Gurus of Chaos by Saurabh Mukherjea

We associate investment related books with authors from Western world and seek experience from best money managers from U.S. and U.K, however here the author has made an attempt to break this pattern. Gurus of Chaos by Saurabh Mukherjea is about ‘experiences’ of fund managers in India and his key learning’s on investments.  The author’s narrative is simple and the book is a quick read for the professionals in financial services industry.

I liked his opening research data point – In the past 20 years, over 80% of listed Indian companies have failed to give share price returns better than the rate of inflation (which is around 7%).  Certainly, there is an interesting story to narrate about our fund managers who have generated substantial returns. This book contains such stories of fund managers/investors.  It’s worth reading all of them; however my favorites are these two interviews.

a)      Sanjoy Bhattacharya , Founding CIO of HDFC Asset Management: his experience in the initial days at CRISIL are very insightful.  His principles on exiting a stock are intuitive.

b)      Akash Prakash, CEO of Amansa Capital: his perspective on mutual funds in India is a must read. He says funds sometimes act sub-optimally and don’t have freedom to invest.

Author’s case study approach on Asian Paints and TTK to decipher the quality of financial statements is a good read. I respect his viewpoint on giving importance to the promoter’s competence and integrity. His simple rules for successful investing are  

1. Only buy a stock if you understand the business model          

2. Only invest in companies which can generate cash flows and high return on capital employed for long periods of time.

3. Buy the franchises identified by rule 2 when they are available at prices which build in ‘margin of safety’.

 In the later part of book, author dwells on investor psychology.  He has referred to the most acclaimed book Thinking, Fast and Slow by Daniel Kahneman and many psychologists. He drives the point that we all can rewire our brain and can become disciplined investors.

I felt that this book could have had a separate section for beginners or novice investors. It’s high time that successful investment professionals in India connect to the prospective investors by writing such books. This may motivate investors to relate to Indian context.