Gunavanth Vaid: Interview with Sovrenn
In the dynamic world of investments, there is a figure "Gunavanth Vaid", whose story is not just about financial success but also about resilience, principles, and the belief that doing good can lead to achieving good. He is a successful investor and a humble person. He says “I don't know the definition of success, but I want to do better today than yesterday. I am like all of you. I believe that by keeping your heart’s balance good, your bank balance will be good as well”
In his interaction with Aditya Joshi, Guna ji spoke to Sovrenn about his journey, investing style and many more.
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Q1 How and when did you start and get into investing? Please share your journey.
I did my CA in 1997. From 1997 to 2013 I was practising and my exposure towards the stock market was very little. I belong to a simple Chennai-based family. My family did not believe in the stock market. They used to say it was a satta. In 2013, I faced a big financial loss. My friend cheated on me, which made me learn people's behaviour. I did not have another way, I had only 2 choices: be a gambler or do something I understood - which was equity and balance sheet. My experience helped in the stock market and investing. So, I became an investor by accident and out of compulsion. I started investing in small and microcaps.
Q2. What was your first stock? What was the rationale behind it?
My inaugural stock investment was in a pharmaceutical company based in Chennai. My guiding principle is “Paisa wohin jahan koi nahi” (Money lies where nobody looks). I chose to invest in a company that intrigued me with its sales performance and the integrity of its promoters. Despite warnings from many, I conducted thorough research and found the company and promoter promising. Eventually, this investment yielded a remarkable 60x return.
The second company I invested in underwent a takeover by a Chinese promoter, which also demonstrated favourable results. I was drawn to this company because of the competence of the individual taking charge. I firmly believe that one doesn't necessarily need Bloomberg or constant chart monitoring to make investment decisions. Basic research coupled with personal interaction, such as meeting the promoters, suffices. Hard work inevitably leads to fruitful outcomes.
"Thoda Mehnat karte ho na to mil jata hai" (If you put in a bit of effort, you'll reap the rewards).
Q3. Whenever you buy a microcap company what are the most important things that you check before buying?
Before buying a microcap company, there are several factors to consider. Personally, I place great emphasis on the character of the promoter. Additionally, monitor how the promoter interacts and behaves with others. Having a competent and trustworthy promoter is paramount for success. Conduct thorough research and due diligence on the promoter and the company. It's important to recognize that microcap companies often have a high failure rate, which is why it's crucial to exercise caution.
The stock market can offer lucrative opportunities if approached with diligence. Focus on conducting comprehensive research and evaluating the integrity and competence of the promoters.
Ultimately, if you've chosen a reliable promoter, you can have confidence in your investment. However, it's essential to analyze other aspects of the company's operations and performance. Keep track of reports and updates, but avoid micromanaging your investments. Trust in your research and the integrity of the promoter.
Q4. Do you conduct extensive diligence on the company's balance sheet?
There are numerous aspects not covered in the balance sheet. Especially in small and microcap companies, the balance sheet might not look favourable in the initial stages. Hence, it's not solely reliant on a strong balance sheet for good results. While it's advisable to review the balance sheet, I don't prioritize it as the primary factor before investing. The balance sheet constitutes only a portion of the overall evaluation process, rather than being the primary consideration. Personally, I don't typically delve into balance sheet analysis. I place more emphasis on evaluating the promoters.
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Q5. When do you sell the company? How do you make a sales decision?
"Kitna chala woh important nahi, kitna chal sakta hai woh important hai" (It's not important how much the stock has run up, but how much more it can run is important)
I believe there can be 3 reasons behind selling a company:
- The purpose for which I bought it has been achieved, then I sell.
- If the purpose for which I bought it is not yielding the expected results, then I sell.
- Last but not the least, when I need money.
Q6. How do you have the target estimation?
"In reality, nobody knows the estimation. The point is, 'If the train has come earlier (before time) to your station then you will thank the driver and leave the train.' Similarly, do the same with stocks if your purpose has been completed. Everyone has their thesis but no one has the exact estimation that it (the investment) will give 20x or 30x. I strongly believe, 'What happens is what you think', so think big. Speed does not matter, direction matters. So always select the right direction."
Q7. Did it ever happen that things didn't go as planned and you made mistakes? What was the response?
This happens sometimes, I also believe that you should always pick at least one wrong stock to make yourself humble. Because when you buy only good companies you start to believe that you are God. Small mistake saves you from a larger mistake. You have to see the bear market before understanding the bull market, then you understand the importance of it.
Q8. What are the checklist components that you follow for SMEs?
I don't follow such checklists, but I check a few things which is very normal like
- Promoter image
- Promoter’s history
- Promoter’s deliverance in the market
I believe the intention is the most important thing.
Q9. What is your Framework?
I follow a framework that we call "PUNYA": P for Promoter’s Vision, U for Under-Researched company, N for Nascent Stage/New Business, Y for Young in market cap, and A for Affordable in valuations. if you don’t give money to Microcap who will give, it is also a work of nation building it is the work of Punya (Saint work).
Q10. Who would consider your business mentor and who taught you investing?
My inspiration and mentor is my father-in-law who is my chacha sasur. He taught me not only about investing but also how to give back to society. My father and brother always supported me. I also followed Rakesh Jhunjunwala in the capital market.
Q11. What are your biggest learnings in the investment market?
Always think beyond things that can happen and have a big dream.
If a person knows everything, he will see red flags in everything. So the person who knows less earns more in the market.
If you want to help society you can only help through equity, and you are not only helping the company or person but also earning money from helping.
Q13. Is there any regret you feel, you want to change?
Yes, I have two regrets. One is if I could get back my mother so I will, and the second is to start my investing journey earlier. I started it at the age of 37 which was late; if I could change it, I would start it a bit earlier.
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