  THAT/S TRUST.

Every night we go to bed, without any assurance of being alive the next
morning, but we still set the alarms to wake up.  THAT'S HOPE.

We plan big things for tomorrow in spite of limited knowledge of the
future.   THAT'S CONFIDENCE.

We see the world suffereing, but still we get married!  THAT'S OVERCONFIDENCE.