The recently concluded tour of Indian cricket team to Australia has been remarkable in many ways. I am sure, the cricket administrators, analysts, strategists and guides in the country would analyse the outcome of tour from the viewpoints of future playing strategies and improvement in fitness regime, and career path for the young promising players who may not get adequate opportunities due to limit of 11 playing members in the national team.
On my part, besides thoroughly enjoying two months of engrossing
game of cricket, I have drawn some key inputs for investment strategy purpose
from this tour.
Pujara vs Pant debate is
meaningless
One of the prominent topics of discussions, before final day of
the Brisbane test, was the “slow” batting of Cheteshawar Pujara; though the
victory at Gabba ended this debate with tins of praise being heaped on Pujara
for his grit and resilience. A loss or draw at Gabba might have seen strong
criticism of Pujara.
On the other hand, Rishabh Pant, who has been consistently the
target of critics for his irresponsible batting, was praised as true successor
of Dhoni - A great finisher and match winner.
I find nothing new in this discussion and criticism. Players
like K. Srikkanth, Virendra Sehwag, Yuvraj Singh, Kaluwitharana, Shahid Afridi,
etc. have always faced this kind of criticism. The fact is that competitive
cricket needs to strike a balance between entertainment and classical game. For
every Gavaskar a Srikkanth; for every Tendulkar & Dravid, Sehwag &
Yuvraj; and for every Jayasuriya a Kaluwitharana is needed. The balance between
classical techniques and aggressive innovation is consistently leading to
evolution of the game and keeping the interest of spectator alive.
Applying this analogy to investment strategy, we must understand
that constructing an investment portfolio is like making a cricket team. The
portfolio must strike a balance between safety, liquidity and returns. While
anchoring the portfolio with consistent compounders, investors must keep trying
the new businesses which could be potential winners due to their innovative
methods and technology. Of course the failure rate in this endeavour will be
high, but one winner will more than compensate for these failures and enhance
overall portfolio return.
Just to illustrate, HUL played a Pujara for 10yr (2001-2010);
ITC is playing the same game for past seven years; and RIL played it for six
years (2011-2016). For these, the balance was provided by the likes of Bajaj
Finance, Page Industries, Divis Lab, Eicher Motors, Havells, HCL Tech, PI
Industries etc. Many rising stars though failed to live upto the expectations,
e.g., IDFC First Bank, DHFL, Yes Bank, JP Associates, Suzlon, etc.
One pertinent question here would be what should be the
proportion of Pujara’s and Pant’s in a balanced investment portfolio!
Well, for that one would need to sit with her/his investment
adviser and work this out.
36 all out and 325/7 on
fifth day Gabba pitch (January 2021) are both exceptions
On 19th December 2020, the fabled Indian batting line
up wilted under pressure and was all out for a mere 36 runs in Adelaide. One
month later on 19th January 2021, a much depleted team scored 325 on
the fifth day Gabba pitch facing infamous hostile Australian bowling. The both
performances are true but not normal. These kinds of performances do occur once
in a while, but cannot be key parameters for evaluating the standard of Indian
team.
The benchmark indices fell by 40% from peak in two months
(February-march 2020) and have risen over 90% in past 10 months. The sharp fall
and fast recovery, both are not normal conditions. These deep oscillations do
occur almost every 10year, but cannot be a key parameter for investment
strategy. Only a trading strategy can factor in these kinds of oscillations. As
such these are more relevant from risk management viewpoint of brokers and
lenders, rather than investors.
